Author: Mohammad Asem Esmailzahi
Capitalism (part 5)
Ethical Flaws of the Capitalist Economic System
The dominant economic thought in the world today is capitalism. Adam Smith (1727–1790), in his first major work The Wealth of Nations, examined liberal thought and the fundamental principles of the capitalist economic system. In his second book, The Theory of Moral Sentiments, he addressed the foundational principles of moral philosophy.
Through these two works, Adam Smith combined ethics and economics. From a moral perspective, the only justification that can be offered for the capitalist economic system is that it aligns with the rational nature of human beings—a point to which Adam Smith himself explicitly refers in his writings. Smith believed that the most successful system, one that corresponds to human nature and can reveal human creativity, is the market system.
According to Adam Smith, within capitalism the exchange of goods and services takes place based on the mutual consent of the parties involved. Free decision-making and the consumer’s right of choice are the sole criteria for valuing exchange. In a free-market system, the use of force and deception is prohibited. In this system, the extent of individuals’ profit and loss in society is determined by their level of awareness and alertness. Therefore, capitalism is considered both a moral and a just system.
On the other hand, according to Thomson, within capitalism there are both winners and losers. The winners are upright, active, thoughtful, responsible, disciplined, rational, and effective individuals. The losers, however, are lethargic, lazy, unintelligent, unproductive, careless, unsuitable, and ineffective. Capitalism is thus a social system that rewards virtues and penalizes deficiencies and bad habits. [1]
According to Adam Smith, incentives in capitalism—due to receiving the full value of the produced goods—lead to greater productivity by producers; that is, rewards are not shared collectively. Capitalism encourages increased activity and penalizes laziness. In the capitalist system, welfare has the potential for progress. Unlike socialism, in capitalism each individual’s profit belongs solely to that individual.
In the history of Western society, capitalism has been the core substance of the economic system, culture, and religious belief. Max Weber expresses this reality as follows: “In capitalism, democracy, science, and law are products of Protestant ethics.” In fact, the title of his famous 1919 work is The Protestant Ethic and the Spirit of Capitalism. This indicates that the spiritual structure of capitalism relies on Protestant ethics, since the earliest development of capitalism and industrialization began in England and later spread to Germany, the Netherlands, and subsequently to Catholic countries.
From Weber’s perspective, one of the most important reasons for the emergence of capitalism in Western Europe was the richness of Protestant beliefs—values that encourage activity and frugality. From an ethical standpoint, the objectionable aspects of capitalism include indifference resulting from private ownership, laziness, and a tendency toward sexual pleasures arising from the accumulation of wealth. More importantly, it leads to distancing from sanctity and religion. [2]
Today, Western society has moved far away from the ideas of Adam Smith (1723–1790) and Max Weber (1864–1920). The rapid development of technology has undermined the infrastructure of capitalism and, on a large scale, has caused the erosion of spiritual values. The pursuit of money, greed, avarice, and obsession with becoming wealthy have destroyed social structures, resulting in what may be described as “moral decay.” This situation has produced tragic consequences for Western societies. The order inherent in capitalist competitive freedom often ends in exploitation.
The foremost concern of capitalism, above all else, is the rapid accumulation of capital, which leads to capital concentration. In short, since the nineteenth century, capital accumulation has paved the way for human degradation.
In other words, capitalism, by distancing itself from the ethically structured Protestant identity, has transformed into a materialistic worldview. All lofty spiritual values and moral sentiments have been eroded. Given the system’s extensive emphasis on personal interests, social inequality has intensified, and societal progress has been hindered due to the disintegration of social capital. Most importantly, in capitalism, the determination of ultimate values is delegated to individuals, which facilitates social problems. [3]
Capitalism is adaptable to various social norms and moral behaviors. In such societies, the state must remain neutral toward all value systems, because government intervention in moral disputes increases pressure. Unlike Europe—where capitalism has produced relatively favorable outcomes—outside Europe its expansion has led to numerous problems, such as social disintegration, environmental degradation, and ecological crises.
In the Pacific Rim countries (Taiwan, Hong Kong, Singapore, South Korea) and Japan, alongside the liberal model, Buddhist and Confucian beliefs and their own value systems are also present. While operating within a liberal capitalist economic model, Japan has managed to preserve its spiritual and religious structures. Even John Naisbitt, in his work Megatrends 2000, identifies beliefs such as Buddhism and Confucianism as motivating forces behind the forward progress of Pacific Rim countries.
Contrary to Naisbitt’s assumption, today neither the Japanese economy nor the economies of other Far Eastern countries demonstrate an exceptional deontological ethic (an ethic that imposes strict rules with outcomes independent of individuals). Consequently, many scandals similar to those seen on Wall Street and in the London Stock Exchange have occurred and continue to occur in those countries.
In conclusion, benefiting from the expected advantages of capitalism is possible only through a moral revolution. To block the path toward exploitation, a pious and ethically conscious generation must be cultivated—and this can only be achieved through social justice. [4]
Continues…
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References:
[1]. Hoppe, Hans-Hermann, Democracy: The God That Failed (translated as Aristocracy, Monarchy, Democracy: A Story of Moral and Economic Folly), p. 312, trans. Soleiman Abdi, 2017, Donya-ye Eqtesad Publications.
[2]. Fesharaki-Zadeh, Hassan, The End of Rational Capitalism and the Collapse of Neoliberalism, p. 671, 2009, Qods Publications.
[3]. Chartier, Gary, Markets Yes, Capitalism No: Individualist Anarchism against Bosses, Inequality, Corporate Power, and Structural Poverty, p. 378, trans. Mehrdad Molaei, 2017, Donya-ye Eqtesad Publications.
[4]. Kahf, Monzer, Religion and Economics: The Islamic Economic System and the Science of Islamic Economic Analysis, p. 322, trans. Seyyed Hossein Mir-Moezzi, Summer 2005, Qom–Iran.
