Capitalism Unbound: The Incontestable Moral Case for Individual Rights by Andrew Bernstein. Lanham, Maryland: University Press of America, 2010. 146 pp. $19.95 (paperback).


With Congress debating far-reaching bills to expand federal control of health care, politicians and pundits blaming the economic downturn on allegedly free markets, President Obama fulfilling his promise to “spread the wealth around,” and dozens of czars overseeing wide swaths of American life, it seems that capitalism is in retreat. A rousing defense of capitalism, therefore, could not have come at a better time, and that is what Andrew Bernstein provides in his new book, Capitalism Unbound. Bernstein ably defends the achievements of the Industrial Revolution, presents the moral foundation for capitalism, skewers socialism, and indicates in some respects how several disasters—including the recent housing bust—were caused by government meddling in the economy.

Capitalism Unbound is an updated and highly condensed version of Bernstein’s 2005 book, The Capitalist Manifesto: The Historic, Economic and Philosophic Case for Laissez-Faire. With the new book, Bernstein promises “the essential points—presented in a simple, easy to read format” (p. ix).

He begins his sixteen-page Prologue, “The Primordial Struggle for Individual Liberty,” by mentioning that capitalism rests on the “moral code . . . of an individual’s inalienable right to his own life” (p. 1). After recounting the American Revolution as a key example of the furthering of individual rights, Bernstein applies the principle of rights to issues such as contracts, property, and employment. He then defines some key terms, including capitalism (“the system of individual rights, including property rights, in which all property is privately owned”), freedom (protection “against the initiation of force by either private citizens or the government”), and statism (“the subordination of the individual to the state [and] the repudiation of inalienable individual rights”) (pp. 10–11). The prologue concludes with a discussion of some of history’s most horrifying instances of statism, including tribal dictatorships, Soviet communism, National Socialism, and Islamic theocracy.

The rest of the book is divided into three parts, about the historical, moral, and economic superiority of capitalism, respectively.

In Part One, “The Historic Superiority of Capitalism,” Bernstein first summarizes the impoverished conditions of preindustrial Europe. He then explains how, inspired by Enlightenment thinkers, innovators of 18th-century England and 19th-century America achieved profound advances in technology and economic production, created goods and services that radically improved the living conditions of the common person, and often amassed fortunes in the process. These productive giants include steam engineer James Watt, steel titan Andrew Carnegie, and oil pioneer John D. Rockefeller, who by the height of his dominance had driven oil prices from fifty-eight cents to eight cents per gallon (p. 52). Bernstein reviews many of the economic advances of the Industrial Revolution, such as the enormous expansion of cotton cloth—spun English cotton increased twenty-four-fold between 1765 and 1784 alone—enabling “hundreds of millions of people worldwide . . . to dress . . . comfortably, cleanly, and hygienically” (pp. 34–35, emphasis removed).

Drawing on these lessons of history, Bernstein persuasively argues that capitalism, in recognizing individual rights, establishes the intellectual freedom that promotes productive achievement. Under capitalism, “an intellectually independent man enjoys a corresponding political independence,” enabling the theorist to publicly articulate his ideas and the inventor and industrialist to translate their ideas to the realm of material production (p. 42, emphasis removed). The right to one’s life, the right to one’s mind, and the right to one’s productive achievements entail each other, Bernstein argues.

After reviewing the “errors of the anti-capitalist historians” (pp. 53–57), Bernstein begins Part Two of his book, “The Moral Superiority of Capitalism,” with a discussion of the disconnect between the astounding productive achievements under capitalism and the negative evaluation of that same system by many intellectuals. Arguing that “morality trumps economics” (p. 63), Bernstein points out that intellectuals who accept the moral propriety of selfless sacrifice overlook the life-serving virtues and productive achievements of industrialists who selfishly pursue profit. The other chapters in Part Two discuss the morality of rational self-interest as the basis of capitalism and as the root of benevolence in society.

Part Three, “The Economic Superiority of Capitalism,” contrasts the success of capitalism with the failures of socialism and the mixed economy. In a chapter on socialism, Bernstein reviews the history of how Western industry propped up communism, and he explains how, far from establishing an efficiently planned economy, socialism disrupts the rational plans of productive individuals. In the final chapter, on mixed economies, Bernstein outlines the harms of coercive monopolies and unions, describes aspects of the economic destruction caused by government-induced inflation, and substantially explains how political controls caused both the Great Depression and the modern housing crisis.

Although Capitalism Unbound generally achieves the goals of its three parts—defending the Industrial Revolution, elucidating the moral basis of capitalism, and discrediting socialism and aspects of the mixed economy—the book suffers a number of problems. It is, in some respects, poorly organized; it ignores important debate about the role of monetary policy in generating boom cycles; it insufficiently explains why government intervention in the economy undercuts justice and productivity; and it lacks citations. Let us touch on these in order.

Among the organizational problems is that before sufficiently explaining what genuine capitalism is and contrasting it with widespread misconceptions about the system, the book launches into a six-page history of the American Revolution in a way that only weakly relates this history to capitalism. At the outset Bernstein does briefly distinguish capitalism from America’s mixed economy (p. x of the introduction) and mention that capitalism is the system of individual rights (p. 1); however, given that most people today—including college students, toward whom the book is largely aimed—regard capitalism as a system of political favors, corruption, and cronyism, lay readers may initially grope to understand what Bernstein seeks to defend and what the founders have to do with his case.

Regarding monetary policy, Bernstein describes some of the major harms of inflation, but he leaves ambiguous the matter of whether inflation can spur an untenable boom, as economists of the Austrian school have argued it can and has. As a consequence, Bernstein unpersuasively denies that inflation played a role in the boom economy of the late 1920s and ignores the question of whether monetary policy played a role in creating a boom prior to the modern housing bust.

Bernstein notes that inflation discourages savings and disrupts long-term planning, and he grants that the government may engage in a policy of inflation from “a desire to . . . maintain a booming economy” (p. 116; see also p. 117). However, while he loosely implies that the government can foster a temporary boom, he does not clearly state as much. This leads to further problems when he transitions from the section on inflation to the sections on the Great Depression and the housing bust.

Claiming that “the prosperity of the 1920s was genuine, not a groundless chimera,” and that prior to the bust “there was no debasement of the dollar’s value” (p. 118), Bernstein argues that what caused the crash and sustained the depression was not inflation but rather the anti-trade and interventionist policies of Hoover, followed by the hyper-interventionism of Roosevelt. The Federal Reserve’s only role in causing the bust, so far as Bernstein explains, was its “punitive policy” of interest-rate hikes in 1928 and 1929 (p. 119), not any boom-inducing policy of inflation.

That the 1920s was a decade of real innovation and wealth production is indisputable, as is the fact that myriad controls, starting with the Smoot-Hawley Tariff Act, exacerbated and sustained the crash. But these claims are perfectly compatible with the claims of Austrian-school economists that the federal government’s policy of inflation also contributed to the boom that led to the bust, and Bernstein unpersuasively dismisses the Austrians’ view.

Nor does Bernstein mention whether an inflation-induced boom fueled the recent housing crisis; in this respect, he discusses only the fact that the Federal Reserve raised interest rates starting in 2004, contributing to the bust (p. 126). This omission is particularly odd given that Thomas Sowell—on whose work Bernstein largely bases his analysis of this era—explicitly links the Federal Reserve’s policy of easy money to the boom.

Although Bernstein demolishes socialism and decries many of the corrosive elements of today’s mixed economy, he insufficiently demonstrates the problems inherent in the mixed economy, and, in some cases, leaves the reader wondering about the possible validity of certain forms of government intervention. For instance, he mentions “philosophy departments in a thousand universities” as an example of the “intellectual/spiritual wealth created under capitalism” (p. 91). But given the fact that most philosophy departments receive government subsidies via taxation, the reader may wonder whether such subsidization is essential to the existence of such departments. In this same vein, Bernstein fails to address the typical concerns that people reasonably have regarding our need of highway systems, dams, fire departments, water and sewage facilities, and the like. Many people think that our need of these values justifies government involvement in the economy, along with the taxation necessary to fund them, yet Bernstein does not address the question of how such values would be produced and maintained in a fully free market.

Finally, whereas in Bernstein’s previous book multiple citations were often grouped under a single end note, making it difficult to decipher which quote corresponds to which citation, in this new book citations are simply omitted, making it difficult to determine who said what, not to mention where they said it. For instance, on the first two pages of the prologue Bernstein quotes “a French economist.” Who is this economist, and where can we verify the quotation? The book neglects to say. In another instance, Bernstein quotes historian Burton Folsom on page 51, but fails to inform the reader as to the source of Folsom’s words. Bernstein then quotes him again several paragraphs later without specifying that Folsom remains the source. (An Internet search confirms that the additional quoted material came from Folsom.)

Despite its flaws, however, Capitalism Unbound offers a good introduction to the achievements of the Industrial Revolution, the moral case for capitalism, and the basic problems with socialism and (aspects of) the mixed economy. Bernstein shows that the progress of capitalism and the horrors of socialism are no accident but instead flow inexorably from the opposite political and moral premises on which those systems are based. Whereas under capitalism, the government recognizes and protects the individual’s moral right to pursue his own life and happiness by his own judgment, thereby unleashing economic prosperity, under socialism the government violates the individual’s rights and thereby quashes economic prosperity. These are messages the world desperately needs to hear.

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