Capitalism: The Libertarian Vision

An Introduction

Individualism is at once an ethical-psychological concept and an ethical-political concept. As an ethical-psychological concept, individualism holds that a human being should think and judge independently, respecting nothing more than the sovereignty of his or her own mind. As an ethical-political concept, individualism upholds the supremacy of individual rights, the principle that a human being is an end in him or her self – and that the proper goal of life is self-realization.

There are many persons who might describe themselves as subscribing to a philosophy of individualism in the abstract, as formulated thus far. But let us think through, concretely and specifically, what this means in social-political terms – because, especially among psychologists, there seem to be a great many persons who profess individualism while in their consulting rooms, working with therapy clients, but who become supporters of statism or collectivism when their focus shifts to the political arena.

Statism or collectivism is the expression of the ethics of altruism in the August Comte sense, others above self, which holds self-sacrifice as the highest virtue, and laissez-faire capitalism is the expression of the ethics of individualism, of rational self-interest.

The essence of the social system entailed by the individualist ethics I advocate in my writings is contained in a single principle: No person or group of persons may seek to gain values from others by the use of physical force – in other words, the principle of voluntarism.

When human beings enter into social relationships, when they choose to deal with one another, they face a fundamental alternative: to deal by means of reason, or to deal by means of force. This alternative is inescapable: either a person seeks to gain values from others by their voluntary consent, by persuasion, by appealing to their mind, or a person seeks to gain values without the voluntary consent of the owner, which means by coercion or fraud. This, I submit, is the issue at the base of all social relationships and all political systems.

It is also the single most avoided issue in discussions of social philosophy.

I shall be blunt here, because there is a tendency in this arena to dance around the obvious, to discuss everything but the self-evident. It is at the mind that every gun is aimed. Every use of force is the attempt to compel a person to act against his or her judgment; if the person were willing to take the action, force would not be required.

The Ethics of Force

In a free society, force may be used only as retaliation and only against the person or persons who initiate its use; a distinction is made between murder and self-defense. The person who resorts to the initiation of force seeks to gain a value by so doing; the person who retaliates in self-protection seeks not to gain a value but to keep a value that is already rightfully possessed.

The policy of seeking values from human beings by means of force, when practiced by an individual is called crime. When practiced by a government, it is called statism – or totalitarianism or collectivism or communism or socialism or Nazism or fascism or the welfare state.

Force, governmental coercion, is the instrument by which the ethics of altruism – the belief that the individual exists to serve others – is translated into political reality.

Although this issue has not been traditionally discussed in the terms in which I am discussing it here, the moral-political concept that forbids the initiation of force, and stands as the guardian and protector of the individual’s life, freedom, and property, is the concept of rights. If life on earth is the standard of value, an individual has a right to live and pursue values, as survival requires; a right to think and act on his or her judgment – the right of liberty; a right to work for the achievement of his or her values and to keep the results – the right of property; a right to live for his or her sake, to choose and work for personal goals – the right to the pursuit of happiness.

Without property rights, no other rights are possible. We must be free to use that which we have produced, or we do not possess the right to liberty. We must be free to make the products of our work serve our chosen goals, or we do not posses the right to the pursuit of happiness. And-since we are not ghosts who exist in some nonmaterial manner-we must be free to keep and consume the products of our work, or we do not possess the right to life. In a society where human beings are not free to own privately the material means of production, their position is that of slaves whose lives are at the mercy of their rulers. It is relevant here to remember the statement of Trotsky: “Who does not obey shall not eat.”

In a political-economical context, freedom means one thing and one thing only: freedom from physical compulsion. There is nothing that can deprive us of our freedom except other persons – and no means by which they can do it except through the use of force. It is only by the initiation of force (or fraud, which is an indirect form of force) that our rights can be violated.

The Role of Government

The only proper and justifiable purpose of government is to protect individual rights – to protect us from physical violence. It is the fact that others can violate our rights that necessitates the institution of government. If we are consistent in our adherence to individualism, we can see that the sole function of a government is to protect us from criminals, to protect us from foreign invaders, to provide a system of courts for the protection of property and contracts against breach or fraud – and otherwise to leave us alone. Voluntarism as a moral principle means libertarianism as a political principle.

In a society where our rights are protected by objective law, where the government has no other function or power, we are free to choose the work we desire to do; to trade our effort for the effort of others; to offer ideas, products, and services on a market from which force and fraud are barred; and to rise as high as our ability will take us. Among persons who do not seek the unearned, who do not long for contradictions or wish facts out of existence, who do not regard sacrifice and destruction as a valid means to gain their ends, there is no conflict of interest. They do not reach for a gun – or a legislator – to procure for them that which they cannot obtain through voluntary exchange.

This is not the place for a treatise on the political economy. I will simply say that, today, the difficulty in discussing this issue lies in the fact that most people have all but lost the knowledge of what capitalism is, how it functions, and what it has achieved. The truth about its nature and history has been drowned in a wave of misrepresentations, distortions, falsifications, and almost universal ignorance.

The Role of Government II

Today many people still take it as axiomatic that capitalism results in the exploitation of the poor; that it leads to monopoly; that it necessitates periodic economic depressions; that it starts wars; that it resisted and opposed the worker’s rising standard of living; that the standard of living was the achievement, not of capitalism, but of labor unions and of humanitarian labor legislation. Not one of these claims is true, but they are among the most common bromides of our culture. People do not feel obliged to question such bromides, since they “know” in moral principle that capitalism must result in evils: because capitalism is based on the profit motive and appeals to the individual’s self-interest

It is a widely held belief, inherited from Marx, that government is necessarily an agent of economic interest and that political systems are to be defined in terms of whose economic interests a government serves. Thus, capitalism is commonly regarded as a system in which the government acts predominantly to serve the interests of businesspeople; socialism, as a system in which the government serves the interests of the working class. It is this concept of government that the libertarian principle rejects.

The fundamental issue is not what kind of economic controls a government enforces, nor on whose behalf; the issue is whether one is to have a controlled economy or an uncontrolled economy.

Laissez-faire capitalism is not government control of economics for the benefit of businesspersons; it is the complete separation of state and economics. This is implicit in the nature of capitalism, but historically it was not identified in such terms nor adhered to consistently.

American Capitalism

It was the United States of America, with its system of limited, constitutional government, that implemented the principle of capitalism-free trade on a free market – to the greatest extent. In America, during the nineteenth century, people’s productive activities were for the most part left free of governmental regulations, controls, and restrictions; most thinkers considered themselves thoroughly emancipated from the discredited economic policies of medievalism, mercantilism, and precapitalist statism.

And in the brief period of a century and a half, the United States created a level of freedom, of progress, of achievement, of wealth, of physical comfort – a standard of living – unmatched and unequaled by the sum of humankind’s development up to that time. With the Enlightenment, the Industrial Revolution, and the rise of capitalism, an extraordinary transformation took place in men and women’s thinking about the possibilities of life on earth, a revolution so radical that it is still far from fully understood.

With the collapse of the absolute state and the development of the free-market society, people saw the sudden release of productive energy that had previously had no outlet. They saw life made possible for countless millions who could have had no chance at survival in precapitalist economies. They saw mortality rates fall and population growth rates explode upward. They saw machines (the machines that many of them had cursed, opposed, and tried to destroy) cut their workday in half while multiplying incalculably the value and reward of their effort. They saw themselves lifted to a standard of living no feudal baron could have conceived. With the rapid development of science, technology, and industry, they saw, for the first time in history, the individual’s liberated mind taking control of material existence.

Impact of Capitalism

To the extent that various countries adopted capitalism, the rule of brute force vanished from people’s lives. Capitalism abolished slavery and serfdom in all of the civilized nations. Trade, not violence, became the ruling principle of human relationships. Intellectual freedom and economic freedom rose and flourished together. Political thinkers had discovered the concept of individual rights. Individualism was the creative power revolutionizing the world.

A system in which wealth and position were inherited or acquired by physical conquest or political favor was replaced by one in which values had to be earned by productive work. In closing the doors to force, capitalism threw them open to achievement. Rewards were tied to production, not to extortion; to ability, not to brutality; to the capacity for furthering life, not to that for inflicting death.

Much has been written about the harsh conditions of life during the early years of capitalism. Yet when one considers the level of material existence from which capitalism raised men and women and the comparatively meager amount of wealth in the world when the Industrial Revolution began, what is startling is not the slowness with which capitalism liberated people from poverty but the speed with which it did so. Once the individual was free to act, ingenuity and inventiveness proceeded to raise the standard of living to heights that a century earlier would have been judged fantastic. It would be difficult to name an event of history more impressive than this – or less appreciated.

Capitalism was achieving miracles before human beings’ eyes. Yet, from its beginning, the majority of nineteenth-century intellectuals were vehemently antagonistic to it. Their writings were filled with denunciations of the free-market economy. Broadly speaking, the antagonism came from two camps: the medievalists and the socialists.

Early Capitalism

The medievalists found the disintegration of feudal aristocracy, the sudden appearance of fortune makers from backgrounds of poverty and obscurity, the emphasis on merit and productive ability, the concern with science and material progress, and, above all, the pursuit of profit spirituality repugnant. Many of them – such as Richard Oastler, William Wordsworth, Samuel Taylor Coleridge, Thomas Carlyle, Robert Southey, William Cobbett, Thomas Hood, and Thomas Loe Peacock – unleashed scathing attacks on the factory system. They were avowed enemies of the Age of Reason. They declared individualism vulgar. They longed for a return to a status society. “Commerce or business of any kind,” wrote John Ruskin, “may be the invention of the Devil.”

And while the medievalists dreamed of abolishing the Industrial Revolution, the socialists wished to take it over. Both camps dismissed or gave only grudging acknowledgement to the achievements of capitalism. They preferred to eulogize the living conditions of previous ages. Freiedrich Engels, along with Carlyle, regarded the domestic industry’s system of the preindustrial era as the golden age of the working classes.

The criticisms leveled against capitalism by both camps were remarkably similar: the “dehumanizing” effect of the factory system upon the worker, the “alienation” of man and woman from nature, the “old impersonality” of the market, the “cruelty” of the law of supply and demand – and the evil of the pursuit of profit.

In the writings of both medievalists and socialists, one can observe the unmistakable longing for a society in which the individual’s existence will be automatically guaranteed – that is, in which no one will have to be responsible for his or her own survival. Both camps project their ideal society as one characterized by what they call “harmony,” by freedom from rapid change or challenge or the exacting demands of competition; a society in which each must do his or her prescribed part to contribute to the well-being of the whole but in which no one will face the necessity of making choices and decisions that will crucially affect his or her life and future; in which the question of what one has or has not earned, and does or does not deserve, will not come up; in which rewards will not be tied to achievements and in which someone’s benevolence will guarantee that one need never bear the consequences of one’s errors.

Early Capitalism II

If we consider the writings of some of capitalism’s most famous nineteenth century defenders, it will help us to understand why people are so confused about the nature of capitalism today – and why statism, during this century, swallowed up so much of the world. John Stuart Mill’s essay On Liberty is generally regarded as one of the classic defenses of the rights of the individual. But individual rights is precisely the concept that Mill does not support. His ethical standpoint is that of utilitarianism. In On Liberty, he does argue that society should leave the individual free. But as justification for his position, he projects an essentially collectivist premise, the premise that the group should permit persons to be free because that will best allow them to serve its interests – thus implying that the individual does not in fact have the right to freedom but is, morally, the property of the collective. Not astonishingly, Mill ended his life as a socialist.

Herbert Spencer defended capitalism by means of spurious analogies to animals in a jungle and the survival of the fittest – which implied a complete misrepresentation of the nature of capitalism, one that was thoroughly in accord with the views of its enemies. An animal’s method of survival is not a human being’s; we do not survive by fighting over a static quantity of meat (or wealth); we survive by producing the values and goods that our lives require. And what was Spencer’s ultimate oral justification for a free-market economy? Not the rights of the individual, but the purification of the race – the weeding out of the unfit, in alleged accordance with the principle of evolution; that is, the good of the collective, of the human species. Aside from all other objections, the ludicrous irrelevance of this defense, sometimes labeled social Darwinism, is that capitalism facilitates the survival and well-being of countless more of the “less fit” than any other system since the beginning of time.

It is historically, philosophically, and psychologically significant that not one of the defenders of capitalism chose to attack the position of its opponents at the root, on the level of basic premises; not one of them challenged the altruist-collectivist frame of reference in which all discussions concerning the value of capitalism were held. Therefore, although the case for capitalism has never been refuted economically, capitalism has lost more and more ground because we have lacked a moral philosophy to sustain and support it. One of the major goals of Ayn Rand in Atlas Shrugged was to provide just such a moral justification – and, in my estimation, she succeeded admirably.

Capitalism Today

In the world of the present, most people regard the right of a government to initiate force against its citizens as an absolute not to be debated or challenged. They stipulate only that the force must be used “for a good cause.” Precisely because capitalism in its ideal (that is, consistent) form forbids the use of force to gain social ends, or any other kind of ends, intellectuals dismiss the laissez-faire concept as “antisocial” and “unprogressive.”

Whatever the differences in their specific programs, all the enemies of the free-market economy – communists, socialists, fascists, welfare statists – are unanimous in their belief that they have a right to dispose of the lives, property, and future of others; that private ownership of the means of production is a selfish evil; that the more a person has achieved, the greater is his or her debt to those who have not achieved it; that men and women can be compelled to go on producing under any terms or conditions their rulers decree; that freedom is a luxury that may have been permissible in a primitive economy, but for the running of giant industries, electronic factories, and complex sciences, nothing less than slave labor will do. Whether they propose to take over the economy outright, in the manner of communists and socialists, or to maintain the pretense of private property while dictating prices, wages, production, and distribution, in the manner of fascists and welfare statists, it is the gun, it is the rule of physical force that they consider “kind,” they who consider the free market “cruel.”

Since the moral justification offered for the rule of force is humankind’s need of the things that persons of ability produce, it follows (in collectivist’s system of thought) that the greater an individual’s productive ability, the greater are the penalties he or she must endure, in the form of controls, regulations, expropriations. Consider, for example, the principle of the progressive income tax: those who produce the most are penalized accordingly; those who produce nothing receive a subsidy, in the form of relief payments. Or consider the enthusiastic advocacy of socialized medicine. What is the justification offered for placing the practice of medicine under government control? The importance of the services that physicians perform – the urgency of their patients’ need. Physicians are to be penalized precisely because they have so great a contribution to make to human welfare; thus is virtue turned into a liability.

A Free Society

In denying human beings freedom of thought and action, statists and collectivist systems are anti-self-esteem by their very nature.

Self-confident, self-respecting men and women are unlikely to accept the premise that they exist for the sake of others.

A free society cannot be maintained without an ethics of rational self-interest. Neither can it be maintained except by men and women who have achieved a healthy level of self-esteem. And a healthy level of self-esteem cannot be maintained without a willingness to assert – and, if necessary, fight for – our right to exist. It is on this point that issues of psychology, ethics, and politics converge.

A free society cannot automatically guarantee the mental or emotional well-being of all its members.

Freedom from external coercion is not a sufficient condition of our optimal fulfillment, but it is a necessary one.

The great virtue of capitalism – laissez-faire capitalism, as contrasted not only with the more-extreme forms of statism but also with the mixed economy we have today – is that it is the one system whose defining principle is precisely the barring of physical coercion from human relationships. No other political system pays even lip service to this principle. No other political system is consistent with the individualism that so many people embrace in the personal realm.