Confronting the Constitution Part 7: Capitalism as Freedom or Justice?

Marc F. Plattner’s contribution to Confronting the Constitution presents an insightful look at the marriage of capitalism and republican governance. His historical digging unearths nuance that makes a world of difference in conclusions otherwise uninformed. Central to his essay: is capitalism a matter of freedom or justice?

Plattner’s interest lies in “the influence of political economy on American opinion about broader questions and morality.” A nation’s “economic system,” he writes, “has an enormous influence on the lives, habits, and views of its citizens.” Knowing that any social system we construct then folds back to remake us, Plattner starts with Adam Smith (1723–1790), amalgamator of modern capitalism. Smith believed that getting the economic model right was essential to social stability in accordance with and subordinate to a pre-established moral terrain. A terrain of ethical behaviors and considerations in a real world of more than one lone individual in their quest for more than survival and prosperity. Smith was a professor of moral philosophy, not economics, at Glasgow University. His first book, The Theory of Moral Sentiments underscores his priority.

In keeping with this focus, Smith’s second book, The Wealth of Nations, is about more than economics. As one University of Tennessee reference has it, Smith’s Wealth is about political economy, “a much more expansive mixture of philosophy, political science, history, economics, anthropology, and sociology… Smith’s philosophy bears little resemblance to the libertarian caricature put forth by proponents of laissez-faire markets who describe humans solely as homo economicus. For Smith, the market is a mechanism of morality and social support.” Plattner agrees.

As did America’s Founders, Smith supported taxes as a requirement for order, and he promoted rational government regulations. The Constitution is, after all, a document of regulations. Freedom also has it limits. Restricting the “natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments,” says Smith. He also never expected his system to be implemented in the extreme, an idea Smith wrote, “as absurd as to expect that an Oceana or Utopia should ever be established in [Great Britain].”

Putting Smith’s view in context with ancients and contemporaries, Plattner finds, “The Laws of Plato contain detailed regulations [about society which] impose the strictest bounds on the pursuit of wealth, including narrow limits on the accumulation of property, the banning of gold and silver, and the forbidding of ‘vulgar’ commercial occupations. For riches are held to be incompatible with virtue and friendship among citizens.” Which all has a familiar ring to it: “It is easier for a camel to pass through the eye of a needle than for a rich man to get to heaven.” Given he arrived 350 years after Plato in the same Hellenistic neighborhood, perhaps Jesus was a Platonist. Living at the same time as Smith, Rousseau (1712–1778) said, “ancient political thinkers incessantly talked about morals and virtue, those of our time talk only of commerce and money.” But Smith sides with none of the above. For Smith, the political order should provide “the people with liberty and security [guaranteeing] enjoyment of the fruits of their labor… In a commercial society, people’s self-interested and ‘vulgar’ desire to ‘augment their fortune’ is alone sufficient to produce that industriousness, sobriety, and frugality Smith characterizes as ‘good conduct.’” Thus reinforcing political stability, though in a manner in opposition to Plato and Jesus. In other words, private vice makes public virtue.

In the 1780s, Alexander Hamilton, James Madison, and Thomas Jefferson read Smith’s Wealth of Nations. Jefferson called it the best book on the subject. (The constitutional debate was in 1787.) While Smith influenced their Lockean perspective, Smith diverged from John Locke (1632–1704). Smith conspicuously echoed Locke’s protocapitalist views on labor as a source of wealth, but he tended to side with David Hume (1711–1776) and Jeremy Bentham (1748–1832) against Locke on his “state of nature” idea, and “the natural rights of man.” Hume labeled the state of nature concept “‘mere philosophical fiction, which never had, and never could have any reality,’ and he never mentions men’s natural rights.” Jeremy Bentham said natural rights were “nonsense on stilts.” While Smith favored rights to life and liberty, he was less fond of property rights, possibly out of inclinations for monarchy.

Among Smith’s critics, we find John Stuart Mill (1806–1873), a fulcrum in Plattner’s essay. For Plattner, Mill divides the thought of Smith and particularly Locke. One branch elevated natural rights, the other the utility of societal wealth that benefits all. The latter became utilitarianism — the greatest happiness for the greatest number — a socialist thrust decades later. For this group, capitalism would no longer be judged in reference to a past state of pre-civilized poverty and insecurity (however fictional) but to a more enlightened future with a higher “standard of morality,” what Plattner views as a different standard of morality.

Mill wrote that “distributive justice constitutes not in imitating but redressing the inequalities and wrongs of nature.” Including human nature. Yet Alexander Hamilton said, “Inequality would exist as long as liberty existed, and it would unavoidably result from that very liberty itself.” These “rewards accruing to greater ability” with one’s right to the fruits of their labor in their exercise of freedom is the just outcome that capitalism serves, according to Plattner, and his central emphasis. Of course, both Hamilton and Plattner assume that reward is due to talent, not corruption. But with Mill’s life ending in the midst of robber barons, one wonders if he re-sighted the aim from moral origin to moral destination because of capitalist abuse. What good was capitalism’s promise of individual gain when a handful of men enslaved wage labor unrestrained “by the laws of all governments”?

“Once it was no longer believed that legislation must be guided by the requirements of civic virtue,” writes Plattner, “the unlimited pursuit of wealth is free to emerge…” After hailing unlimited wealth while demoting virtue, it should be no surprise — though it seems one to Plattner — that over time he finds a “radical divorce of freedom from justice” constituting a decisive departure from the Founders. Hence, as Plattner tells it, appeals to “individual freedom, divorced from justice, are unlikely to prevail in the political arena against appeals to equality that emphatically claim to be on the side of justice.”

Did the embrace of greed provide a wedge for the Left? Does the divorce of freedom from justice now bolster the Right?

Smith’s philosophy is a practical, individualist, materialist one, emphasizing stability of the whole through prosperity of the one; the individual. Through accumulation, it’s meant to translate into prosperity — if only in political stability — for those many individuals composing the state. Explicit in some ways, implicit in others, it degrades obligations to community through the practice of virtue and virtue’s self-restraint on individual passion as preached by the Greeks and Jesus. Such Enlightenment ideas were a colossal reversal in the century’s old beliefs — notably Christian — about wealth, morality, and society. America’s Founders relegated selflessness for the endorsement of selfishness, believing as Smith did that it could be harnessed for the common good.

After some 250 years, how did it work?

Materially, in the long run, on the whole, no other system so far divined comes close to the products of selfish, individualist, capitalist society. East and West Berlin serve as a virtual lab experiment between competing economic models. On one side the prosperity of democratic-capitalist West Berlin. On the East, a razor-wire fence to keep people in. Marx’s “alienation” turned out to be “incentive.”

But are there flaws? Does Smith’s model assume infinite resources without knowing it assumes it? Does its viability falter should the planet be crowded by 10-times the number of humans today than the 800 million alive at Smith’s time? Does capitalism again invite assault when the average U.S. CEO salary is 320-times that of their workers?

In practice, Smith’s philosophy came naturally to overshadow what Smith meant to foster: morality. “Economics is [now] entirely neutral between ends,” writes Plattner, “to the extent that it conforms to this, economics cannot be explicitly pro-capitalist or committed to the principles of [classical] liberalism… [it] has emancipated itself from any concern with moral and political ends.” E.g. corporations are about money, not the flag. Corporations that dodge taxes in the nation they’re born from for lower rates in another is standard practice.

The selflessness of virtue is a community-referenced, self-imposed brake on passion, in contrast with external regulation. True communities (Amish, Mennonite, orthodox Jews) exert pressure external to the individual to coerce behavior in conformance with community rules. But unlike imposition from far away strangers of a State, community pressure comes from those we know and are raised with. Laws from the State might seem like oppression, while from the community, like family values. But with human numbers now in the hundreds of millions composing pluralistic mega-societies, community ties were bound to dissolve, regardless of capitalism’s community-curbing effects; regulation had to come from somebody. A thousand years after the Sumerian invention of the city, king Ur-Nammu didn’t create the first extant law code ca. 2100 B.C. for nothing. Law made by faceless strangers became a necessity, especially for individualist societies like America with our absolutist attitudes of “all rights, no responsibilities.” So irresponsible that the mere inconvenience of wearing a cloth mask to combat a foreign invader killing hundreds of thousands of Americans would, by mental acrobatics of the most inane, become a violation of some new right. The WWII Generation we ain’t. To devalue selflessness by what became the sanctification of selfishness was to set not a static hierarchy but two trajectories, one up, the other down.

Smith did not intend this, but all great ideas commit suicide through excess.

References not linked to above:

Paragraph 1: Alan Bloom Ed., Confronting the Constitution, AEI Press, 1990.

Paragraph 2: “…questions and morality.” Ibid. pg. 315; “…views of its citizens.” Ibid. pg. 315. Adam Smith, The Theory of Moral Sentiments, 1759, Uplifting Publications, 2009.

Paragraph 3: Adam Smith (1723–1790), An Inquiry into the Nature and Causes of the Wealth of Nations, 1776; “…and social support.” Bloom. pg. 320; “…established in [Great Britain].” Ibid. pg. 320–321.

Paragraph 4: “…friendship among citizens.” Ibid. pg. 319; “…get to heaven.” Matthew 19:24; “…commerce and money.” Bloom, pg. 319; “…as ‘good conduct.’” Ibid. pg. 321.

Paragraph 5: “…men’s natural rights.” Ibid. pg. 325; “nonsense of stilts.” Ibid. pg. 325.

Paragraph 6: Ibid. pg. 329. “…standard of morality.” Ibid. pg. 328.

Paragraph 7: “…and wrongs of nature.” Ibid. pg. 328; “…central emphasis.” Ibid. pg. 331.

Paragraph 8: “…free to emerge…” Ibid. pg. 319. “…from the Founders.” Ibid. pg. 331; “…side of justice.” Ibid. pg. 332.

Paragraph 14: “…political ends.” Ibid. pg. 332–333.