The market and morality

The market economy is not perfect. However, we do sometimes forget that it is the market that has delivered significant prosperity to the world and lifted millions of people out of poverty. Improvements in literacy and sanitation have contributed to a significant reduction in the number of people existing on the benchmark measurement of $1 a day. Enterprise, trade, micro-credit and social venture capital are, however, foundational to a global reduction in poverty. This reminds us that there is a moral case to be made for the market.

Capitalism is built upon four moral principles. These principles are rooted in the Judeo-Christian tradition upon which a market based enterprise economy is constructed.

First, the principle of creativity. This idea is expressed through the creation of wealth and the flourishing of human creative skill. Wealth creation is about the harnessing of human capital, skills and innovation to add value to the productive capacity of the economy. So, the combining of raw materials to make goods for sale, the delivery of services, entrepreneurial skill in developing and applying new ideas lie at the heart of enterprise. Wealth creation has to precede the debate on distribution.

Second, the principle of responsibility. Encouraging dependency denies the essence of humanity. Human flourishing means recognising humanity’s uniqueness and capacity for innovation and learning.

Third, the principle of freedom. Free human expression is only possible within a context of both economic and political freedom. That is one reason why Marxist command economies don’t work. It is also why excessive economic control constrains enterprise and innovation. Entrepreneurial skill and risk needs recognition and reward.

Fourth, the principle of fairness. The fairness of the capitalist system stems from the fact that the market allocates goods and services fairly and efficiently between willing buyers and sellers at agreed prices. Excessive levels of taxation in this respect are intrinsically unfair.

The market economy also generates moral problems. Issues of greed, excess, monopoly and oligopoly mean that there is a proper place for regulation. However, because we seem to have lost sight of the intellectual case for the market, regulation and taxation seem to have become ends in themselves, rather than as means or tools to act as moral restraints in an essentially free economy in a free society.

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Dr Richard Turnbull is the Director of the Centre for Enterprise, Markets & Ethics (CEME). For more information about Richard please click here.

  • David Howell

    If only this were true. The capitalist market encourages purely competitive behaviour between and within corporations. This has very little to do with the Christian tradition, and everything to so with greed and most of the other sins. Fewer mergers, take overs, price wars and more partnering and cooperation would go a long way to addressing the imbalance.

    There is very little real prudence (the mother of all virtues) applied in the business world. Market economics argues that competition leads to the best outcome for consumers, but that is complete nonsense. The cheapest price leads to worker exploitation, quality and safety corner-cutting and toxic packaging and ingredients (e.g. dangerous preservatives in food) being used in products. It means huge amounts of wasted fuel and cold storage energy in shipping because imported products are cheaper. Trade is good when it involves locally unobtainable products, or higher quality products. It’s bad when the only criterion is price for exactly my reasons stated above.

    Corporations and particularly multinationals do not care about all of their stakeholders: Suppliers, customers, employees, community, environment, competitors & partners, shareholders. They are not incentivised to care. Most companies only think about the next quarters’ earnings and the stock price, it’s even written into legislation that their primary responsibility is to the shareholder.

    What we need is a radical rethink of corporations law. Sustainability principles include a significant ethical focus particularly regarding governance, and I would assert that the “Shared Value” model of corporate behaviour is very much aligned with the ideals you are espousing.

    Market capitalism is not responsible for increased literacy and sanitation. Those are directly related to state provided schooling, labour laws (no child labour, children going to school), and state funded sewerage works and water supply projects.

    I am not completely disagreeing with you about there being some good aspects to market economics, but as I said, it is too focussed on aggressive behaviour and not enough on caring and kindness. Corporations are not good Samaritans, but they should be. I would support the ideals of any research you can do into ways of making this happen.