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