Capitalism in One Lesson: Capitalism Is the Only Practical System Because It Is the Only Moral System
By Andrew Bernstein
Yeonmi Park considers herself a lucky woman. She was born in socialist North Korea in 1993. Her father was condemned to slave labor for importing and selling sugar and salt—a crime under the communist regime’s laws against black-marketeering. She was expelled from elementary school, receiving only the equivalent of a second-grade education. Her mother was arrested for illegally changing her residence. The family crashed into unspeakable poverty; Yeonmi suffered malnutrition and ate bugs to survive. At thirteen years old, she weighed but sixty pounds. With no hope of improving their situation, she and her mother escaped North Korea into China.
There, their troubles continued. Those who helped them leave North Korea were sex traffickers who subjected them to misery for years before they managed to escape. Eventually, she and her mother trudged mile after mile in the brutally cold Gobi Desert to reach Mongolia, where authorities threatened to return them to communist China. Mother and daughter vowed to commit suicide with their razors—and only then did the government officials relent. Yeonmi was finally permitted to defect to the relative freedom of South Korea, and, eventually, to America.1
Today, Yeonmi Park is the successful author of In Order to Live: A North Korean Girl’s Journey to Freedom, and she speaks out on Korean and American political issues. As an activist for the rights of North Koreans and oppressed persons globally, she savors the relative freedom of life in America. She has said, “When I came to this land [the United States] I just felt a spirit of justice,” and that “the best thing I could have given [my son] is American citizenship.”2
Why is life so grotesquely brutal under communism and similar politico-economic systems? Why is life so much better in freer, more capitalist countries?
To answer these questions, we will contrast capitalism with its antipode, statism (which includes all systems in which the state is supreme and the individual is subservient to it); examine contemporary economic evidence; compare the historical records of statist and more capitalistic systems; analyze the causes of capitalism’s wealth-generating capacity (which even its fiercest critics acknowledge); and evaluate the arguments of capitalism’s critics. Throughout, we will integrate these analyses to reveal one overarching lesson: Capitalism is the only practical system because it is the only moral system.
Capitalist versus Statist Systems
What are some essential differences between capitalist and statist systems?
In more capitalistic countries, such as the United States, South Korea, and much of Western Europe, individuals are free to choose their careers and where they will live; they are free to travel and to leave the country; they are free to speak out against government policy; they can openly hold religious beliefs or not, and of any denomination, as they choose; and so on.
Statist systems are those in which the state largely controls the individual’s life. Under statism, the government might decide one’s career, require that individuals gain permission to live in a given area, prohibit travel without government approval, restrict criticism of government policy, control the exercise of religion, and more. Communist nations, among the most statist of history, typically close their borders and kill those seeking to escape. If a person speaks out against the government, he may be arrested by secret police. If he openly holds religious views, he might be imprisoned and condemned to slave labor.
From such observations, we can see that one big difference between capitalism and statism is clear: Under full-blown statism, the state controls nearly every aspect of an individual’s life, so one lives by permission. Under capitalism, an individual lives freely, not by permission but by right. As long as he does not initiate force or fraud against others, an individual is free to live as he chooses. The government exists to protect the rights of individuals.
_The essence of capitalism is that it is the system of individual rights _.
Ayn Rand accurately defined capitalism: “It is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”3 This is the fundamental reason why capitalism leads to better living conditions: The principle of individual rights recognizes that human beings live by the work of their own minds and bodily effort. To live, people must be free to act on their own judgment as long as they do not violate the similar rights of others; that is, as long as they do not initiate force or fraud against other people. The principle of individual rights, therefore, requires a moral and legal ban on the initiation of force both by private citizens and especially, by the government.
The purpose of government and its moral justification is to protect individual rights. A proper society subordinates its government to a written constitution that spells out and upholds the inalienable rights of its citizens, which are not subject to the discretion of government functionaries.
But, to this day, no fully capitalist, fully rights-protecting social system has existed. The northern states of late-19th-century America came closest. But they were not fully rights-protecting. And what we have now in America and in the states we refer to collectively as “the free world” is not capitalism or even close to it. Rather, these are mixed economies: They mix substantial recognition and protection of individual rights with substantial coercion (e.g., regulations and licensing laws), which violates rights. (More on such violations later.)
The polar opposite of full capitalism is statism, which refers to any system in which the government does not recognize or protect individual rights but instead holds that the individual’s sole value is to serve the state. Today, the primary antipode to capitalism is socialism. Under full socialism, an individual’s life is socialized; it belongs not to the individual himself but to society (to the state). The National Socialists (Nazis) claimed that a man’s life belongs to the race; the communists argue that it belongs to the working class. For example, the Khmer Rouge, the Cambodian communists, repeatedly berated their victims with this spirit-crushing claim: “Losing you is not a loss, and keeping you is no specific gain.”4
Whether statist regimes are National Socialist or communist or some other variant, they all share this in common: _The state comes before the individual _. The government does not serve the people; the people serve the government. Hence, the catchall name for such systems is statism.
Capitalism, because it protects the individual’s right to his own life, is the moral system. And, as we’ll see, because this includes the right (and incentive) to create and own wealth, capitalism is the practical system.
The Economic Data
How do capitalism and statism impact people’s ability to generate prosperity? Both the Fraser Institute and the Heritage Foundation issue annual reports that examine the relationship between liberty and prosperity for almost every nation. Let’s look at some of their analyses spanning the past several decades.
The 2001 Index of Economic Freedom from Heritage noted, “The story that the Index continues to tell is that economically freer countries”—that is, those with strong protection of property rights and minimal regulation—“tend to have higher per capita incomes than less free countries.”5 At that time, the freest countries and territories, including the United States, Hong Kong, Singapore, and the United Kingdom, had an average per capita income in excess of $21,000. The “mostly free” countries, including Japan, Taiwan, Canada, Poland, and Sweden, had an average per capita income of more than $11,000. The “most repressed” nations, including Cuba, North Korea, Iran, and Iraq (under Saddam Hussein) came in at approximately $2,800. This means that the average per capita income in the freer nations was seven times greater than in the less-free nations. No wonder people sought to flee Cuba for the United States and not the other way around!
These trends continued. According to the Fraser Institute’s Economic Freedom of the World: 2013 Annual Report, “Virtually without exception . . . countries with institutions and policies more consistent with economic freedom have . . . higher income levels, and a more rapid reduction in poverty rates_._”6
The report’s data showing the relationship between economic liberty and prosperity are stunningly clear. The per capita gross domestic product (GDP) for nations in the top 25 percent of economic liberty was more than $36,000; in the lowest 25 percent, it was less than $4,400. In the freest countries, the average income of the poorest 10 percent was greater than $10,500; in the most repressed nations, it was $932. The poor under economic liberty were eleven times wealthier than the poor under statism. Further, the average income of the poorest 10 percent in the freest countries was more than double the overall average income in the least free. Put simply, the poorest people in the freest, most capitalist nations are financially twice as well off as the average people in the least free, least capitalist nations. What’s more, life expectancy averaged more than 79 years in more capitalist countries versus 60.2 years in the statist ones.
The trends identified in the earlier reports of economic liberty have continued; consider Heritage Foundation’s recent Index of Economic Freedom:
The standard of living, measured by per capita incomes, is much higher in economically freer countries. Countries rated “free” or “mostly free” in the 2021 Index generate incomes that are more than double the average levels in other countries and more than six times higher than the incomes of people living in . . . “repressed” countries.7
In summary, “Poverty rates are much lower in countries with higher levels of economic freedom.”8
Economic liberty is a significant part, but not the entirety of protecting individual rights. Freedom of speech and of religion, for example, are also important rights. A statist, semi-dictatorial government might permit a degree of private ownership and profit-seeking but not allow citizens to criticize the government, read certain books, or reject a state-backed religion. Nonetheless, it is stunning how even a limited amount of economic liberty leads to greatly increased levels of human well-being. The data point to an undeniable conclusion: Statism stifles and eliminates prosperity; capitalism enables it.
However, one common criticism of such data is: These measure mere material wealth, but there are more important issues in life, such as happiness. One answer is that desperately poor parents in statist countries who lose their three-year-old child to starvation fervently desire vastly more of that “mere material wealth.” Notice, for example, that caravans of the poor trudge from Latin America to the United States, not in the opposite direction. Why? Because the poor migrants want to live and be happy, and they want their children to live and be happy—and they know that the freer system best facilitates that noble goal.
Capitalism’s enemies also criticize it because of the resulting economic inequality. It is true that in a free society, some people will go further and climb higher than others. Individuals differ in their work ethic, talents, starting points, and choices of work; consequently, some will become vastly wealthier than others. This is a virtue, not a flaw, because it means everyone can choose his own line of work, and talented, hardworking people can earn and retain a fortune. Nor is “economic equality” a legitimate value. Prosperity, not equality, is a value. Most people realize this: They would much rather make $21,000 per year in a society in which some others are millionaires than make $3,000 per year in a society in which everyone makes $3,000. The former is indicative of capitalism; the latter, of socialism (and of statism more broadly).
Also, people who work from sunup to sundown six or seven days per week to scratch out a bare subsistence lack the time, energy, and money to pursue artistic or intellectual interests. The attainment of material comfort creates leisure time to engage in nonmaterial pursuits. Where, after all, do literature and the arts, philosophy, and the sciences most flourish—in the United States or North Korea? In Israel or Iran? Capitalism is the system that enables the creation of prodigious amounts of such intellectual and spiritual wealth in the form of songs and symphonies, novels and dramas, scientific and philosophic advances, and much more.
Here, from a fresh perspective, we can see the unparalleled ability of capitalism to support human life. This is what makes capitalism the only practical and moral social system.
We’ve glimpsed the political-economic state of freer versus less free nations in the 21st century. But what were living conditions like in preindustrial countries before there was even a modicum of protection for individual rights? Let’s examine the history and see.
Life under Feudalism
The roots of capitalism stretch back to 18th-century Britain. What were conditions like before that?
Some authors speak glowingly of a lost “Golden Age” before the development of industrialization and the factory system—an age in which workers supposedly lived happily in freedom and prosperity. Friedrich Engels, the Communist writer and collaborator of Karl Marx, provides a taste of such anticapitalist claims. He wrote a book titled Conditions of the Working Class in England in 1844, claiming that workers of the precapitalist era enjoyed a “standard of life that was much better than that of the factory workers today [the 1840s]. They were not forced to work excessive hours; they themselves fixed the length of their working day and still earned enough for their needs.” They supposedly had time for recreation and played “bowls and football” with their neighbors. If children helped their parents work, it “was only an occasional employment and there was no question of an eight-or-twelve-hour day.” In the absence of extensive child labor, “workers’ children were brought up at home. . . . Children grew up in idyllic simplicity and in happy intimacy with their playmates.”9
Capitalism’s critics arrived at two general conclusions: first, that the workers’ living conditions were generally satisfactory (or at least bearable) under feudalism, the form of statism in which political power is concentrated in the hands of a hereditary aristocracy; and second, that the factory system of industrialists lowered these living standards significantly and “forced” people to work. The truth, however, is the reverse. Even the richest people in feudal times were atrociously poor by standards of the modern industrial era; and to the extent that capitalism was adopted, it raised workers’ living standards to heights never before dreamed of. Further, under capitalism no one is forced to do anything.
The Abysmal Poverty of Precapitalist Europe
Before the industrialization of Britain, the state of the English working class was poverty and misery beyond anything since witnessed in the Western world.
Famine—including death by starvation for thousands—was widespread. Sanitation and sewerage were nonexistent; filth, excrement, and vermin filled the streets of towns and the hovels of the poor. Lethal disease of every variety was virtually inescapable, especially among the poor. Historians Mabel Buer and M. Dorothy George report that people simply dumped garbage and sewage into the street, and human and animal excrement fouled the streams from which came their drinking water.10 This caused the proliferation of vermin and germs. Outbreaks of cholera, dysentery, typhoid, and other diseases were common and deadly. The fleas that rats carried caused the dreaded bubonic plague—a ghastly horror that afflicted Europe for centuries up to and including the 1700s.
To say that incomes were low is a gross understatement. In the modern Western world, the poverty of feudal Europe is almost unimaginable. For example, by a test employed in Lyon, France, in the 17th century, poverty meant a man’s daily income was insufficient to buy him a crust of bread. In 17th-century England, 25 to 50 percent of the population subsisted near, at, or below this level of poverty.11
According to economic historian Angus Maddison, Europe managed zero economic growth from AD 500 to 1500—and per capita annual income stood at $215 in 1500. European economic growth inched up to only 0.1 percent from 1500 to 1700, and per capita income was an estimated $265 at the turn of the 18th century.12
The grim result? According to E. A. Wrigley and R. S. Schofield in The Population History of England 1541–1871, on the eve of the Industrial Revolution in mid-18th-century England, life expectancy was less than thirty-five years.13
Death by starvation was prevalent. A 1662 French report stated: “Famine this year has put an end to over ten thousand families . . . and forced a third of the inhabitants . . . to eat wild plants.” Another commentator said, “Some people ate human flesh.”14 The situation was dire.
“It is difficult for those living in the industrialized countries of the 20th century to imagine hunger and famine,” wrote the historian Carlo Cipolla. “People literally died of hunger and it was not unusual to find men dead at the roadside, their mouths full of grass and their teeth sunk in the earth.”15
In Scotland, the so-called Lean Years of 1697–1703 saw widespread crop failure and harrowing suffering. Historian Arthur Herman wrote, “No one knows how many died during the Scottish famine . . . but they probably numbered in the tens of thousands”—a significant number, particularly in a country of roughly 1.2 million inhabitants. In the same period, a horrific tragedy struck Finland. The eminent historian Fernand Braudel stated, “If one wants to measure the catastrophes of history by the proportion of victims claimed, the 1696–7 famine in Finland must be regarded as the most terrible event in European history. A quarter or a third of the Finnish population disappeared at that time.”16 Further, he wrote, “Famine recurred so insistently for centuries on end that it became incorporated into man’s biological regime and built into his daily life. Dearth and penury were continual and familiar.”17 Indeed, persistent famine did not disappear from western Europe until the 18th century.18
Third-World Europe
Britain was the equivalent of a third-world country before the Industrial Revolution. The rampant famine, the incessant outbreak of plague and other diseases, the crushing poverty, and the abysmally low life expectancy were akin to areas of Africa today—the world’s poorest region.
But third-world Europe was vastly worse off than is Africa today. At least contemporary Africa benefits from modern agriculture, electricity, cars, airplanes, and antibiotics. Consequently, life expectancies in many African nations are significantly higher than in third-world Britain. Although some areas of contemporary Africa have life expectancies in the thirties, many are in the fifties. The advances that have made this possible were not available in preindustrial Britain for the simple reason that none had yet been invented. All are products of the capitalist era. Further, in 2011, the per capita GDP of the world’s poorest nations stood at around $4,382 annually; per capita income of the poorest 10 percent of those in the poorest nations stood at $932 (in 2011 U.S. dollars). This is well more than three times the average income of $265 in early-18th-century Europe.19 These figures were as high as they were in 2011 only because of the infusion of Western technology, investment, business acumen, and charity. Without such aid from substantially capitalist countries, the living standards of today’s third-world nations would be much lower—similar to those in third-world Europe. Consider the famine in Ethiopia in 1983–1985 (ruled then by a Marxist regime) in which an estimated one million people died.20 Or take the widespread famine in Communist North Korea in 1994–1998; in a population of approximately 22 million, an estimated 500,000 people (possibly more) died of malnutrition.21 In both cases, the catastrophes would have been worse were it not for massive donations of food, much of it from the United States and other semi-capitalist countries. But, in prior centuries, there were no wealthy semi-capitalist nations to come to the aid of the starving poor in Europe.
They simply died—often young.
Political Oppression and Economic Destitution
As we’ve already glimpsed, the most politically repressed nations today are, by far, the poorest. It was the same in Europe’s feudal era. Political repression was everywhere a constant. European nations—including Britain—were often ruled by a combination of monarchy, aristocracy, and official state-backed religions. There was no concept of or protection for individual rights and consequently, no freedom; in practice, everyone’s life belonged to the state.
British subjects, for instance, suffered from such oppressive policies and institutions as serfdom, guilds, tariffs, and ludicrous taxes. Under serfdom, peasants were tied to specific tracts of land and forced to work for aristocrats, who seized the bulk of their output. This undercut incentives to produce and blocked the potential for a mobile labor force that could move to areas of greater opportunity. The prevalence of government-backed guilds—professional organizations that generally required workers to pay an entrance fee and then serve a years-long, unpaid apprenticeship—ensured that no matter how talented a young baker, blacksmith, or other worker might be, he was legally forbidden to set up shop on his own. But an entrance fee and years of unpaid toil were exactly what the poor could not afford. Then there were the “Corn Laws,” high tariffs on imported grain supposedly intended to “protect” British landowners. The artificially high prices of bread (and other food) were especially onerous for the poor, who suffered starvation. Finally, there were the endless taxes, including the astonishing “window tax” that impelled many of the poor to board up windows, thereby restricting the flow of fresh air and sunlight, leading to increasing numbers of dank, airless spaces that bred germs.
The rise of the principle of individual rights in 18th-century Britain constituted a cultural revolution. This is the era of proto-capitalism, which emerged amid the oppression of feudalism—and sounded its death knell. The proto-capitalist revolution in late-18th-century Britain brought nearly immediate improvement to general living standards and especially, to the lives of the poor. Regarding the period between 1790 and 1850, economic historian J. H. Clapham stated, “For every class of urban or industrial labour about which information is available . . . wages had risen markedly.”22 Gradually, many rights-violating restrictions were curtailed or dropped. The onerous Corn Laws were repealed during the early 1800s, resulting in lower prices for imported grain. Likewise, import duties on meat, butter, cheese, and other food were reduced, making vital supplies less expensive. Economic historian R. M. Hartwell wrote, “The conclusion . . . is unquestionably that the amount and variety of food consumed increased between 1800 and 1850.”23 Further, Britain’s textile mills manufactured vast supplies of cotton clothing, and the economies of scale made that clothing significantly less expensive. In this and countless other ways, the burgeoning system of industrial proto-capitalism raised wages, lowered prices, and increased wealth for all.
Even Marx and Engels—capitalism’s most strident critics—acknowledged the stupendous life-giving achievements of the era’s industrialists. In The Communist Manifesto, they wrote:
The bourgeoisie, during its rule of scarce one hundred years, has created more massive . . . productive forces than have all preceding generations together. Subjection of Nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalisation of rivers, whole populations conjured out of the ground—what earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?24
Capitalism, to whatever degree it exists, enables people to create wealth unmatched by any statist system. It does so without regard to an individual’s social status, unleashing the self-made man or woman to rise from poverty into middle-class affluence, and at times into fabulous wealth. Benjamin Franklin, Andrew Carnegie, Madam C. J. Walker, Ray Charles, and Sam Walton are only a handful of such American examples. Billions of human beings in semi-capitalist nations have enjoyed higher living standards; longer life expectancies; the creation of vastly more literary, musical, artistic, and intellectual wealth—monumentally enhanced well-being. These are all trademarks of capitalism; they never occur under statist systems.
From this historical standpoint, we can discern that feudalism—like communism and other statist regimes—was antithetical to human life and flourishing, which brings us back to our lesson: Capitalism is the only system that honors the requirements of human life, which makes it both the only moral social system and the only practical one.
How, by what means, does capitalism accomplish these advances?
The Philosophic Cause of Capitalism’s Superiority
What must we do not merely to survive but to flourish? How do we create food, clothing, shelter, medicine, scientific advances, and the countless material and intellectual values that enable us to thrive?
By means of the mind. Our rational faculty is the fundamental source of wealth. Oil, iron ore, fertile lands, and such—the givens of nature—are useless until someone discovers ways to use them productively. Man’s thinking mind—not petroleum or coal or any other raw material—is the “ultimate resource,” as economist Julian Simon termed it.
In Atlas Shrugged, Ayn Rand showed that every value on which human life depends is the product of a reasoning mind. Food must be grown, which requires knowledge of agricultural science, which requires reason; medicines must be researched and developed, which requires knowledge of biology, which requires reason. Houses must be built, which requires knowledge of architecture, engineering, and mathematics, which requires reason. Every great work of art and every advancement in philosophy or science is an achievement of individual genius. Every value that advances human life is a product of the reasoning mind.
Every species on Earth has evolved specific attributes that enable its survival. Birds have wings to fly, lions have claws and fangs to subdue their prey, and so forth. Notice that these species survive because of physical qualities—wings, size, strength, speed, and the like. But physically, humans are weak. We lack the wings, strength, size, and claws of other species. The attribute enabling our survival is the human mind.
Given this truth, the question is: Which social system most effectively liberates human minds to create intellectual and material wealth? Let’s do some thought experiments.
What would have happened to the brilliant American agricultural scientist George Washington Carver, who was born a slave, if slavery had persisted? He would have been forced to work the fields, denied an education, and coercively restricted from pursuing science.
What would have happened to Charles Darwin if he had tried to publish On the Origin of Species under the Taliban? He would have been killed and his book burned.
What would have happened to Ayn Rand if she had remained in the Soviet Union and defended capitalism? She would have been sent to a Siberian gulag, where a prisoner’s life expectancy was measured in months.
Under any statist regime, the only “thinking” an individual may articulate or act on is what the state permits. Under such regimes, an individual’s life belongs to the state, and if an independent thinker openly disagrees, he will be silenced—imprisoned, enslaved, or killed.
Capitalism—the system of individual rights—liberates the mind. Rights recognize that man lives by using his mind, and they sanction his freedom to use it. Rights recognize that your life belongs to you, not to the state or anyone else. Every human being is properly the sovereign master of his own life. He has the right to live as he sees fit, so long as he doesn’t violate the rights of others; that is, as long as he does not initiate force or fraud against others.
This is the essence of what capitalism recognizes and protects: the fact that your life belongs to you, and that your mind belongs to you—to use in service of your life. All forms of statism reject this principle.
Historically, Britain generally was freer than the nations in continental Europe; and, as we’ve seen, in the 17th and 18th centuries the concepts of individual rights and personal liberty were starting to gain intellectual currency there. One famous example of this was the Two Treatises of Civil Government, written by English philosopher John Locke, who formulated a brilliant defense of private property rights, writing:
Every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property.25
Further, he wrote,
The state of nature has a law of nature to govern it, which obliges everyone; and reason, which is that law, teaches all mankind, who will but consult it, that being all equal and independent, no one ought to harm another in his life, health, liberty, or possessions.26
Later, in Britain’s rebellious North American colonies, this idea was paraphrased by Thomas Jefferson in the Declaration of Independence as an individual’s “inalienable right to life, liberty, and the pursuit of happiness.” Also in 18th-century Britain, the brilliant Scotsman Adam Smith, formerly a professor of moral philosophy at the University of Glasgow, largely pioneered the study of economics with his monumental book The Wealth of Nations (1776). In it, he urged that protecting liberty would result in substantially increased prosperity for all.
Smith, of course, was correct—and the reason is that liberty enables individuals to use their minds in service of human flourishing. Observe the torrent of life-giving advances that followed as these ideas gained cultural ascendency in Britain and America.
Freeing the Mind—and the Consequences
Who were some of the great thinkers, liberated by increased freedom, who brought about substantial improvements in living standards? One hero of proto-capitalism—that is, the era of increasing protections for individual rights—was Scottish inventor James Watt (1736–1819). He perfected the steam engine, the work engine of the Industrial Revolution, which enabled the mass production of cotton clothing, among other things. A penniless commoner in one of Europe’s poorest countries, Watt would have had little chance to rise to engineering greatness and wealth before the relative freedom of 18th-century Britain, but as a proficient, largely self-educated workman at the University of Glasgow, he caught the attention of Professor Joseph Black. A leading scientist of the period, Black discovered the principle of latent heat in 1761 and, three years later, measured its quantity in steam.
After working with Black, Watt formulated the idea of separate condensation, which enabled him to design an engine generating constant motion. He later journeyed to England, going into partnership with Matthew Boulton at the Soho Engineering Works near Birmingham. In Boulton, Watt found a mind brilliantly able to handle engineering issues. Further, Boulton, already established in business, employed the artisans Watt required to create the engine’s intricate mechanisms.
The Watt and Boulton steam engine powered the mass production of an enormous quantity of commodities, enhancing the prosperity of millions of lives. The steam engine was the beginning of the machine age and had immensely life-advancing results. For instance, the application of steam engines in the British textile industry so increased the production of cotton yarn that by 1812, its price had dropped to 10 percent of what it had been decades earlier. Historian Paul Johnson pointed out that by the 1860s, “the price of cotton cloth . . . was less than 1 percent of what it had been in 1784. . . . There is no previous instance in world history of the price of a product in virtually universal demand coming down so fast.”27 Because scrubbing clothes adds to wear and tear, the poor, who previously could afford only one set of clothes, wore them unwashed every day, contributing to the spread of germs and vermin. Now, with cotton clothing so much cheaper, they could afford to buy more and regularly wash them. Therefore, hundreds of millions of people worldwide were able to dress—at long last—comfortably, cleanly_, hygienically_.
The application of the powerful Watt and Boulton steam engine to the manufacture of textiles in 1785 was the “Big Bang of the Industrial Revolution.”28 Previously, human productivity was limited to the muscle power of men and draft animals, sometimes augmented by the force of rushing rivers. The work was backbreaking, and the output paltry. The power of machinery revolutionized men’s productive capacity.
Similarly powerful advances followed in the late 19th century: the harnessing of electricity made possible electric lights, then refrigerators, freezers, stoves, washing machines, vacuum cleaners, and countless other inventions. Together, these added to human productivity, giving people more nutritious, safer foods, as well as cleaner homes and clothes. In the 20th century, the creation of the internal combustion engine revolutionized personal transportation and enabled the invention of tractors, harvesters, and combines, which immensely increased the production of food. The development of diesel locomotives enabled freight trains to deliver enormous quantities of goods across a continent. The creation of derricks, steam shovels, cranes, and power tools facilitated the building of homes, office buildings, hospitals, and other structures.
Machine power is embodied mind power. When people are free to use their minds to create vast quantities of consumer goods, as they are under more capitalistic systems, it prodigiously improves human life.
Economists draw a critical distinction between nominal (or monetary) wages and real wages. Nominal wages are “in name only”—for example, $10 per hour or $400 per week. Obviously, a higher nominal wage is better than a lower one, but an individual’s standard of living is dependent not on how much he makes but on how much he can buy with what he makes. One might make $100 an hour, but if bread costs $800, he’d work all day to earn a single loaf.
The all-important point regarding wages is not how high they are—but how high they are relative to prices. What’s important is how many life-serving goods and services one’s money can buy in the marketplace. Real wages represent an individual’s income measured in terms of purchasing power. Economically speaking, central to a person’s well-being is the amount of food, clothing, shelter, medicine, and so forth that he can obtain in exchange for his money.
There is only one condition under which people can generate sweeping prosperity: the freedom to create a colossal supply of vital goods relative to demand for them, which thereby lowers prices and facilitates rising real wages.
The only way to create massive availability of life-serving goods is to prodigiously increase our productive power. We must produce vastly more of the goods our lives require—food, homes, clothing, and so forth. How do we do this? By industrialization. How do we industrialize? By advances in science and technology. How do we make advances in science and technology? By mind power. How do we unleash the mind power of eight billion human beings to create material wealth? How do we unleash that of writers, artists, and philosophers to create superlative intellectual and spiritual wealth? By the universal protection of individual rights.
This is how we improve human life immensely: by recognizing and protecting individual rights and thus freeing the human mind to think, innovate, and produce. Capitalism is the only social system that does so. Capitalism is the only moral and thus practical system.
Rising Living Standards during and Due to the Industrial Revolution
For much of the 20th century, a debate raged among economic historians between the so-called optimists and pessimists. The optimists recognized that the Industrial Revolution raised living standards among workers and the poor generally; the pessimists claimed that it lowered living standards for both. That debate is over.
Statistical analyses conducted by economic historians show significant gains for virtually all types of workers during this era. Data from 1781 to 1851 show an average real wage gain of more than 60 percent for farm workers, more than 86 percent for blue-collar workers, and more than 140 percent overall, including white-collar workers. Economic historians Peter Lindert and Jeffrey Williamson pointed out that the material gains were even greater after 1820 than optimists had previously claimed.29
Williamson concluded,
After a long stagnation [stretching for centuries during the feudal era] blue collar workers’ real wages doubled between 1810 and 1850. This is a far larger increase than even past optimists had announced. . . . the average worker was much better off in any decade from the 1830s on than in any decade before 1820.30
The great Austrian economist Ludwig von Mises put it this way:
The outstanding fact about the Industrial Revolution is that it opened an age of mass production for the needs of the masses. The wage earners are no longer toiling merely for other people’s well-being [like a serf on a feudal estate]. They themselves are the main consumers of the products the factories turn out. Big business depends on mass consumption.31
There are laws in economics, as there are in physics. The latter tell us that it is not possible to leap off the observation deck of the Empire State Building and fly to Paris by flapping your arms. Similarly, in a market, it is not possible to vastly increase the supply of consumer goods relative to demand while lowering real wages and living standards of the general population. In the words of the 19th-century French economist Jean Baptiste Say, “Produce, produce, that is the whole thing!”32 By the laws of economics, a substantial increase in the supply of vital goods relative to demand for them will bring prices down and real wages up. Economic history shows us that this is exactly what occurred.
Capitalism’s critics often blame the burgeoning proto-capitalism of the Industrial Revolution for the poverty of factory workers during the early days of industrialization. This is to commit the logical fallacy of dropping the context. No phenomenon can be understood independent of the causal factors that gave rise to it. The destitution of the European masses prior to the Industrial Revolution has been thoroughly documented: A handful of aristocrats were wealthy, whereas the masses, held down by rights-violating feudalism, suffered inhuman poverty. This abhorrent legacy was inherited by proto-capitalism upon its historic emergence in the late 18th century. To ignore this is to sweep aside the reasons for such destitution. To then accuse capitalism of causing the very poverty it was finally eradicating is to commit both a logical fallacy and a profound injustice. For all sincere humanitarians, the proper attitude is to venerate capitalism, not censure it.
Further, it was rising real wages in Britain (and later in all semi-capitalist nations) that finally put an end to child labor. For centuries prior to the emergence of proto-capitalism, children had performed grueling labor in the fields or cottage industries. In the early days of the Industrial Revolution, they toiled in the factories. The reason is manifest: Parents were too poor to support the children; in many cases, they could not support themselves. Children labored to eat. Poor parents preferred that their children work in the factories than in the fields or cottage industries because machine power both lightened the workload and increased productivity, generating higher wages. But the most valuable achievement was that in mere decades, rising real wages enabled millions of parents to provide for their children with no need for the young to work. This was accomplished—for the first time in history—thanks to increasing protections for individual rights—meaning, increasing degrees of capitalism.
To legislate against child labor in the absence of rising real wages would have condemned countless numbers to starvation. And of course, destitute parents would rather their children work than starve. So, such legislation merely drives the practice underground, giving rise to a “black market” of child labor. Today, child labor exists throughout statist third-world regimes, because the lack of technological advance there renders it impossible to create vast supplies of goods and, thus, impossible for millions of parents to feed their children.
Not surprisingly, life expectancies rose during the Industrial Revolution after stagnating near the mid-thirties for centuries. In 1541, the English life expectancy was 33.75 years. In 1761, on the eve of the Industrial Revolution, it was still merely 34.23 years. It had increased by less than half a year in more than two centuries. By contrast, in 1811, it was 37.59; in 1851, it had climbed to 39.54; and in 1871 to 41.31.33 During the Industrial Revolution, in a little more than a century, the average life expectancy increased by more than seven years. Population expert Samuel Preston wrote, “It is clear that a steady advance begins just after the turn of the 19th century, and accelerates after about 1871–75.”34
Whereas the preindustrial period could generate only minor (often downward) fluctuations in life expectancy, the Industrial Revolution created a sustained upward movement. Economic historian R. M. Hartwell pointed out, “People lived longer because they were better nourished and sheltered, and cleaner, and thus were less vulnerable to infectious [diseases].”35 Julian Simon wrote, “It took thousands of years to increase life expectancy at birth from just over 20 years to the high 20s. Then in just the past two centuries, the length of life . . . in the advanced [i.e., industrialized] countries jumped from less than 30 years to perhaps 75 years.”36 The historical data conclusively establish that capitalism supports human life, and rights violating systems undermine it. Again, from a new perspective, we return to the lesson: Capitalism is the sole practical system because it is the sole moral system.
In the second half of the 19th century, Britain gave way to the United States as the world’s most advanced civilization of rights protection and industrialization. The life-giving results were dramatic.
The Inventive Period
In the late 19th century, America’s northern states came as close to laissez-faire capitalism as any society has yet come. Slavery had been terminated, the North had no oppressive Jim Crow laws, and the “Progressive” push toward socialism had barely begun. There were few restrictions on creative minds. Individuals could think, write, and speak as they wished; they could develop new theories; they could disagree with the state and/or the church; they could invent technologies; they could start new companies; they could produce and trade at will; and they could make and keep a fortune. What was the result?
Brilliant individuals used this freedom to create unprecedented life-promoting wealth. Take, for example, Thomas Edison’s contributions. Edison’s singular career included the invention of the phonograph (1874), the incandescent lightbulb (1879), the electric power plant (1882), the motion picture camera (1893), the storage battery (1909), and numerous other devices.
Alexander Graham Bell (1847–1922), a Scottish immigrant, invented the telephone in 1876, a device soon to revolutionize the field of communication.
In 1885, in Chicago, the distinctively American architectural achievement—the skyscraper—debuted. Erected by the brilliant engineer William Le Baron Jenney (1832–1907), the ten-story Home Insurance Company building was the first edifice constructed with steel girders using a genuine skyscraper “cage design.” The renowned architect Louis Sullivan (1856–1924) worked briefly for Jenney, and his famous skyscrapers best represent Chicago’s phoenixlike rise from the ashes of the Great Fire of 1871.
Such towering buildings required safe, efficient elevators. This problem was solved by Elisha Graves Otis (1811–1861), whose invention of critical safety devices alleviated the hazards of rapid ascent and descent. Otis established a factory in Yonkers, New York, and shortly before his death in 1861 patented and manufactured his steam elevator.
During the years that steel and concrete structures tall enough to “scrape the sky” were conceived, John Roebling (1806–1869) perfected the design of suspension bridges and began his masterpiece, the Brooklyn Bridge. Completed in 1883, this epic accomplishment ushered in the great age of expansive suspension bridges.
That recounting merely scratches the surface of life-sustaining American advances during the late 19th century. The historian Charles Beard—who was no friend to capitalism—wrote, “Nearly every year between the close of the civil conflict [the Civil War, 1865] and the end of the 19th century witnessed some signal achievement in the field of applied science.”37
As the 20th century dawned, America’s technological innovators were just getting started. Engineers in several countries built automobiles—but it was Henry Ford (1863–1947) in Michigan who made the new form of transportation commercially viable. He began the Ford Motor Company in 1903; in time, he doubled wage rates for machinists, giving his company the pick of the most productive workers in Detroit. Between 1909 and 1924, he lowered the cost of a new Model-T from $850 to $260, in large part thanks to his pioneering use of the assembly line. Ford was a visionary entrepreneur who grew wealthy by making the automobile a commercial success, revolutionizing personal transportation in America—and subsequently around the world. The automobile enabled people to travel faster, further, more comfortably, and less expensively than ever before, empowering millions to pursue careers and leisure that were not possible earlier.
And 1903 was also the year that Wilbur (1867–1912) and Orville (1871–1948) Wright, two bicycle mechanics from Dayton, Ohio, self-educated in aeronautical engineering, accomplished the first controlled, powered flight of a heavier-than-air vehicle at Kitty Hawk, North Carolina. The Wrights studied aeronautics intensively, poring over the era’s leading aeronautics texts, experimenting with flying devices, and devising the first wind tunnels to test their models. Sixty-six years after the Wrights first flew—after millennia of humans dreaming of flying—Americans landed safely on the moon.
The steel used in the first skyscrapers, the Brooklyn Bridge, the New York City subway, and much else, was supplied by Carnegie Steel. Andrew Carnegie (1835–1919), a Scottish immigrant, devised methods for creating high-quality, inexpensive steel. The eminent historian Paul Johnson wrote that Carnegie’s furnaces produced “nearly one-third of America’s output [of steel] and they set the standards of quality and price.”38 In 1875, steel rails cost $160 per ton; by 1898, they’d dropped to only $17 per ton.39 Construction of every kind—including apartments, office buildings, automobiles, trucks, railroads, locomotives, ships, tractors, combines and other farm equipment, water and sewer mains to keep waste products out of the drinking water, and so forth—was now more affordable and safer, all to the immense material betterment of virtually every man, woman, and child in the country.
John D. Rockefeller (1839–1937) was, likewise, a titan of productivity. He increased the production of petroleum products enormously, and between Carnegie and Rockefeller they created the indispensable necessities of industrial civilization: building materials and fuel. Like Carnegie, Rockefeller was a stickler for cutting costs. He built his factories efficiently and saved on insurance. The historian Burton Folsom wrote that Rockefeller employed his own plumbers and “almost halved the cost on labor, pipes, and plumbing material.”40
He also understood a paradoxical truth that escapes some businessmen and virtually all anticapitalist intellectuals, including and especially Marx and Engels: He increased profits by paying higher wages. Like Ford, Rockefeller thereby gained the pick of the most efficient, hardworking, and productive workers. A business does not create wealth by employing the cheapest labor force—but the most productive.
The result of Rockefeller’s genius was inexpensive oil for everyone. By the mid-1880s, Standard Oil accounted for 90 percent of America’s refining industry and had lowered the price from 58 cents to 8 cents a gallon. Rockefeller wrote to one of his partners: “We must . . . remember we are refining oil for the poor man and he must have it cheap and good.”41
Rockefeller, Carnegie, Ford, and others were more than self-made men. They were creative geniuses of material production.
American creative geniuses flourished also in the 19th and early 20th centuries in literature (Nathaniel Hawthorne, Edgar Allan Poe, Mark Twain), psychology (William James), music (George Gershwin, Duke Ellington), film (the creation of the entire industry), philosophy (Ayn Rand), and every other branch of the humanities.
The examples could be multiplied endlessly, but the principle is clear: Capitalism liberates the creative human mind to pioneer life-promoting progress in every field of endeavor, whether it is food of increased quantity and quality; or inexpensive, efficiently manufactured steel; or automobiles, airplanes, locomotives, and railroads; or great works in literature and music; or advances in psychology; or a thousand other life-supporting values. Capitalism is the only practical system because it is the only moral system—practical because it liberates human beings to use their minds and create the values on which human life and flourishing depend.
Errors of the Anticapitalist Historians
How do historians assess this era of unprecedented creativity in technology and industrialization? Unfortunately, most do not begin to appreciate capitalism. Employing a line from Twain, American historians characteristically refer to the post–Civil War period as the “Gilded Age,” implying that America’s ascent to wealth was inherently corrupt. (“Gilded” means to coat with gold, providing a deceptively pleasing outward appearance.) Often these same historians dub the major businessmen of the era “robber barons,” as if their fortunes were gained by force, fraud, graft.
Richard Hofstadter is a representative example, expounding the view that 19th-century American business was persistently rapacious. In The American Political Tradition and the Men Who Made It, he wrote, “Under the competitive capitalism of the 19th century, America continued to be an arena for various grasping and contending interests.”42 In a chapter titled “The Spoilsman: An Age of Cynicism,” Hofstadter claimed,
The industrialists of the Gilded Age were . . . parvenus and they behaved with becoming vulgarity; but they were also men of heroic audacity and magnificent exploitative talents—shrewd, energetic, aggressive, rapacious, domineering, insatiable. They directed the proliferation of the country’s wealth, they seized its opportunities, they managed its corruption.43
Hofstadter took it as self-evident that the leading entrepreneurs of the period gained their wealth by venal and fraudulent methods. He treated corruption as the dominant essence of the age.
Not surprisingly, then, Edison was not deemed worthy of inclusion in his chapter on late-19th-century America. Bell was not mentioned. The achievements of the Wright brothers were not included. Nor was Ford’s mass production of automobiles. Hofstadter made endless claims about the “rapacity” with which industrialists strove for wealth and power. But the inventions, the innovations—and the brilliant minds who created them—apparently were unworthy of his notice.
But to those who honestly study economic history, the facts of America’s economic growth are clear. Average American gross national product doubled between the ratification of the Constitution and the outbreak of the Civil War—and then, despite the arrival of millions of penniless immigrants, doubled again between the conclusion of the Civil War and the outbreak of World War I. American production of anthracite coal increased by 422 percent, of bituminous coal by 2,260 percent, of petroleum by 9,060 percent, and of crude steel by 10,090 percent. Real wages rose by 20 percent, and per capita income grew by an average of 3 percent annually.44 Economist Jonathan Hughes wrote that America’s “rise in population, enormous as it was, was actually outstripped by increases in output of goods and services to such an extent that the rising output per head of population came to be a thing taken for granted by Americans.”45 Increasing production of goods meant greater supplies, diminishing prices, increasing real wages, the emergence of a widespread middle class, and rising living standards across vast swaths of society. Paul Johnson summarized this development: “From about 1870 onwards, American industrialists, inventors, and salesmen began to bring the fruits of the earth, and its man-made mechanical marvels, to the bulk of the American population in unheard of abundance. . . . Food, housing, refrigeration, light, and power . . . were suddenly made available” and within reach of almost everyone.46
The designation “Gilded Age” does not merely miss the essence of the era; it grossly distorts it. Late-19th-century America appeared golden because its foundation was 24-karat gold—especially when contrasted with the horrifying stagnation of the prolonged feudal era. Fraud is present in any country and era, and it is vastly more prevalent in statist societies than in free ones, because innocent people must bribe powerful officials and commissars who hold life-and-death power over them. But a brilliant starburst of technological advance is not similarly common. The unprecedented progress—especially in technology—is the distinguishing characteristic of the age. Inventiveness was the dominant theme of the era. That’s what must be acknowledged and celebrated. In justice, the era should be glorified for what it was: the Inventive Period. If Germany is the land of poets and philosophers, then the United States is the land of inventors and innovators.
No thinker has understood this vital point as clearly as Ayn Rand. In The Fountainhead, she wrote, “Throughout the centuries there were men who took first steps down new roads armed with nothing but their own vision. Their goals differed, but they all had this in common: that the step was first, the road new, the vision unborrowed.” Though their inventions and groundbreaking theories were often opposed, “the men of unborrowed vision went ahead. They fought, they suffered and they paid. But they won.”47 In no country was this as true as in the United States—and in no era more so than the Inventive Period.
What conditions enabled this outpouring? Nathan Rosenberg and L. E. Birdzell, two experts in the history of technology, wrote, “The first condition of this proliferation, as in basic science, was that the innovations did not require the assent of governmental or religious authorities.”48 Edison, for example, did not have to truckle before Stalin to get permission to invent the electric lightbulb or power grid. Under capitalism, creative minds need no green light from authoritarian rulers; they simply go ahead and create.
If raising living standards and promoting human life are proper moral goals—and they are—then it must be recognized that the time is long past to jettison the misconceived robber barons’ view and to celebrate the leading 19th-century entrepreneurs for what they were: productive geniuses.
However, even during the Inventive Period, these productive geniuses were not fully free to realize their monumental aspirations for creating life-serving products and services. Although they were freer than any generation before, they did not operate in a system of full capitalism—laissez-faire capitalism—wherein governments protect individual rights and never violate them. Rather, they operated under a mixed economy. What has always passed for “capitalism” was, in fact, a mixed system—partly protections for individual rights and partly violations of those rights. Some examples of rights-violating government actions were the Sherman Anti-Trust Act, the establishment of the Interstate Commerce Commission, and the legal monopoly granted to the “Big Four” who ran the Southern Pacific Railroad in California.
An important question: Which element of the mixture is responsible for advances and prosperity? Which element contributes nothing but problems? It is clear from the aforementioned that the protection of individual rights liberates the independent mind to create material and intellectual wealth in every field. The capitalist element is responsible for prosperity.
What effects does the statist—rights-violating—element cause? Consider a few examples. One: When governments grant a legal franchise to a single company and coercively restrict competitors from entering that field, it establishes a legal monopoly that is impossible when the rights of competitors to enter the field are protected. Such coercive monopolies, of course, can and do charge prices often ruinous to their customers.
Two: When a government establishes a school system that receives both funding and students by force, it undermines economic incentive for schools to upgrade their educational product. As I wrote in my book on education, “Local, state, and federal governments finance the public schools by seizing wealth from productive persons, largely via property taxes but also by means of sales and income taxes. . . . So the schools are funded not voluntarily, based on merit, but by coercion, regardless of merit.”49 The onerous taxation makes it impossible for many families to seek private schooling, because they are unable to pay twice for education. When the government legally bans homeschooling, as it does in numerous nations and did in many U.S. states for a long time, it forces many children to attend government schools, where an inferior education is assured.
Three: When the government expands (or inflates) the money supply to finance its programs, this puts more money in circulation to be bid for a relatively stable supply of goods. The consequence is inevitably rising prices that eat away the value of money people have saved—often that of the elderly, accumulated across a lifetime of honest work. And so on. The simple truth is: The capitalist element of a mixed economy creates advances and prosperity; the statist element causes the problems.
Therefore, from consideration of yet another issue, we arrive at a fuller understanding of our lesson: Capitalism—not a mixed system that introduces rights-violating policies—is the practical system because it is the only moral system.
This raises a disturbing question: Why is capitalism denounced by so many intellectuals? Capitalism’s life-giving beneficence cannot be doubted. All those concerned with human life should embrace the sole system able to promote it. Why, then, do so many oppose it?
Capitalism is condemned because it counters the prevailing moral code. Western civilization’s dominant morality, in varying forms for the past two millennia, has been the code of self-sacrifice, of dutiful service to God or society. But capitalism is based on the idea of owning one’s own life, of pursuing one’s own happiness, and of not sacrificing one’s values.
The morality of self-sacrifice stands in direct conflict with the system of individual rights. If the facts of man’s nature and of capitalism’s life-enhancing benevolence oppose the dominant moral code, it is time to challenge that code.
What Makes Capitalism Morally Good?
What is the proper moral code for human beings? What makes something—capitalism or anything else—good or evil? What moral standard do I employ when I claim that capitalism is morally superior to any other social system?
The standard of human life.
Why is it good to advance human life? After all, jihadists don’t think that furthering human life is good. In their view, serving “the will of Allah” is good, even if it means murdering thousands of innocent people. Many environmentalists claim that nature has “intrinsic value” apart from any benefit human beings gain from it, and that the good is furthering a wild planet—a pristine nature unsullied by human touch—by enacting policies detrimental to human life. These people, and many others, hold that the standard of moral value is something other than flourishing human life, and they are willing to sacrifice that flourishing in service to their various standards. Is there a proper moral standard? And if so, what is it? How do we validate it?
What Is the Basis of Good and Evil?
The question of good and evil has long puzzled philosophers. For example, if I said that an individual should work hard and support himself honestly, most people would agree. But what makes it good? Is it good because God commands it? Or good because society says so? Or good because an individual feels it is right? Alternatively, is there some fundamental fact of reality that makes it good?
Ayn Rand answered this question.
She identified, after 2,500 years of Western philosophy, a rational, fact-based standard of moral value. Prior to Rand, philosophers had often repudiated the idea that values could be based on facts. For example, the Scottish philosopher David Hume questioned whether an “ought” proposition can be derived from an “is” proposition—that is, whether it’s possible to establish any connection between factual knowledge and moral principles—and he answered with a resounding “no.” Hume held, in effect, that although he could observe an individual working long hours, earning money, paying bills, and so forth—he could not discern the “good” in this. Where is the “good?” One cannot observe it—cannot touch or see it. If there is no observational evidence to establish an action as good, then the good is not based on facts. Hume concluded that no identifiable positive relationship exists between values and facts. Value judgments are not based on observed facts, he held, but on some subjective consideration.
The idea that values cannot be grounded in objective and observable fact but must be based on something else has long been prevalent in philosophy and the culture at large—and it still is. There are three dominant schools on this issue: the religious, the social, and the personal.
Major Schools of Thought Regarding the Nature of Right and Wrong
The religious school holds that God’s will is the standard of right and wrong. In this view, anything God commands is good by virtue of God’s will alone. So, if God chooses to flood the Earth, killing untold numbers of human beings—or commands slaying thousands of Hebrews for the “crime” of worshipping a golden calf—or condones the burning of thousands of heretics at the stake—then these actions are good simply because he chose them. This was the dominant moral theory of medieval Europe, and it still dominates most of the Middle East and lingers in parts of the West.
The social school maintains that society’s judgment, the will of the people——determined by majority vote or the like—is the standard of right and wrong. In this view, good and evil are decided by the group and are relative from one society to another. If, for example, a secular society repudiates God and claims that morality is derived from a dictator’s edicts, then it is, for that society; however, if a religious society judges the Bible to be the source of morality, then, in that society, it is. Similarly, if Nazis or Communists hold that one’s life belongs to the state, then, in those societies, it does; if Americans claim that an individual’s life belongs to him, then, in America, it does.
This theory is dominant in the modern Western world. In its most virulent form, this was the school of thought giving rise to both National Socialism and communism, whose shared precepts include the all-powerful, infallible state—the state as sole creator of right and wrong.
Because society, on this view, is held akin to a mini-God on Earth, this code is merely a secularization of the religious school.
The personal school holds that an individual’s sheer will is the standard of right and wrong (for him). Whatever a person desires is good merely because he desires it. “If it feels good, do it” was the refrain of the 1960s hippies, giving perfect expression to this code. On the personal code, a person’s feelings tell him the proper actions to perform or shun. If he wants to use toxic drugs, engage in indiscriminate sex, sponge off others—or assault them—or whatever, then doing so is good . . . for him.
“I am higher than you people,” wrote Columbine killer Eric Harris in his journal. “If you disagree, I would shoot you.”50 This is legitimate, on this view, which holds that whatever an individual feels—even if murderously violent—is right for him to act upon.
Indeed, this code is a variation on the social theory; in both, right and wrong are decided subjectively, whether individually or collectively, not based on facts but on feelings.
Historically, the choices offered to mankind have been: Follow God’s will or society’s arbitrary dictates or your own whims. What do these codes have in common? Morality is decided by the will or whim of a mind or group of minds—but it has no basis in objective reality.
Morality Is Objective
It remained for Rand to demonstrate that facts, not whims, form the proper basis of moral judgments. Rand provided a revolutionary approach to the “is-ought” question. Rejecting the premise that values are grounded in the desires of some subject(s), she asked, in effect: What facts of reality give rise to the phenomenon of valuing? What makes valuing necessary? What makes it possible?
Approaching the subject of values in this innovative manner points toward the answer to the supposed “is-ought” gap: Values exist only because living beings must attain certain ends to sustain their lives. A living being’s proper values are those things that its nature requires for its survival. An organism’s nature is not a matter of whim—but of observable fact.
Observe the causal connection between an organism’s life and its values. A plant must gain the water, sunlight, and nutrients that its life requires, without which it will die. An animal must find the food and shelter upon which its life depends; if it fails, it perishes. Human beings must produce the values necessary to survive and thrive; if they don’t, they will suffer and die. For man, as for all living beings, the alternative is stark: Attain life-promoting values—or perish.
I wrote elsewhere:
In a lifeless world, there would be no values: no good, no evil. After all, good or evil to whom, and for what? If we grind a rock . . . to dust, what has it lost that it previously strove to maintain? Nothing. A rock takes no steps to maintain its rock form as distinct from a pile of dust particles. . . . Living organisms, on the other hand, engage in processes to sustain their lives. Plants, for example, grow their leaves toward the sun to engage in photosynthesis to support their lives. If we kill the plant, it has lost something that it took steps to sustain—its life.51
Rand’s insight, that the factual necessities of human life are the source of man’s values—of good and evil—is the indispensable foundation of a rational ethics. And whether one considers basics of human survival—such as food, clothing, and shelter—or more advanced values—such as abundant energy, psychological therapy, and soul-fueling entertainment—producing life-serving values requires reason. Thus, as Rand wrote in her essay “The Objectivist Ethics,” “that which is proper to the life of a rational being is the good; that which negates, opposes or destroys it is the evil.”
With the understanding that life is the standard of value, so much becomes clear. “The validation of value judgments is to be achieved by reference to the facts of reality,” wrote Rand. “The fact that a living entity is, determines what it ought to do.”52 And man, being the animal who lives by reason, ought to use reason. It is clear, based on abundant evidence, that capitalism is the social system that benefits human life—because it frees people to think and act in accordance with their rational judgment.
But notice that another moral issue is involved. Capitalism protects the right of each individual to act in his self-interest—it enables him to profit from his own efforts, to pursue his success and happiness. Capitalism is based on the pursuit of self-interest; it does not call on us to sacrifice ourselves to the state or to God or to anything else. In philosophy, the theory promoting self-interest is called egoism. Should individuals pursue their self-interest? Should they sacrifice to others? Is some combination of the two possible and proper? To fully validate what we’ve said about capitalism, we need answers to these questions.
The Code of Rational Egoism
We are aware of many living beings. I start with myself—self-evidently an individual. I look out the window and see my neighbor, a middle-aged woman—an individual—walking her dog, a fox terrier—an individual—down the street. The dentist I recently visited is an individual human being, as is her receptionist, as is the waiter at the restaurant where I dined yesterday; and so on. The Borg, a collective entity in Star Trek, was a brilliant science-fiction creation. But in reality, only individuals exist; only individuals will continue to live if they attain the necessary values, and only individuals will die if they do not.
Further, people can collaborate, but no one can live for another. As Howard Roark, the hero of Ayn Rand’s novel The Fountainhead, observed,
We can divide a meal among many men.. We cannot digest it in a collective stomach. No man can use his lungs to breathe for another man. No man can use his brain to think for another. All the functions of body and spirit are private. They cannot be shared or transferred.53
Is it morally right for individuals to pursue values for themselves? Yes.
Is it morally right for individuals to sacrifice for others? No.
Why—and why not?
Life requires the achievement of values, not their surrender. If we achieve the values human life requires, we flourish; if we sacrifice them, we suffer or perish. To live, each individual must achieve the values his life requires; if he does not, he will suffer and/or die. Sustaining human life requires an individual to pursue and gain values, and never to sacrifice them. It is morally right to act in allegiance to the requirements of human life—and morally wrong to flout those requirements. Philosopher Leonard Peikoff makes the point succinctly: “The alternative with which reality confronts a living organism is its own life or death. The goal is self-preservation.”54
Ayn Rand provided a clear definition of “sacrifice”: “‘Sacrifice’ is the surrender of a greater value for the sake of a lesser one or of a nonvalue.”55
For example, if a loving parent spends his money on his child’s education and then goes without a new car for himself, this is not a sacrifice because he values the child’s education more than he does the new car. But if he spends his money on the education of a stranger’s child and lets his own child go without one, this is a sacrifice. That we should not sacrifice for others does not preclude helping them, forming intimate relationships, or being filled with, as Shakespeare memorably phrased it, the milk of human kindness.56 A rational person can be an enormous value to us—whether as a friend, lover, family member, neighbor, colleague, or the like—and helping such people in many forms is a benefit, not a loss; it makes us happy, not miserable to do so, because it supports our lives and well-being.
Related to this, we flourish by creating values, not plundering them. We flourish by growing food, building homes, researching and developing medicines, and so forth—and then by trading voluntarily with other producers—not by robbing or victimizing them in any form. A flourishing life is not measured in minutes, hours, or days—but across a lifetime; and it is achieved by productive effort, voluntary trade, and fruitful relationships with other rational people.
Rational egoism requires rejecting human sacrifice in any form. This code recognizes that each human being has an inalienable right to his own life—that we must neither sacrifice self to others nor others to self—and that this principle, properly understood and applied in action, protects both me from others and others from me.
Because of this, it is easy for a rational egoist to fulfill himself and, secondarily, benefit others, as well. For example, a good teacher works hard to educate his students: He gains pride in his work, gratitude from the students, and a well-earned salary. His students gain a valuable education, and the people who love these students are gladdened by their intellectual growth. This example can be replicated across any productive career—doctors, plumbers, bakers, and so on. A moral person benefits from his own rationality, strong work ethic, and responsibility for his own life, including his errors and/or flaws; other honest men benefit from his trustworthiness and scrupulous sense of justice. Under the code of rational egoism, all proper relations are based on mutual benefit and mutual consent. All are win-win.
By contrast, altruism, the code of human sacrifice, entails that someone must lose values and thereby suffer or perish. Peikoff makes the point eloquently regarding this code, whether an advocate upholds sacrificing self to others or others to self:
In either case, he holds that human existence requires martyrs . . . that somebody’s throat must be cut. The only question then is: your life for their sake or theirs for yours? This question does not represent a dispute about a moral principle. It is nothing but a haggle over victims by two camps who share the same principle.57
Rational egoism is the only moral code of flourishing human life—for everyone. Human kindness, whether extended by me toward others, or by others toward me, requires first and foremost a recognition that each individual has a right to his own life—and must achieve, not surrender, the values that further it.
This is why the principle of individual rights is vital to human life. It protects the freedom of every individual to gain the values that human life requires. That human beings must create values, and that they must be free to create and trade them voluntarily, are the reasons that it is morally obligatory to ban the initiation of physical force from human relationships and to establish a rights-protecting political system—that is, to establish capitalism.
Capitalism’s Moral Superiority
Egoism is the code of personal value achievement. It is the code by which human beings attain flourishing lives. Capitalism is the social system that protects an individual’s ability and right to seek personal values. Under capitalism, individuals are free to act egoistically and to pursue happiness. (This is the reason that people all over the world flee regimes forcing them to provide selfless service to God or the state and immigrate to America—and this is the reason that it is morally right for them to do so.)
Whatever supports and furthers human life is morally good. Capitalism is the system that, from every standpoint and perspective, preeminently supports human life. Therefore, for the final time, we can restate our lesson: Capitalism is the only practical system because it is the only moral system.