In the last issue of On Principle I attempted to explode many of the falsehoods commonly attributed to the free enterprise system and its history in the late nineteenth century. The extraordinary material prosperity and well-being generated by unregulated capitalism did not happen in a vacuum, however. I propose in this sequel to briefly examine how a revolution in moral and political philosophy provided the necessary precondition for the rise of capitalism and the peculiarly American culture of freedom and virtue.
Socialists and a certain kind of conservative have always found capitalism to be low and distasteful. One conservative philosopher has even described the capitalist world view as a “joyless quest for joy.” Left- and right-wing socialists like to speak of community and some mystical notion of the public good. Both camps yearn for an older time.
In the centuries before the rise of capitalism, feudal or post-feudal society was structured by a fixed, unchanging hierarchy of status. Laborers were born as laborers and died as laborers. Everyone in this society was assigned his or her appointed and inherited role in life. Laborers were forced to work for others and they were bound to certain professions. This kind of feudal or post-feudal society (its remnants were felt in Europe well into the nineteenth century) was held together by legal and sentimental ties between baron and serf, master and servant, laborer and guild; it was held together by status, by class ranks, cartelized industries, guilds and various other organizations which kept men in permanent relations to one another. There was little if any social mobility.
Beginning in the late seventeenth century a new conception of liberty took hold of the Anglo-American world. Encouraged and supported by the development of John Locke’s natural-rights philosophy, civil liberty was now defined as a social guarantee that all individuals, under the rule of law, would have the freedom to pursue, exchange, and keep property. As a corollary to the protection of private property, the inviolability of contracts was also guaranteed as a natural right. In other words, each man would now have complete self-governing authority and the exclusive employment of all his physical and intellectual powers.
The rise of capitalism–that is to say, the rise of freedom–was a direct consequence of this revolution in political philosophy. But ideas in themselves are not enough; theory must be translated into practice. For new ideas to have any substantive affect on society, they must be institutionalized politically, socially and economically. The death-knell of the ancien regime came when America’s founding statesmen institutionalized Locke’s philosophy. They built a strong and durable constitutional edifice in which freedom might flourish.
The Founders’ Constitutionalism can be characterized as having established a negative conception of government–that is, the purpose of government was to protect the rights of individuals, but much beyond that it would not go. In America, this meant that government would not tax for its own purposes or redistribute for the benefit of others the profits of individual and private companies. Nor would government in the name of the elusive public interest regulate and control that which was fundamentally private.
The American Constitution laid the foundation for the development of laissez-faire capitalism by protecting private-property rights and the sanctity of contract, thereby providing individuals with security from the arbitrary powers of government. Such protection was seen as being absolutely necessary for the peaceful and productive activities of a growing and prosperous nation. The culture and mores of capitalism found fertile soil in this kind of
This political revolution had cultural consequences as well. Traditional relations between individuals were bound to change. This new society would be based on the voluntary actions of freely laboring, freely associating, freely contracting and freely exchanging individuals. The old system of status, hierarchy, prescription and custom was dissolved and torn to pieces by a society that would guarantee to each individual the right to “life, liberty, and the pursuit of happiness.” No longer was a man tied by sentimental or legal bonds to family, farm, guild or master. The static, unchanging world of feudal and post-feudal society would be replaced by a dynamic, ever-changing, progressing society.
In this new society, men and women would come together as free and independent parties for the purpose of exchanging goods and services that are of mutual advantage. The relationship between individuals in this new society was based on the premise that all individuals are self-governing, that they have a right to self-generated action, and that they are the best judges of their own prosperity and happiness. The relations between individuals in such a society are rational and voluntary rather than sentimental and coerced.
Freedom in this new social context did not mean anarchy or brutishness, however. Freedom and the necessity wrought of nature’s niggardliness meant that individuals would be encouraged to develop certain virtues–virtues necessary to achieve prosperity and happiness. The new-model man of capitalism would be self-reliant, independent, industrious, enterprising, frugal, temperate, honest and rational. For those who chose to be idle, lazy, intemperate, extravagant, shiftless, imprudent, negligent, and impractical, freedom would mean bad luck and hard times.
What, then, does it mean to exploit workers? How did the captains of industry actually exploit their workers?
In the first place, workers were not compelled or forced by businessmen to take jobs in factories. This point is important. For the first time in history, the laboring classes could, on the whole, choose the kind of work they wanted to do, they could choose where they wanted to work, and they could choose for whom they wanted to work. This new sense of liberation freed young men and women from either the drudgery of life on a farm or from a stratified society based on a fixed, unchanging hierarchy of status relations.
Under the system of unregulated laissez-faire, every individual had the right to sell his or her labor/skills in exchange for a fair wage. Unlike the feudal system, the worker was not restricted by family, by guild or by baron as to whom or as to where he may seek employment. On the basis of a free and voluntary contract, the employer agreed to pay a wage salary in exchange for the employee’s labor and know-how.
In this free-market environment, wages were determined by the law of supply and demand. Employers competed with one another for the services of workers. An employer who underpaid his workers would frequently lose them to those who paid a higher wage. The case of Henry Ford is illustrative. To attract the best possible workforce, Ford paid his workers five dollars a day at the very same time that his competitors were offering two and three dollars a day. It is a truly remarkable feat that as tens of millions of new immigrants poured into this country, wages continued to rise.
Unlike the defenders of socialism, the advocates of capitalism do not believe that human nature or human society is capable of perfection. Under any social system–including unregulated capitalism–there will be unscrupulous individuals who will lie, cheat, exploit, coerce, and will use violence against other people. Our system of justice has both criminal and civil remedies against such people and against such actions.
If capitalism improves the conditions of the vast majority of the laboring poor, one cannot condemn a whole system because a few may slip through the cracks or because a few individuals may be unscrupulous or dishonest. The question under consideration is what social system will best promote the virtues of human nature and which will best prevent the vices of human nature?
Both conservative and socialist defenders of regulations believe that ordinary people are incapable of making rational decisions that affect their self-interest. They believe that government is necessary to make those decisions for them.
I stand with capitalism because it is the most just social system, because it is the system that best fosters virtue, and because it is the system that brings the greatest happiness and prosperity to the greatest number of people. If, as conservatives, we are unable to defend capitalism, we are also unable to defend America.
C. Bradley Thompson is Assistant Professor of History and of Political Science at Ashland University and Coordinator of Publications and Special Programs at the John M. Ashbrook Center for Public Affairs.