The Liberal Case for Capitalism
By James Paron
Usually, political debate with my peers ends in impasse, but I still do it, because an unquestioned viewpoint is never valid. As someone whose broader ideology began in fiscal conservatism, I have always asked with genuine curiosity why my liberal peers believe in their economic platform. And although I have yet to be persuaded leftward, I have come to understand that fiscal liberals have principled intentions.
At the core of liberal ideals are values of fairness, liberty, and above all, equality. It makes sense, therefore, that a liberal economic policy should seek to generate prosperity not just for the whole, but primarily for society’s least fortunate. Politically, this has manifested in ideas of big government and regulation. But if the liberal objective is to prioritize a moral outcome, then history and academia tell us the most “liberal” system is in fact capitalism.
At its most tangible level, the free market has given rise to the greatest degree of economic prosperity and development. Since the Industrial Revolution, the world’s economic superpowers have unfailingly been those driven by free enterprise. It is easy to see why competing businesses run by motivated individuals create more aggregate wealth than a sluggish, centralized bureaucracy.
However, such big picture arguments tend not to resonate with the left, which views capitalism as a system that benefits the rich and hinders the poor. This is false rhetoric. Fiscal conservatism, especially for the world’s least fortunate, is still the freest, fairest, and most equitable.
The Fraser Institute’s annual Economic Freedom of the World report evaluates economies on the basis of freeness. The freer the economy, the more capitalist: less government spending, lower taxes, fewer regulations, and more international free trade. Consistently, the decades-old annual report has found that more freedom leads to more individual well-being.
The aim of even a moderate fiscal liberal is to equalize outcomes by manipulating markets. However, the reports have repeatedly found that the share of income going to the bottom 10% is no higher in less free economies, meaning that more government intervention has failed to benefit the poor. At the same time, 2016 per capita income of the bottom 10% in the freest economies was over ten times that in the least free.
Of course, the benefits of economic freedom extend farther than measures of wealth. The Heritage Foundation’s 2017 Index of Economic Freedom found that freer economies perform significantly better on measures of literacy, social progress, and environmental protection. By reason of technological innovation, the most capitalist nations were also shown to have higher life expectancy and better access to healthcare.
The freedom of capitalism also generates unparalleled hope and equity. Capitalism at its heart is the dream of “rags to riches.” That any person of any background can, through ambition and industriousness, be liberated from socioeconomic strata seems like the quintessence of liberal values. It creates a meritocracy in which hard work, not origin, leads to success.
A March article in The Economist entitled The progressive case for immigration cites numerous examples of how immigrants have been integral to American economic development. From Mexican laborers to entrepreneurs like Steve Jobs, the article makes a compelling case that immigration has been responsible for some of society’s greatest economic developments.
This value would be lost without economic freedom. Without the attractive wealth and living conditions created by capitalism, workers would have no desire to migrate for a better life. Likewise, it was the innovative nature of the free market, not government action, that resulted in the creation of Apple. The notion that a person can immigrate penniless and forge his or her own prosperity is an extraordinary — and fundamentally liberal — idea.
Capitalism benefits not only a society’s least fortunate, but also the world’s. By freeing trade, useless barriers are broken down and shared economic growth is made possible, especially in underdeveloped nations.
Hong Kong, widely considered to have the freest economy, is extremely prosperous, yet just decades ago, its economic prospects were bleak. While domestic policies certainly played a role in Hong Kong’s success, the primary reason for its immense growth was its commitment to unrestricted trade. By opening its economy and employing global resources, Hong Kong has become a paragon for economic progress and high quality of life.
If liberals truly do want an outcome that advances society’s least fortunate, then unadulterated capitalism is the clear answer. While ideological debate is usually founded in conjecture, when it comes to the economy, history and hard data make the case clear: the government should seek to give economic agency to the people wherever possible. As Milton Friedman put it, “Government should be a referee, not an active player.”