Ethics and Economics

"The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of misery." - Winston Churchill

What should the proper goal of an economic system be? Should it be prosperity or social justice? The easy answer, of course, is "both", and any policies that simultaneously promote growth and help the impoverished are going to be popular.

But many times we are faced with a decision to advance either one or the other; greater wealth or greater equality of wealth. The two goals can't be pursued in tandem; policymakers must choose which goal is of greater importance. This is complicated by the fact that advancing one goal may not just ignore the other; it can actually cause the other to lose ground. Higher taxes make more job training available, but hurt the balance sheets of companies who might otherwise want to hire the newly trained workers. On the other hand, reduced tax rates offered to select industries to promote job growth can spark a bidding war between jurisdictions, cutting tax revenues for each one without actually generating any new jobs.

So it's usually a trade-off. How do we decide what to trade off, and what to keep? Many free-market enthusiasts will plump for prosperity. The role of the state at most is to work for equality of opportunity; then the market will reward best those willing to work more, or with greater skill or intelligence, or with greater judgment on when to save or when to invest. Let those who earn success keep the rewards of success. Those who don't succeed either judged badly or didn't try hard enough in the first place, and deserve no special consideration.

That's a pretty extreme position, and even most free market fans will temper that with a little mercy. No one can guarantee equality of opportunity. Those whose parents push for education will tend to be more skilled than those whose parents act otherwise. Some people invest wisely, but still come short due to sheer bad luck. In fact, many of the most successful American capitalists of the past (Jay Rockefeller, Andrew Carnegie, Henry Ford), who cut their teeth in ruthless markets, were also dedicated philanthropists whose foundations and social work pay dividends even today. This tradition continues, as many of today's successful businessmen are active in community service groups such as Rotary, Kiwanis, and thousands of local charities and churches. Many who appear to be tough-as-nails on the job are deeply involved (personally and financially) in non-profit organizations to help the less fortunate.

I think the feeling of sympathy and compassion for others is a common thread in most of humanity, regardless of political or economic views. Where the true division lies is who should shoulder the burden of aid. Free-market types put their faith in private philanthropy, while believers in social justice see this as the proper role of the state.

There is sometimes a deeper motive for using the state in the role of benefactor. It's not just a matter of helping the poor. It's a feeling that what is really needed is punishment of the rich. There's a sense among many people that being wealthy is a moral failing. "Behind every great fortune is a great crime, to misquote Balzac. Envy is human, but for some this goes beyond mere jealousy. This is class warfare (if you're not rich, as Karl Marx was not) or self-loathing (if you are rich, as Max Engels was). The need to soak the rich with punitive taxation, undermine private enterprise with burdensome and damaging over-regulation, and replace local charities with bureaucratic public programs frequently stems from a visceral desire to humble those who are at the top of the ladder of success.

This is not economics. This is not ethics, either. On a small scale, it's petty. When it becomes a philosophy of governance, it's poisonous. To make success at commerce a cause for wrath is to make prosperity impossible to achieve, at least legally. Ambitious people leave the private sector and enter the public sphere, turning their energies (and their egos) into building power bases rather than building thriving commercial enterprises.

A grasping government, it turns out, doesn't do much to pursue social justice anyway. Better to leave the creation of prosperity, and the pursuit of social justice, to the private sector.