One of the common criticisms of those on the left, particular the religious left, is that capitalism is an evil system because it treats individuals as commodities of momentary worth, rather than as people made in the image of God. This is really just a self-serving definition that tells us more about the person making the claim than about capitalism itself.
One reason for this is that at its core capitalism is based on a mutual giving among individuals that is, at least ideally, freely chosen. There is nothing in this that demands greed or exploitation. Granted we live in a fallen world where people are not always driven by the highest motives, but this is a problem with all systems, from sports to science, movies to teaching, the private sector, government, and yes, even socialism. It is hardly limited to capitalism. People are people, regardless of where they are. One of my favorite quotes is by Victor Frankel from his book Man’s Search for Meaning (If you have not read it, you should do so now). Frankel, from the perspective of one who had recently been freed from a Nazi Concentration Camp, wrote,
From all this we may learn that there are two races of men in this world, but only these two — the “race” of the decent man and the “race” of the indecent man. Both are found everywhere; they penetrate into all groups of society. No group consists entirely of decent or indecent people.
There is nothing inherent in capitalism that makes men greedy or teaches them to exploit others, in fact if anything it is the opposite for capitalism simply seeks an exchange that is best for both sides, where what is best is determined by each individual. Since it is based on mutual consent, it encourages people to be concerned with the needs of others, which I believe is one of the reasons those supporting capitalism are on average more charitable than those supporting socialism. If someone were driven by greed and a desire to exploit others, unless there was some mechanism to restrict choice, they will find it difficult to find those who will freely want to be exploited.
You will notice that I have talked about a generic “exchange” instead of money. While money is required for most transactions, this requirement is not inherent in capitalism. Capitalism, for example, functions just as well in a barter system where no money changes hands. It is only economic conventions, and in some cases laws, that require the use of money.
Nor is there any requirement to accumulate great wealth, though this might be the result of one or more exchanges. Again each side decides what is of value to them. While for some profit is important, it is also often only a means to a different end, and not an end in and of itself. For many companies profit is just a means of staying in business, for if there is no profit, the business fails. For many profits are reinvested back into the business so it can better serve customers, open new locations, and yes, even hire more employees and to pay them better.Many may find this strange, particularly given that there are some sections of the economy that are more profit focused than others. For example, the stock market is very profit focused, but is this really greed? When you combine households, mutual funds, pension plans and government retirement plans invested in the market, you are looking at about 70% of the total market. Insurance policies’ holdings that protect people from risk make up another 7%. Is it really greed that is driving people to save up for retirement?
Add to this the growing number of purpose driven companies, companies where profit is seen as simply a means to other and often more noble goals. Again, to many it might seem strange, but the companies that focus less on profit and more on a purpose often do much better.
This is because there is a growing body of evidence that the traditional carrot and stick approach to motivation, what is called Type X motivation, is of limited value, and may not be a very good fit for a 21st century economy.
Extremely briefly, for thousands of years societies have been based on extrinsic rewards and/or punishments to motivate people. While these worked in some situations, they become increasing ineffective and even counter-productive the more a task requires creativity or originality, something a growing number of modern jobs require. For example in one study, some artists were commissioned to produce a work of art while others were ask to contribute a work without pay. Later a group of judges, without knowing where these pieces came from, ranked the works of equal quality, but consistently ranked the art works that had been commissioned to be lower in creativity.
Where all this enters into capitalism is that the motivation behind an exchange is left to the individual. Sure a person could seek a higher wage because they are greedy, but they could also seek a higher wage as it allows them to travel to third world countries on their vacation to spend that time helping those in need. The motivation is up to them and capitalism works either way.
Intrinsic or Type I motivation is much more powerful than type X, which is why purpose driven companies often do better than those who seek only profit. While we are in a transition to purpose driven, like the transition into the industrial age it will not be easy. Intrinsic motivation is driven by Autonomy, Mastery, and Purpose. People must believe in what they are doing, spend the time and effort to master what they are doing, and be free to determine how they do it.
Since capitalism does not care what motivates a transaction, only that it is freely entered into by both sides, both forms of motivation are consistent with capitalism, though the freely-entered-into part requires at least some autonomy. Intrinsic motivation strongly conflicts with socialism, at least in its current form, as socialism requires a strong central government. While mastery might still fit, purpose is questionable. It would be fine if your purpose just happens to line up with the Government’s but if not, you have to try and find a way around the government. The biggest problem however is autonomy. Government by its very nature is based on the older extrinsic motivation model. Do one thing and you pay a fine, or even go to jail. Do another and get a tax break. Classic type X. Government restricts autonomy, at times even the ability to freely enter into a transaction. The bigger government is the more laws and regulations it passes the less autonomy people can have. This is a big mark against socialism, and in favor of capitalism. It also to some extent helps explain the success America, with its emphasis on Liberty (autonomy) and until recently limited government, has tended more towards Type I.