Capitalism and morality
by Jayant Bhandari (originally published on in January 2005)





It was 1992. Starting with Lithuania, the Soviet Union had just broken apart and I was involved in a project to teach those from the former republic visiting the UK the fundamentals of a capitalistic economy. Passions rose among the teachers when they found that the students could not accept some of their fundamental tenets. Why did a balance sheet have to be balanced? When, if the costs of ingredients went up, could the government not subsidize production? Most responses they made to questions the teachers had involved manipulating the system in some way.


Communication was difficult; in fact, the students found it difficult to make eye contact. To get them to discuss concepts openly was merely a dream. To ask them to work in groups was not easy either. Smiles, laughter, and easygoing behaviour was unheard of. The students attempted to establish a pecking order early in any social conversation—if such a conversation ever got started at all. Suspicions were rife. Teachers were scared of our short-tempered visitors. How ironic: the Soviets had achieved the exact opposite of what they had dreamed they could create!


That was then. Recently, almost 13 years later, I visited Lithuania to encourage university students to discuss the free-market economy. The capital, Vilnius, looked to me to be calm and self-satisfied. Members of the younger generation looked straight at me, reasonably confident of their abilities. Well-dressed youth walked the streets. When accosted, they responded calmly and without fear.


In the course of the visit, we gathered at a resort in Trakai, a beautiful village that was once the Lithuanian capital. The students easily worked in groups—and it was difficult to stop their conversation once they got started. On this visit, it was no longer difficult getting them to engage in passionate debate. In fact, it was much more difficult to moderate those debates! These young people were no longer afraid of authority. Often, men lay shirtless on the grass, sunbathing during the discussions, showing no excessive respect. All openly challenged anything they disagreed with. I was sometimes infuriated with their attempts to argue against something, particularly if they otherwise supported that something—they were arguing for argument’s sake. However, the atmosphere was a vast improvement on the obsequious acceptance of authority that was palpable just 13 years earlier.


At least among the students in my class, the free-market economy is the only way to go. Socialism is out. The students have few inhibitions about money and freedom. They see no alternatives to democracy. In fact, sometimes it is difficult to discuss any of democracy’s problems with them.


My experience is anecdotal, but it does illustrate the vast shift in attitude that has taken place in that country.


I once asked the students if they thought that capitalism was a moral principle. Few hands went up. Apparently they thought capitalism is immoral and unfair. At best, they had doubts about it.


In reality, their position is not very different from what one encounters in the West where most discussions about capitalism become mired in cloudy rhetoric about environmental consequences, the gap between the rich and the poor, unemployment, discrimination, and so on. Had folks in the West a deep and fundamental sense of the moral basis of capitalism, their governments would not have grown to control almost half of the GDP in their nations. A firm belief in the moral value of capitalism would have kept governments—a form of collectivism—to their absolute minimum size, about 10 percent of GDP according to Milton Friedman.


In the ensuing discussion, I suggested that the application of the force that is needed to redistribute wealth and to enforce positive rights inherent in socialist policies was what made socialism highly immoral. Of course a capitalist society uses force, too, but it is a force that protects negative rights (such as enforcing business contracts, and protecting citizens from arbitrary state intervention) so it affects only those who do not respect the freedom of others. Capitalism, I explained, is not only good for an economy, but more importantly, is morally good for the whole society, which is why capitalism is sustainable and why it works as well as it does.


The so-called capitalist societies of the West have plenty of socialist elements in them. Although socialist policies drag down western economies and the liberty of their people, their effects are not clearly visible because of the converse effect of prosperity that the capitalist aspect of their economies has brought. In Eastern Europe this is not the case. People there have seen the stark, naked truth—the immorality—behind socialism. Unfortunately, though, somewhere in their minds, doubts about capitalism remain. 


Before I left Lithuania, I had become very respectful of its citizens, who have made a success of their freedom. I also thought that instead of people from capitalist countries visiting them, some Lithuanians should visit us in the West to explain their experiences with the harm that socialism causes.


Jayant Bhandari