The Ethics of Capitalism

The title is that of Chapter 30 in Henry Hazlitt’s The Foundations of Morality (1964; free download here).

Hazlitt says the basic institutions of capitalism are: (1) private property, (2) free markets, (3) competition, (4) division and combination of labor, and (5) social cooperation. They are not separate institutions but mutually dependent (303).

He mentions force and fraud elsewhere. I don’t know why he didn’t include prevention and retribution against them here.

He quotes economist P. H. Wicksteed at length (318-20) because he considers Wicksteed’s the most powerful statement he ever encountered of the thesis that the free market system is "ethically indifferent" or ethically neutral. The thesis, nevertheless, seems to him seriously questionable (320).

The habit of voluntary economic cooperation tends to make a mutualistic attitude habitual. And a system that provides us better than any other with our material needs and wants can never be dismissed as ethically negligible or ethically irrelevant (322).

Hazlitt cites Adam Smith and Ludwig von Mises regarding productivity, the following from Mises. "The division of labor extends by the realization that the more labor is divided the more productive it is. The fundamental facts that brought about cooperation, society, and civilization and transformed the animal man into a human being are the facts that work performed under the division of labor is more productive than isolated work and that man's reason is capable of recognizing this truth" (308).

He writes about mutualism in Chapter 13.

A society in which everybody act on purely egoistic motives, or one in which everybody acts on purely altruistic motives (if either is really imaginable) would not be workable. A society in which each works exclusively for his own interest, narrowly conceived, would be a society of constant collisions and conflicts. A society in which each works exclusively for the good of others would be an absurdity. The most successful society seems to be one in which each worked primarily for his own good while always considering the good of others whenever he suspected any incompatibility between the two.

“In fact, egoism and altruism are neither mutually exclusive nor do they exhaust the possible motives of human conduct. There is a twilight zone between them. Or rather, there is an attitude and motivation that is not quite either (especially if we define them as necessarily excluding each other), but deserves a name by itself.

I would like to suggest two possible names that we might give this attitude. One is an arbitrary coinage—egaltruism, which we may define to mean consideration both of self and others in any action or rule of action. A less artificially contrived word, however, is mutualism” (102).