The
Rational Argumentator
The Fourth Revolution
"We have it in
our power to begin the world over again." --Thomas Paine, Common Sense,
1792.
The crisis in financial markets has
set off a predictable torrent of anti-capitalist sentiment. Despite the fact
that government regulations were a major cause of the crisis, anti-capitalists
and their enablers in the media have blamed the market and called for new
restraints. The government has already exerted an unprecedented degree of
intervention in financial markets, and it now seems clear that new economic
controls will expand far beyond Wall Street.
Regulation of production and trade
is one of the two basic things that government does in our mixed economy. The
other is redistribution—transferring income and wealth from one set of hands to
another. In this realm, too, anti-capitalists have seized the moment to call
for new entitlements such as guaranteed health care, along with new tax burdens
on the wealthy. The economic crisis, along with the election of Barack Obama,
has revealed a huge pent-up demand for redistribution. Where does that demand
come from? To answer that question in fundamental terms, we need to look back
at the origins of capitalism and look more closely at the arguments for
redistribution.
The capitalist system came of age in
the century from 1750 to 1850 as a result of three revolutions. The first was a
political revolution: the triumph of liberalism, particularly the doctrine of
natural rights, and the view that government should be limited in its function
to the protection of individual rights, including property rights. The second
revolution was the birth of economic understanding, culminating in Adam Smith's
Wealth of Nations. Smith demonstrated that when individuals are left
free to pursue their own economic interests, the result is not chaos but a
spontaneous order, a market system in which the actions of individuals are
coordinated and more wealth is produced than would be the case if government
managed the economy. The third revolution was, of course, the Industrial
Revolution. Technological innovation provided a lever that vastly multiplied
man's powers of production. The effect was not only to raise standards of
living for everyone, but to offer the alert and enterprising individual the
prospect of earning a fortune unimaginable in earlier times.
The political revolution, the
triumph of the doctrine of individual rights, was accompanied by a spirit of
moral idealism. It was the liberation of man from tyranny, the recognition that
every individual, whatever his station in society, is an end in himself. But
the economic revolution was couched in morally ambiguous terms: as an economic
system, capitalism was widely regarded as having been conceived in sin. The
desire for wealth fell under the shadow of the Christian injunction against
selfishness and avarice. The early students of spontaneous order were conscious
that they were asserting a moral paradox—the paradox, as Bernard Mandeville put
it, that private vices could produce public benefits.
The critics of the market have
always capitalized on these doubts about its morality. The socialist movement
was sustained by allegations that capitalism breeds selfishness, exploitation,
alienation, injustice. In milder forms, this same belief produced the welfare
state, which redistributes income through government programs in the name of
"social justice." Capitalism has never escaped the moral ambiguity in
which it was conceived. It is valued for the prosperity it brings; it is valued
as a necessary precondition for political and intellectual freedom. But few of
its defenders are prepared to assert that the mode of life central to capitalism—the
pursuit of self-interest through production and trade—is morally honorable,
much less noble or ideal.
There is no mystery about where the
moral antipathy toward the market comes from. It arises from the ethics of
altruism, which is deeply rooted in Western culture, as indeed in most
cultures. By the standards of altruism, the pursuit of self-interest is at best
a neutral act, outside the realm of morality, and at worst a sin. It is true
that success in the market is achieved by voluntary trade, and thus by
satisfying the needs of others. But it is also true that those who do succeed
are motivated by personal gain, and ethics is as much concerned with motives as
with results.
In everyday speech, the term
"altruism" is often taken to mean nothing more than kindness or
common courtesy. But its real meaning, historically and philosophically, is
self-sacrifice. For the socialists who coined the term, it meant the complete
submersion of the self in a larger social whole. As Ayn Rand put it, “The basic
principle of altruism is that man has no right to exist for his own sake, that
service to others is the only justification of his existence, and that
self-sacrifice is his highest moral duty, virtue, and value".
Altruism in this strict sense is the basis for the various concepts of
"social justice" that are used to defend government programs for
redistributing wealth. Those programs represent the compulsory sacrifice of the
people taxed to support them. They represent the use of individuals as collective
resources, to be used as means to the ends of others. And that is the
fundamental reason why they should be opposed on moral grounds by anyone who
defends capitalism.
Demands for Social Justice
Demands for social justice take two
different forms, which I will call welfarism and egalitarianism. According to
welfarism, individuals have a right to certain necessities of life, including
minimum levels of food, shelter, clothing, medical care, education, and so on.
It is the responsibility of society to ensure that all members have access to
these necessities. But a laissez-faire capitalist system does not guarantee
them to everyone. Thus, argue the welfarists, capitalism fails to satisfy its
moral responsibility and so must be modified through state action to provide
such goods to people who cannot obtain them by their own efforts.
According to egalitarianism, the
wealth produced by a society must be distributed fairly. It is unjust for some
people to earn fifteen, or fifty, or a hundred times as much income as others.
But laissez-faire capitalism permits and encourages these disparities in income
and wealth, and is therefore unjust. The hallmark of egalitarianism is the use
of statistics on the distribution of income. In 2007, for example, the top
twenty percent of U.S. households on the income scale earned fifty percent of
total income, whereas the bottom twenty percent earned only 3.4 percent. The
goal of egalitarianism is to reduce this difference; any change in the
direction of greater equality is regarded as a gain in equity.
The difference in these two
conceptions of social justice is the difference between absolute and relative
levels of well-being. The welfarist demands that people have access to a
certain minimum standard of living. As long as this floor or "safety
net" exists, it does not matter how much wealth anyone else has, or how
great the disparities are between rich and poor. So welfarists are primarily
interested in programs that benefit people who are below a certain level of
poverty, or who are sick, out of work, or deprived in some other way.
Egalitarians, on the other hand, are concerned with relative well-being.
Egalitarians have often said that of two societies, they prefer the one in
which wealth is more evenly distributed, even if its overall standard of living
is lower. Thus, egalitarians tend to favor government measures such as
progressive taxation which aim to redistribute wealth across the entire income
scale, not merely at the bottom. They also tend to support the nationalization
of goods such as education and medicine, taking them off the market entirely
and making them available to everyone more or less equally.
Let us consider these two concepts
of social justice in turn.
Welfarism: the unchosen obligation
The fundamental premise of welfarism
is that people have rights to goods such as food, shelter, and medical care.
They are entitled to these things. On this assumption, someone who
receives benefits from a government program is merely getting what is due him,
in the same way that a buyer who receives the good he has paid for is merely
getting his due. When the state dispenses welfare benefits, it is merely
protecting rights, just as it is when it protects a buyer against fraud. In
neither case is there any necessity for gratitude.
The concept of welfare rights, or
positive rights as they are often called, is modeled on the traditional liberal
rights of life, liberty, and property. But there is a well-known difference.
The traditional rights are rights to act without interference from others. The
right to life is a right to act with the aim of preserving oneself. It is not a
right to be immune from death by natural causes, even an untimely death. The
right to property is the right to buy and sell freely, and to appropriate
unowned goods from nature. It is the right to seek property, but not a right to
a dowry from nature, or from the state; it is not a guarantee that one will
succeed in acquiring anything. Accordingly, these rights impose on other people
only the negative obligation not to interfere, not to restrain one forcibly
from acting as he chooses. If I imagine myself removed from society—living on a
desert island, for example—my rights would be perfectly secure. I might not
live long, and certainly would not live well, but I would live in perfect
freedom from murder, theft, and assault.
By contrast, welfare rights are
conceived as rights to possess and enjoy certain goods, regardless of one's
actions; they are rights to have the goods provided by others if one cannot
earn them oneself. Accordingly, welfare rights impose positive obligations on
others. If I have a right to food, someone has an obligation to grow it. If I
cannot pay for it, someone has an obligation to buy it for me. Welfarists
sometimes argue that the obligation is imposed on society as a whole, not on
any specific individual. But society is not an entity, much less a moral agent,
over and above its individual members, so any such obligation falls upon us as
individuals. Insofar as welfare rights are implemented through government
programs, for example, the obligation is distributed over all taxpayers.
From an ethical standpoint, then,
the essence of welfarism is the premise that the need of one individual is a
claim on other individuals. The claim may run only as far as the town, or the
nation. It may not embrace all of humanity. But in all versions of the
doctrine, the claim does not depend on your personal relationship to the
claimant, or your choice to help, or your evaluation of him as worthy of your
help. It is an unchosen obligation arising from the sheer fact of his need.
But we must carry the analysis one
step further. If I am living alone on a desert island, then of course I have no
welfare rights, since there is no one else around to provide the goods. For the
same reason, if I live in a primitive society where medicine is unknown, then I
have no right to medical care. The content of welfare rights is relative to the
level of economic wealth and productive capacity in a given society.
Correspondingly, the obligation of individuals to satisfy the needs of others
is dependent on their ability to do so. I cannot be blamed as an individual for
failing to provide others with something I cannot produce for myself.
Suppose I can produce it and simply
choose not to? Suppose I am capable of earning a much larger income than I do,
the taxes on which would support a person who will otherwise go hungry. Am I
obliged to work harder, to earn more, for the sake of that person? I do not
know any philosopher of welfare who would say that I am. The moral claim
imposed on me by another person's need is contingent not only on my ability but
also on my willingness to produce.
And this tells us something
important about the ethical focus of welfarism. It does not assert an obligation
to pursue the satisfaction of human needs, much less the obligation to succeed
in doing so. The obligation, rather, is conditional: those who do succeed in
creating wealth may do so only on condition that others are allowed to share
the wealth. The goal is not so much to benefit the needy as to bind the able.
The implicit assumption is that a person's ability and initiative are social
assets, which may be exercised only on condition that they are aimed at the
service of others.
Egalitarianism: “fair” distribution
If we turn to egalitarianism, we
find that we arrive at the same principle by a different logical route. The
ethical framework of the egalitarian is defined by the concept of justice
rather than rights. If we look at society as a whole, we see that income,
wealth, and power are distributed in a certain way among individuals and
groups. The basic question is: Is the existing distribution fair? If not, then
it must be corrected by government programs of redistribution. A pure market
economy, of course, does not produce equality among individuals. But few
egalitarians have claimed that strict equality of outcome is required by
justice. The most common position is that there is a presumption in favor of
equal outcomes, and that any departure from equality must be justified by its
benefits to society as a whole. Thus, the English writer R. H. Tawney wrote
that "inequality of circumstance is regarded as reasonable, in so far as
it is a necessary condition of securing the services which the community
requires." John Rawls's famous "Difference Principle"—that
inequalities are permitted as long as they serve the interests of the least
advantaged persons in society—is only the most recent example of this approach.
[See the sidebar on these two pioneers of
egalitarianism.] In other words, egalitarians
recognize that strict leveling would have a disastrous effect on production.
They admit that not everyone contributes equally to the wealth of a society. To
some extent, therefore, people must be rewarded in accordance with their
productive ability, as an incentive to put forth their best efforts. But any
such differences must be limited to those which are necessary for the public
good.
What is the philosophical basis of
this principle? Egalitarians often argue that it follows logically from the
basic principle of justice: that people are to be treated differently only if
they differ in some morally relevant way. If we are going to apply this
fundamental principle to the distribution of income, however, we must first
assume that society literally engages in an act of distributing income. This
assumption is plainly false. In a market economy, incomes are determined by the
choices of millions of individuals—consumers, investors, entrepreneurs, and
workers. These choices are coordinated by the laws of supply and demand, and it
is no accident that a successful entrepreneur, say, earns much more than a day
laborer. But this is not the result of any conscious intention on the part of
society. In 2007, the most highly paid entertainer in the United States was
Oprah Winfrey, who earned some $260 million. This was not because "society"
decided she was worth that much, but because millions of fans decided that her
show was worth watching. Even in a socialist economy, as we now know, economic
outcomes are not under the control of government planners. Even here there is a
spontaneous order, albeit a corrupt one, in which outcomes are determined by
bureaucratic infighting, black markets, and so forth.
Despite the absence of any literal
act of distribution, egalitarians often argue that society is responsible for
ensuring that the statistical distribution of income meets certain standards of
fairness. Why? Because the production of wealth is a cooperative, social
process. More wealth is created in a society characterized by trade and the
division of labor than in a society of self-sufficient producers. The division
of labor means that many people contribute to the final product; and trade
means that an even wider circle of people share responsibility for the wealth
that is obtained by the producers. Production is so transformed by these
relationships, say the egalitarians, that the group as a whole must be
considered the real unit of production and the real source of wealth. At least
it is the source of the difference in wealth that exists between a cooperative
and a non-cooperative society. Therefore society must ensure that the fruits of
cooperation are fairly distributed among all participants.
But this argument is valid only if
we regard economic wealth as an anonymous social product in which it is
impossible to isolate individual contributions. Only in that case will it be
necessary to devise after-the-fact principles of distributive justice for
allocating shares of the product. But this assumption, once again, is plainly
wrong. The so-called social product is actually a vast array of individual
goods and services available on the market. It is certainly possible to know
which good or service any individual has helped to produce. And when the
product is produced by a group of individuals, as in a firm, it is possible to
identify who did what. After all, an employer does not hire workers by whim. A
worker is hired because of the anticipated difference his efforts will make to
the final product. This fact is acknowledged by the egalitarians themselves
when they allow that inequalities are acceptable if they are an incentive for
the more productive to increase the total wealth of a society. To ensure that
the incentives are going to the right people, as Robert Nozick has observed,
even the egalitarian must assume that we can identify the role of individual
contributions. In short, there is no basis for applying the concept of justice
to the statistical distributions of income or wealth across an entire economy.
We must abandon the picture of a large pie that is being divided up by a
benevolent parent who wishes to be fair to all the children at the table.
Once we abandon this picture, what
becomes of the principle espoused by Tawney, Rawls, and others: the principle
that inequalities are acceptable only if they serve the interests of all? If
this cannot be grounded in justice, then it must be regarded as a matter of the
obligations we bear to each other as individuals. When we consider it in this
light, we can see that it is the same principle we identified at the basis of
welfare rights. The principle is that the productive may enjoy the fruits of
their efforts only on condition that their efforts benefit others as well.
There is no obligation to produce, to create, to earn an income. But if you do,
the needs of others arise as a constraint on your actions. Your ability, your
initiative, your intelligence, your dedication to your goals, and all the other
qualities that make success possible, are personal assets that put you under an
obligation to those with less ability, initiative, intelligence, or dedication.
In other words, every form of social
justice rests on the assumption that individual ability is a social asset. The
assumption is not merely that the individual may not use his talents to trample
on the rights of the less able. Nor does the assumption say merely that
kindness or generosity are virtues. It says that the individual must regard
himself, in part at least, as a means to the good of others. And here we come
to the crux of the matter. In respecting the rights of other people, I recognize
that they are ends in themselves, that I may not treat them merely as means to
my satisfaction, in the way that I treat inanimate objects. Why then is it not
equally moral to regard myself as an end? Why should I not refuse, out of
respect for my own dignity as a moral being, to regard myself as a means in the
service of others?
Toward an individualist ethics
Ayn Rand’s case for capitalism rests
on an individualist ethics that recognizes the moral right to pursue one's
self-interest and rejects altruism at the root.
Altruists argue that life presents
us with a basic choice: we must either sacrifice others to ourselves, or
sacrifice ourselves to others. The latter is the altruist course of action, and
the assumption is that the only alternative is life as a predator. But this is
a false alternative, according to Rand. Life does not require sacrifices in
either direction. The interests of rational people do not conflict, and the
pursuit of our genuine self-interest requires that we deal with others by means
of peaceful, voluntary exchange.
To see why, let us ask how we decide
what is in our self-interest. An interest is a value that we seek to obtain:
wealth, pleasure, security, love, self-esteem, or some other good. Rand's
ethical philosophy is based on the insight that the fundamental value, the summum
bonum, is life. It is the existence of living organisms, their need to
maintain themselves through constant action to satisfy their needs, that
gives rise to the entire phenomenon of values. A world without life would be a
world of facts but not values, a world in which no state could be said to be
better or worse than any other. Thus the fundamental standard of value, by
reference to which a person must judge what is in his interest, is his life:
not mere survival from one moment to another, but the full satisfaction of his
needs through the ongoing exercise of his faculties.
Man's primary faculty, his primary
means of survival, is his capacity for reason. It is reason that allows us to
live by production, and thus to rise above the precarious level of hunting and
gathering. Reason is the basis of language, which makes it possible for us to
cooperate and transmit knowledge. Reason is the basis of social institutions
governed by abstract rules. The purpose of ethics is to provide standards for
living in accordance with reason, in the service of our lives.
To live by reason we must accept
independence as a virtue. Reason is a faculty of the individual. No matter how
much we learn from others, the act of thought takes place in the individual
mind. It must be initiated by each of us by our own choice and directed by our
own mental effort. Rationality therefore requires that we accept responsibility
for directing and sustaining our own lives.
To live by reason, we must also
accept productiveness as a virtue. Production is the act of creating value.
Human beings cannot live secure and fulfilling lives by finding what they need
in nature, as other animals do. Nor can they live as parasites on others.
"If some men attempt to survive by means of brute force or fraud,"
argues Rand, "by looting, robbing, cheating or enslaving the men who
produce, it still remains true that their survival is made possible only by
their victims, only by the men who choose to think and to produce the goods
which they, the looters, are seizing. Such looters are parasites incapable of
survival, who exist by destroying those who are capable, those who are pursuing
a course of action proper to man."
The egoist is usually pictured as
someone who will do anything to get what he wants—someone who will lie, steal,
and seek to dominate others in order to satisfy his desires. Like most people,
Rand would regard this mode of life as immoral. But her reason is not that it
harms others. Her reason is that it harms the self. Subjective desire is not
the test for whether something is in our interest, and deceit, theft, and power
are not the means for achieving happiness or a successful life. The virtues
I've mentioned are objective standards. They are rooted in man's nature, and
thus apply to all human beings. But their purpose is to enable each person to
"achieve, maintain, fulfill, and enjoy that ultimate value, that end in
itself, which is his own life." Thus the purpose of ethics is to tell us
how to achieve our real interests, not how to sacrifice them.
The trader principle
How then should we deal with others?
Rand's social ethics rests on two basic principles: a principle of rights and a
principle of justice. The principle of rights says that we must deal with
others peaceably, by voluntary exchange, without initiating the use of force
against them. It is only in this way that we can live independently, on the
basis of our own productive efforts; the person who attempts to live by
controlling others is a parasite. Within an organized society, moreover, we
must respect the rights of others if we wish our own rights to be respected.
And it is only in this way that we can obtain the many benefits that come from
social interaction: the benefits of economic and intellectual exchange, as well
as the values of more intimate personal relationships. The source of these
benefits is the rationality, the productiveness, the individuality of the other
person, and these things require freedom to flourish. If I live by force, I
attack the root of the values I seek.
The principle of justice is what
Rand calls the trader principle: living by trade, offering value for value,
neither seeking nor granting the unearned. An honorable person does not offer
his needs as a claim on others; he offers value as the basis of any
relationship. Nor does he accept an unchosen obligation to serve the needs of
others. No one who values his own life can accept an open-ended responsibility
to be his brother's keeper. Nor would an independent person wish to be kept—not
by a master, and not by the Department of Health and Human Services. The
principle of trade, Rand observes, is the only basis on which humans can deal
with each other as independent equals.
The Objectivist ethics, in short, treats
the individual as an end in himself in the full meaning of that term. The
implication is that capitalism is the only just and moral system. A capitalist
society is based on the recognition and protection of individual rights. In a
capitalist society, men are free to pursue their own ends, by the exercise of
their own minds. As in any society, men are constrained by the laws of nature.
Food, shelter, clothing, books, and medicine do not grow on trees; they must be
produced. And as in any society, men also are constrained by the limitations of
their own nature, the extent of their individual ability. But the only social
constraint that capitalism imposes is the requirement that those who wish the
services of others must offer value in return. No one may use the state to
expropriate what others have produced.
Economic outcomes in the market—the
distribution of income and wealth—depend on the voluntary actions and
interactions of all the participants. The concept of justice applies not to the
outcome but to the process of economic activity. A person's income is just if
it is won through voluntary exchange, as a reward for value offered, as judged
by those to whom it is offered. Economists have long known that there is no
such thing as a just price for a good, apart from the judgments of market
participants about the value of the good to them. The same is true for the
price of human productive services. This is not to say that I must measure my
worth by my income, but only that if I wish to live by trade with others, I
cannot demand that they accept my terms at the sacrifice of their own
self-interest.
Benevolence as a chosen value
What about someone who is poor,
disabled, or otherwise unable to support himself? This is a valid question to
ask, as long as it is not the first question we ask about a social system. It
is a legacy of altruism to think that the primary standard by which to evaluate
a society is the way it treats its least productive members. "Blessed are
the poor in spirit," said Jesus; "blessed are the meek." But
there is no ground in justice for holding the poor or the meek in any special
esteem, or regarding their needs as primary. If we had to choose between a
collectivist society in which no one is free but no one is hungry, and an individualist
society in which everyone is free but a few people starve, I would argue that
the second society, the free one, is the moral choice. No one can claim a right
to make others serve him involuntarily, even if his own life depends on it.
But this is not the choice we face.
In fact, the poor are much better off under capitalism than under socialism, or
even the welfare state. As a matter of historical fact, the societies in which
no one is free, like the former Soviet Union, are societies in which large numbers
of people go hungry.
Those who are capable of working at
all have a vital interest in economic and technological growth, which occur
most rapidly in a market order. The investment of capital and the use of
machinery make it possible to employ people who otherwise could not produce
enough to support themselves. Computers and communications equipment, for
example, have now made it possible for severely disabled people to work from
their homes.
As for those who simply cannot work,
free societies have always provided numerous forms of private aid and
philanthropy outside the market: charitable organizations, benevolent
societies, and the like. In this regard, let us be clear that there is no
contradiction between egoism and charity. In light of the many benefits we
receive from dealing with others, it is natural to regard our fellow humans in
a spirit of general benevolence, to sympathize with their misfortunes, and to
give aid when it does not require a sacrifice of our own interests. But there
are major differences between an egoist and an altruist conception of charity.
For an altruist, generosity to
others is an ethical primary, and it should be carried to the point of
sacrifice, on the principle: give until it hurts. It is a moral duty to give,
regardless of any other values one has, and the recipient has a right to it.
For an egoist, generosity is one among many means of pursuing our values,
including the value that we place on the well-being of others. It should be
done in the context of one's other values, on the principle: give when it
helps. It is not a duty, nor do the recipients have a right to it. An altruist
tends to regard generosity as an expiation of guilt, on the assumption that
there is something sinful or suspicious about being able, successful,
productive, wealthy. An egoist regards those same traits as virtues and sees
generosity as an expression of pride in them.
The fourth revolution
I said at the outset that capitalism
was the result of three revolutions, each of them a radical break with the
past. The political revolution established the primacy of individual rights and
the principle that government is man's servant, not his master. The economic
revolution brought an understanding of markets. The Industrial Revolution
radically expanded the application of intelligence to the process of
production. But mankind never broke with its ethical past. The ethical
principle that individual ability is a social asset is incompatible with a free
society. If freedom is to survive and flourish, we need a fourth revolution, a
moral revolution, that establishes the moral right of the individual to live
for himself.
David Kelley is the founder and senior fellow of the Atlas Society.
Copyright, The Atlas Society. For more information, please visit www.atlassociety.org.
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Learn about Mr. Stolyarov's novel, Eden against the Colossus, here.Read Mr. Stolyarov's comprehensive treatise, A Rational Cosmology, explicating such terms as the universe, matter, space, time, sound, light, life, consciousness, and volition, here.