Is the Capitalist System Simply About the Selfish Pursuit of Profit?
Based on the author’s observations of the world over many years, many things that people find strange or unreasonable often turn out not to be as absurd as they initially appear. Conversely, many things that are widely regarded as reasonable and self-evident may not be quite as straightforward as they seem.
Could it be that common understandings of markets and the capitalist system are shaped by a considerable number of misconceptions and biases?
Author: GUDORDI | 2024-04-19
Capitalism is working to produce more money but does not see the people.
──Lech Walesa
America’s abundance was not created by public sacrifices to ‘the common good’, but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes. They did not starve the people to pay for America’s industrialization. They gave the people better jobs, higher wages, and cheaper goods with every new machine they invented, with every scientific discovery or technological advance─and thus the whole country was moving forward and profiting, not suffering, every step of the way. What they have to discover, what all the efforts of capitalism’s enemies are frantically aimed at hiding, is the fact that capitalism is not merely the ‘practical’, but the only moral system in history.
──Ayn Rand
In the previous article, the author has discussed a conversation with a Mainland government officials on the nature and operating principles of the market system. I also referred to the insights of Friedrich Hayek, who argued that the greatest function of the market system is its ability to enable society to make more effective use of information.
In this respect, the superiority of the market over government is quite evident, because the market possesses far more information than any government can. No matter how well-intentioned or capable public officials may be, many of their expectations and assumptions may ultimately prove to be little more than “beautiful misunderstandings.”
Hayek’s Insightful Contribution Has Been Overlooked
Hayek’s argument originated from his 1945 essay, The Use of Knowledge in Society. Although this essay is arguably one of the most important works explaining how economic systems function since Adam Smith, it is unfortunate that even within academia, relatively few people seem to be familiar with it.
This is perhaps not difficult to understand. After all, Hayek belonged to the Austrian School, which has never been part of the mainstream. Some economists have even argued that because the Austrian School makes limited use of mathematical modeling, it should be regarded as a body of political and social thought rather than as orthodox economics. This, in my view, is one of the unfortunate aspects of modern economics.
The official I mentioned firmly believed that a capable and selfless government is superior to the market. He argued that governments possess far more information than most people realize, and that their ability to gather and process information is constantly improving. In his view, technological progress clearly favors governments. Relying on a government guided by the public interest, he believed, is preferable to relying on a market driven by the pursuit of private gain.
He maintained that the most balanced and socially just arrangement is one in which the government takes the leading role in all major sectors of society while allowing private markets a certain degree of participation and room for development.
At first glance, this argument appears reasonable. Most cultural traditions seem inclined to regard the pursuit of private interest as something less than honorable, often treating it as a “necessary evil” that must reluctantly be tolerated.
Is the Pursuit of Self-Interest a Necessary Evil?
Throughout more than two thousand years of Chinese history, the prevailing metaphysical outlook appears to have divided society into four classes: scholars, farmers, artisans, and merchants. Merchants were often portrayed as people concerned solely with fame and profit, giving rise to sayings such as “all merchants are deceitful.”
The underlying assumption was that commerce and the pursuit of self-interest were necessary evils within society. Without allowing people to pursue profit and advancement, economic development would lack momentum. From this perspective, it seems entirely reasonable for a government, seen as the guardian of justice and the public good, to balance the market’s pursuit of private interests.
But is capitalism really nothing more than the pursuit of self-interest?
This is a profound question. The quotation from former Polish President Lech Wałęsa cited at the beginning of this article reflects a common stereotype about capitalism. Yet if we examine Ayn Rand’s arguments carefully, a very different picture emerges. Which of these pictures more accurately reflects reality? I will leave that judgment to the reader.
Based on my observations of the world over many years, many things that people find strange or unreasonable often turn out not to be as absurd as they initially seem. Conversely, many ideas that appear perfectly reasonable and self-evident may not be entirely correct. Could it be that common understandings of markets and the capitalist system are shaped by a considerable number of misconceptions and biases?