Markets have always been a moral force

Article by John Blundell in The Business

“I AM an advocate of commerce because I am a friend of its effects. It is a pacific system expanding to ­cordialise mankind.” So said Tom Paine, normally portrayed as a Leftie and a Republican. The notion that an active commerce is socially benevolent would not have startled anyone in the Enlightenment. To the classical authors it was plain that markets were ethical as well as productive.

Today, to claim capitalism or markets are the morally superior or ethical option seems outlandish. Those ­paladins of capitalism at the Confederation of British Industry regard themselves as merely the sources of prosperity to be milked for schools, hospitals and pensions. I doubt if any top industrialist today would feel confident explaining why he and his company are ethically superior to any public body. It is a pity ­capitalism is so weak about defending its moral credentials. Lord Kalms of Dixons is the exception that proves the rule, as he takes his sword to those who would denigrate or misrepresent his vast contribution not only to our wealth but also to our sense of right and wrong about capitalism.

The essence of morality or ethics is options or choices. The market is a creative tissue of these choices. It is the opposite of coercion or command. Markets are a civilising force. To offer a good or a service to others – to trade – is to serve others. The alternatives are force, or more politely, political coercion.

Yet for the past 100 years the forces of socialism, under different guises, have advanced the view that the ­market is immoral and only the ­exemplification of greed. The notion that benevolence must be nationalised is rendered tangible in the National Health Service, state pensions and countless other “virtuous” projects undertaken by the state. It is the ­central belief of the British political classes.

But the market allows people who know little or nothing of each other to ­collaborate. It is a vast computer that harmonises human activity. If I try to argue the English language is moral or ethical you might think me eccentric. The tongue is morally neutral. Yet what is the global language of market prices but a tissue reflecting everyone’s ­different desires or priorities – in ­different places? Prices are the signs of people at work and exchanging, and here is the really crucial word, ­voluntarily.

The main “ethical” argument against capitalism is the inequalities it opens up. Yet people seem to be barely aware that those on the most modest incomes live a life of opulence compared to those locked out of industrial life in the Third World or those who lived before the Industrial Revolution. Inequality is the side effect of freedom. Some will be luckier, some will be more adventurous. Equality is the opposite of liberty.

That wise observer of the world Friedrich Hayek noted that intellectuals are unhappy about markets because of their “spontaneous” qualities. Clever people seek design or purpose or direct cause and effect. Markets are almost too subtle to understand in close detail. They are as mysterious as the mind is in psychology. Capitalism is the result of action – not of design. Intellectuals have a strong prejudice for the constructed.

To succeed in business you need reputation. Key attributes are honesty or trustworthiness. A firm gains its respect and legitimacy by moral ­conduct. Character or repute are prized in capitalism. It is the first cousin of credit as well as honour.

This is not to say there are no rascals. Enron and other scandals emerge but their news value was in their ­exceptional nature. Marketplaces are schools of virtue.

This may appear to contradict sense. Those baying voices in a Chicago exchange seem animated only by greed and chaos. Yet look more closely. Those jumping to price data are helping the rest of us. They may feel no altruism but their results are highly beneficent.

The Good Samaritan was acting by himself. He was not a Judean Social Worker. Morality is not exercised by the state or its agencies. Compassion is a personal quality, not an attribute of the Department of Social Security.

We have reached an unsatisfactory consensus. It is that “Capitalism may be efficient but it is morally deficient”. This is the pretext for every intervention. I often find those who have lived under an oppressive state regime – those from Eastern Europe or Africa – are more clear-sighted about the cleaner ­commercial air of open markets ­compared to the bribery and corruption than lubricates closed systems. In the West we can be very naive.

One of the most moving exponents of market economics is Hernando de Soto, the Peruvian. His account of how markets translate into dignity and ­liberty rather than mere prosperity is profoundly touching. We in the West have only an opaque understanding of the cultural traditions which, largely by accident, have lifted us from the brutishness of the past. Ethics is the basis of capitalism – and capitalism is above all ethical.

John Blundell is director general of the Institute of Economic Affairs. For more on this subject, read [link][ur]http://www.iea.org.uk/record.jsp?type=recommendedBook&ID=302'>
Ethics of the Market
by John Meadowcroft published by Palgrave.

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