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American Law Review
     Established 1890  

April 11, 2002
Capitalism, Commerce
and the Corporation

By Edward W. Younkins, Acton Institute    

    GRAND RAPIDS...(Mich.) --Capitalism is a system of voluntary relationships within a legal framework that protects individual rights against force, fraud, theft, and contract violations.
     Morality is impossible unless one has the freedom to choose between alternative actions without outside coercion. Since capitalism is based on freedom of choice, it can promote morality and character development, a key aspect of human flourishing.
     Commerce in a free economy not only requires but rewards virtuous behavior. Introduction An economic system such as capitalism1 is a s
ystem of relationships and cannot be moral or immoral in the sense that an individual can be only persons are genuine moral agents.
     However, an economic system can be moral in its effects if it fosters the possibility of moral behavior among individuals who act within it. Since the formation of such a system is a human act, it follows that there is a moral imperative to create the kind of political and economic system that permits the greatest possibility for self-determination and moral agency.     
All humans possess natural rights endowed by the Creator and are morally obliged to respect the rights of others.
     The purpose of natural rights is to protect individual autonomy and accountability. Natural rights impose a negative obligation: the obligation not to interfere with another person's liberty.
     Since persons are ontologically equal and independent, no one ought to harm another with respect to his or her life, liberty, or possessions. It is illegitimate to use coercion against a person who does not first undertake the use of force.
     The role of government is to protect natural human rights through the use of force, but only in response to those who undermine such rights.
     The natural right to political freedom is a necessary social condition for the possibility of moral action. Political freedom involves the idea of a protected private sphere within which an individual can pursue freely chosen norms, actions, and ends without the intervention of arbitrary coercion.
     Natural rights, therefore, require a legal system that provides the necessary conditions for the possibility of human flourishing through freely chosen courses of action.
     The common good should not be seen as a single, determinate goal that all persons must work toward. Rather it is the procedural implementation and protection of the natural human right to liberty.
     The natural right to liberty is a necessary precondition for the possibility of human moral action. There can be no morality without individual responsibility and no responsibility without personal self-determination.
     Responsible self-determination implies prudence, rationality, honesty, self-control, productiveness, and perseverance. In its absence, people will devalue liberty, character qualities will diminish, and governmental institutions may become the means for people to evade personal responsibility.
     To provide the maximum degree of self-determination for each individual, the state should be limited to maintaining justice, police and defense forces, thereby protecting life, liberty, and property.
     Capitalism is a system in which individuals are free to decide which goals to pursue. Within a capitalist system, government's proper role is to enable people to pursue happiness. The pursuit of happiness may be viewed as voluntary, purposive action.
     Happiness is the positive, conscious, and emotional experience associated with the use of a person's individual human potentialities including one's talents, abilities, and virtues. Happiness cannot be given to people; it must be attained through one's own exertions. Dignity and self-esteem (including self-efficacy and self-respect) must be acquired through one's own efforts - government cannot supply more than the prerequisite conditions.4 No economic system can make people virtuous, it can only provide the occasion for virtue or vice. Morality requires the freedom to act immorally.
     Capitalism, the system that maximizes human freedom, cannot guarantee a moral society; however, freedom is a necessary condition for a moral society. It is only when a person has choice that he or she can be moral. Choice (i.e., free will) is the foundation of virtue.
     Capitalism is consistent with the fundamental moral principles of life itself and, when compared to other economic systems, is conducive to the use of free will, which makes moral behavior possible.
     To Exist Is to coexist. The sense of belonging to freely chosen communities is an important constituent of human flourishing and happiness. Although the individual is metaphysically primary (and communities are secondary and derivative), communities are fundamental because they assist us in reaching our potential.
     The social bonds of affiliation are instrumentally valuable in the satisfaction of non-social desires and are necessary for one's personal flourishing. Since a large portion of a person's potentialities can only be realized through association with other human beings, personal flourishing requires a life with others - family, friends, organizations, and business associates.
     These associations are instrumentally valuable in the satisfaction of non-social desires and are necessary for a person's moral maturation including the sense of meaning and value obtained from the realization of the consanguinity of living beings that accompanies such affiliations.
     Human beings are unique, ontologically equal individuals who are not only born into a universal (i.e., human) community of shared mortality and accountability but because of their nature have potentialities that can only be realized through association with other human beings.
    Equality involves the recognition of our common human capacity to be free to associate with those of our own choosing. People are responsible for choosing, creating, and entering relationships that will enable them to flourish. If people are free, they will naturally form communities and voluntary associations.
     When communities are freely chosen, the results are a sense of joint ownership, a coincidence of interest, and a sense of belonging. Community identification and involvement thus contri-butes to the happiness of the individual participants.
     For example, the corporationunites people in a common goal and gives them a sense of meaning and purpose. The cooperative nature of the corporation illustrates that capitalism is far from the anarchic individualism that critics have claimed it to be. In fact, it can be argued that capitalism's antidote for social dislocation is the corporation, in which mobile workers are organized into teams of task-oriented colleagues.
     The corporation is a community whose social purposes include: making a profit; creating new wealth; providing desirable goods and services; providing private moral and material support of activities of civil society; and establishing within the firm a sense of community and respect for the dignity of persons.
     Work is at the root of a meaningful life, the path to individual independence, and a necessity for human survival and flourishing. It is also the distinctive means by which human beings forge their identity as rational, goaldirected beings.
     Productive work is the process by which humans control their existence by acquiring knowledge and translating their ideas and values into physical form. Work is a synthesizing activity, involving both cognitive and physical aspects, and helps to actualize specifically human abilities and desires.
     Work is needed not only for sustenance but also for psychological and spiritual well-being - it is the means by which a person can maintain an active mind, attain purposes, and follow a goal-directed path. Since humans must work to obtain material well-being, employment is a major factor in most peoples lives.
     Work is integral to human flourishing and happiness. Each worker is a rational being who is naturally motivated to pursue his own happiness, able to discern opportunities and barriers to his happiness, and is cognizant that happiness is, for the most part, dependent upon his own efforts.
     There is an inextricable link between reason, self-interest, productive work, goal achievement, human flourishing, and happiness. Work is a concrete expression of rationality.
     Every productive human activity originates with mental effort and involves the translation of thought into a definite form. Every creative work and discovery contributes to human existence by increasing one's understanding of reality or by making human life longer, more secure, or more pleasurable. Productiveness comprises an important existential content of virtue and is a moral responsibility of every person.
     At issue is not one's field of work, the level to which one rises, or how much one accomplishes.
     Since people differ with respect to their intelligence, talents, and circumstances, the moral issue becomes how one addresses his or her work given the person's potentialities and concrete circumstances.
     A productive life not only builds character, it also requires virtuous work habits and adherence to basic ethical norms. There are many virtues associated with work including perseverance, patience, conscientiousness, self-control, obedience, cooperation, longanimity, constancy, honesty, integrity, fairness, and justice.
    Virtuous workers are energetic, productive workers who (1) think objectively, rationally, and logically; (2) focus on reality; (3) ask clear, pertinent questions and listen carefully; (4) use time efficiently and effectively; (5) search for facts in their total context before making judgments; (6) organize one's life and work toward worthwhile endeavors; and (7) set value-producing goals and strive to accomplish them.
     People can act morally or immorally in a capitalistic system just as they can in any other economic system. However, capitalism does possess a number of positive and morality-promoting characteristics that are absent or weak in other economic systems.
     Capitalism provides freedom of choice, fosters cooperation and mutual adjustment, respects the dignity and individuality of each person, provides accountability, limits and disperses power, promotes innovation and progress, and creates wealth for the masses.
    Human flourishing, however, requires more than material wealth. Prosperity is a condition that enables each individual the opportunity to develop his potential and find happiness through the cultivation of his talents, abilities, and virtues.
     Capitalism, the best system for wealth creation, permits indivi-duals to spend less time on physical concerns thus giving them the time to turn to higher level pursuits of happiness such as religious pursuits, education, love, creative and fulfilling work, character development, and community building. Happiness is related to one's self-esteem and includes both a person's self-efficacy and self-respect.
     Self-respect, in turn, stems from a person's character development. By allowing for individual autonomy and self-determination, capitalism gives each person the chance to develop his or her character, the internal source of external behavior. Self-direction involves the use of one's reason and is a necessary feature of human flourishing. Morality is a matter of character and the free exercise of will and judgment. The virtues are moral excellences—the lack of which diminishes self-respect.
     In a free society an individual must develop and earn his personal character. When a person deve-lops a good personal character he will be happier, more satisfied, and more self-actualized.
When commerce is conducted within a capitalistic society, virtue is promoted. The pursuit of profit reflects the presence of many of the virtues. The free market rewards polite, accommodating, tolerant, open, honest, realistic, trustworthy, discerning, creative, fair-dealing businessmen. In the long run, profitable businesses tend to be populated by good people, who, at a minimum, conduct business in accord with basic ethical principles calling for honesty, respect for persons and property, fidelity to commitments, justice, and fairness.
     At the very least, a businessman is required to refrain from any rights-infringing activity. He should be honest and just in his dealings with others. For example, the most deserving employees should be promoted and the best bidders should be awarded contracts. Furthermore, a manager should not support governmental actions such as price supports, tariffs, quotas, and subsidies even though such policies may result in higher profits for his own company.
     To do so would involve the use of coercion, one step removed. To support such actions that violate natural rights is to undermine the principles of the free society on which business depends. Business people have incentives to do the right thing. Lying and cheating may ruin the company's image and reputation. Mistreating workers will lead to decreased productivity, absenteeism, grievances, and employee turnover.
     Unsafe working conditions will lead to higher wage demands. Misinforming customers or giving them less than they bargained for will lead to reduced sales. Ignoring product safety could lead to accidents, lawsuits, and decreased sales. Taking advantage of suppliers may result in material shortages and possible shutdowns. Screening out potential employees because of race, gender, or other group characteristics means reducing the firm's chances of hiring the best workers. Excluding customers because of their group identity means losing sales to competitors.
     Successful businesses seek out talented and virtuous managers who bring out the best in others, help employees develop and improve through training and supervision, provide advice and support, share values with others in the firm, and help workers recognize the wholeness of their lives.


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