Why is capitalism (still) a dirty word among business students?

Why is capitalism (still) a dirty word among business students?

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I just finished teaching another business ethics course. As often in my many years of teaching, students were surprised to learn about the moral code of rational egoism, which was unknown to them before. Many embraced it enthusiastically and commented: “We are all egoists now.”

My pointing out that being an egoist—someone who pursues self-interest without violating others’ individual rights—is not easy and requires careful thinking to discover what truly is one’s self-interest did not diminish the students’ enthusiasm. Quite the contrary, they seemed particularly attracted to the egoist value of reason and the corresponding virtue of rationality: adhering to facts in one’s thinking and actions.

That is not surprising, of course. As Ayn Rand and ethicists of the naturalist school have shown, humans survive primarily through the means of reason, by thinking. That is the essential characteristic of human nature that differentiates us from all other species: man is a rational animal. For the naturalists, the moral imperative for all living organisms is to act according to their nature, to further their survival and flourishing. The moral imperative for people – if we are to gain values, therefore, is to act rationally: to adhere to facts and not to evade them.

Despite their embrace of reason and rationality, the students were suspicious of capitalism. I tried to help them understand Rand’s explanation that the only social requirement of using reason is freedom, institutionalized in the social system of capitalism.  

But the students remained skeptical. They commented that the government’s role included taxing us, to “redistribute” the taxes to those in need, regulating businesses (that otherwise would not pay adequate wages, provide safe working conditions, or be honest in their advertising), and limiting the “greed” of business for “extreme” profits.

In fact, in a thought experiment we did in class about the chances for prosperity of a handicapped person, with a normal brain and the use of one arm, all but two students said that in that person’s situation, they would prefer the current welfare state system to capitalism. For them, living on tax-payer-funded social assistance trumped the prospect for being productive and supporting oneself.

The students did not consider the better chance of affordable medical innovations to cure paralysis (such as widely available stem cell technology) or affordable technological innovations to improve functioning of the handicapped that capitalism would offer.

The students’ inability to conceive of the impact of true laissez-faire capitalism, which Ayn Rand defined as “a social system based on the recognition of individual rights (including property rights) in which all property is privately owned,” on human survival and flourishing is understandable. The welfare state is the only system they have ever experienced, and their view of capitalism has been tainted by the Marxist notion that the capitalist business owners exploit workers or by the mixed economy cronyism where the government hands out favors to companies for financial contributions.

Moreover, like most people, business students have been influenced by the prevailing moral code of self-sacrifice, altruism, and will not easily shed its fundamental idea that it is their duty to help those in need or less well off than themselves.

Most students have not been exposed to the concept of laissez-faire capitalism before. The idea that government’s only role in capitalism is to protect the individual rights of their citizens against those who initiate physical force or fraud is also new to students. Not surprisingly, many are not willing to consider capitalism a feasible alternative to the mixed economy system just on the basis of my short course.

However, for anyone who grasps the importance of reason and the pursuit of self-interest in human survival and flourishing, the inevitable logical conclusion will be that the exercise of reason to pursue self-interest requires freedom from coercion by others. The only social system that protects such freedom is capitalism, which leads to unparalleled prosperity and progress.

Witness the evidence of unparalleled prosperity that followed even from the limited experiments with increased freedom, from 19th century America, Sweden from the 1870s to the 1930s, to Hong Kong (before China’s crack-down) and other Asian “Tigers.” And contrast the evidence of human suffering, including starvation, that has always followed from curtailing of individual freedom in the socialist systems, such as China (under Mao in particular), Soviet Union, Cuba, and Venezuela today.

For business students to embrace capitalism, they need to learn what it is, about its moral basis in rational self-interest, and about the history of more and less free social systems. A good place to start would be reading Rand’s essay “What is capitalism?” in Capitalism: The Unknown Ideal.

This is slightly edited version of a post that was first published on 16 February 2019. It is applicable to my recent teaching experience.

Photo credit: Lucas Franco on Unsplash

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One Response

  1. Because they have been indoctrinated in Karl Marx’ definition of ‘capitalism’, and his fixed-pie economics with drive-to-the-bottom ethics.

    Those come from denial of effectiveness of our mind for life, but that is rarely said. Never mind evidence all around of human creativity, productivity, and collaboration with people of good values.

    I was at a person’s house on a Saturday morning, the phone rang but he ignored it.
    That productive individual explained that he was tired of being the person who would charge out and fix a system on a hilltop, when others would always duck the big task.
    When I said they should be fired he said that everyone needs a job.
    Yes, I replied, but not everyone deserves their job.
    (He leaned toward socialism.)

    His jerk co-workers were exploiters of their co-workers and their employer.

    You should stop using the tainted word ‘capitalism’ as it is not effective communication, instead use ‘individual freedom supported by a justice system’. You start well with rational egoism, and you cover many of the results of Marxist teachings. But perhaps to your surprise the students did not make connections between what you point out and rational egoism.

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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.

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