Capitalism is not the problem – but a solution worth defending

Capitalism is not the problem – but a solution worth defending

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Countries with the greatest economic freedom (based on 2020 data: Hong Kong, Singapore, Switzerland, New Zealand, Denmark) – those that are most capitalistic – are the most prosperous and rank also the highest in human wellbeing metrics, such as life span, literacy, and life satisfaction.

Yet the anti-capitalist movement is alive and well, particularly among environmental activists. Recently, climate crusader Greta Thunberg called for downfall of capitalism, blaming it for man-made climate change (as well as for colonialism, oppression, genocide, racism, and social injustice).

Climate change has been harnessed by the anti-capitalist movement as a cause to unite the largest number of supporters, including governments and business. Some governments (including the UK and Canada) have passed laws committing them to net-zero carbon emissions by 2050, and corporations are complying with ESG goals and plans to abandon fossil fuels.

But is capitalism to blame for climate change and the ills that the anti-capitalists accuse it of?

To answer, we need to understand what capitalism is. The term is used casually today to refer to the dominant mixed economy system, where some elements of capitalism, such as free trade and private ownership of property, are mixed with government control and public ownership. Even corrupt mixed economies where politicians hand out favors to businesses that make political contributions are called capitalism, albeit with the label “crony” attached.

However, capitalism is not a mixed economy, or crony “capitalism” (or any other modified capitalism, such as state “capitalism,” welfare “capitalism,” or “anarcho-capitalism”). In its original meaning capitalism is “laissez-faire:” a system of freedom based on voluntary trade, or as Ayn Rand defined it: “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”

In capitalism, freedom is ensured by individual rights which the government protects (through police, armed forces, and the courts) without playing any role in the economy (“all property is privately owned”).

In capitalism, governments cannot initiate physical force; their sole role is to protect their citizens against the initiation of physical force and fraud by criminals or foreign invaders, through deterrence or retaliation. That rules out capitalism as the cause of colonialism, oppression, and genocide. (Absolute monarchies and other forms of dictatorships that initiate force, whether communist, fascist, or theocratic, were and are to blame).

Capitalism is also not the cause of racism or social injustice. In capitalism, all individuals have the same rights to life, liberty, property, and the pursuit of happiness, regardless of skin color or social status. Capitalism penalizes racist or other irrational discrimination, say that of a business owner who only trades with people of particular skin color and thus limits his investors, supply chain, labor pool, and customers – and his economic success.

Neither does capitalism cause climate change. Climate has always varied greatly. Human industrial activity has had some impact on the atmospheric carbon levels and the global temperature in the last 150 years, during which there have been only mixed economies and centrally planned countries. With its freedom and protection of rights, capitalism would have encouraged rapid innovations as adaptive solutions to any negative impacts of climate change, whether natural or man-made.

Greta and her fellow anti-capitalists want to take down “capitalism” – the mixed economy – and replace it with a centrally planned socialist economy. We have had a taste of that when governments everywhere expanded their power in the name of fighting climate change: state-mandated net-zero carbon emission targets, “just-transition” to clean energy legislation (in Canada), barring new oil and gas pipelines, banning gas-powered vehicles while subsidizing EVs, mandating ESG reporting, etc.

Although there has been some pushback on such measures by industry leaders, most businesses have quietly gone along, by adopting net-zero targets and plans to abandon fossil fuels. But they should not go along, because if they do, statism will only expand, eventually leading to absolute tyranny where the state dictates every aspect of people’s lives. For examples of industry leaders speaking up, see Terence Corcoran’s Financial Post editorial.

If companies want to stop ever-expanding statism and the problems it has caused (energy crisis, food crisis, war, inflation), they must quit supporting it and defend capitalism and freedom. That includes defending their own freedom to operate and to return to their proper role – what they do best: produce and trade goods and services that our lives depend on, including innovative solutions to energy, pollution, and adapting to climate change.

More business leaders standing up to statism and defending capitalism would affect political change towards freedom for business and the rest of us. More wealth creation and prosperity for all would ensue, deflating the tires of the anti-capitalism movement and accelerating human flourishing.

Photo credit: actionvance on Unsplash

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada.

She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada.

Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.