Rupert Murdoch, chairman and CEO of News Corporation, addressed the morality of free markets in his recent editorial. The essence of Mr. Murdoch’s argument is that free market is inherently moral and that greed is not the driving force of success.
“The market succeeds because it gives people incentives to put their own wants and needs aside to address the wants and needs of others. To succeed, you have to produce something that other people are willing to pay for.” Mr. Murdoch writes.
Let’s dwell on this for a moment. Benevolence is not why people start a business. Businesses are profit driven. Some enterprises can begin as an experiment and be iconoclastic and pioneering in nature, like Apple; the rest are founded with the sole purpose of making a profit. If someone wants to put his own wants and needs aside to address the wants and needs of others he volunteers or starts a non-profit.
One can’t mindlessly marvel at the virtue of the free markets without considering the following: people are not always rational; markets do not always self-correct; there are informational asymmetries between transaction parties; there’s an agency problem (that is when a hired representative, in business or in public life, represents his own interests rather than the client’s). If we lived in an idealistic world of artisanal mom and pop shops, Mr. Murdoch would have a case for the morality of market participants. But when those small shops run out of natural customers the troubles begin. Embarking on the quest of permanent growth, those businesses tend to enter the realm of creative finance, consolidation, dubious products and political favors. Business models for many big firms have long ceased to resemble the innocuous model that some laissez faire idealists subscribe to. We’re not living in the world of mom and pop cupcake stores and community banks anymore. Consumers’ interests and corresponding profits are not aligned anymore: customers and their interests are secondary to the interests of shareholders and investors. Because everything is put at the altar of “growth” there’s a point where a business begins to invent useless or harmful products (addictive prescription drugs, subprime mortgages, leveraged buyouts, entertainment disguised as “news”).
Morality and capitalism, in their distilled forms, are incompatible. Any efforts to mix the two are disingenuous attempts to make those at the bottom moral while those at the top reap the benefits of that morality. Being opportunistic, mercurial, calculating and aggressive – qualities required to start and run a successful business – cannot be abandoned once the business has succeeded. Being honest, law-abiding, family-oriented, benevolent and religious – qualities that are being peddled by many conservative moralists like Charles Murray – stand in the way of a successful enterprise.
As such, when one talks about the morality of free markets, omitting to consider the necessity of regulations and a robust and functioning welfare programs weakens his case. Many conservatives understand this and the case for regulated markets and the virtue of social welfare can be made even without quoting Karl Marx. Bruce Bartlett, a former Bush’s policy advisor makes a conservative case for welfare: “In postwar Europe, conservative parties were the principal supporters of welfare-state policies in order to counter efforts by socialists and communists to abolish capitalism altogether. The welfare state was devised to shave off the rough edges of capitalism and make it sustainable. Indeed, the conservative icon Winston Churchill was among the founders of the British welfare state.” Here’s Ed Morrisey of HotAir: “If nothing else, the past few months should have made it clear that in practical terms, talking about “the 47 percent” and “makers versus takers” won’t win elections for Republicans. It’s in our nature to care about the poor and struggling among us, and that impulse speaks well of Americans.”
Conservative and classic liberal philosophers spent centuries looking for a moral justification of a capitalist system. Such conservative thinkers like Friedrich Hayek and Irving Kristol have foreseen this problem and tried to address it decades ago. The best practice that free market adherents could come up with since then was to try to marry capitalism and social conservatism. But the two are not naturally well-matched: a classical capitalist assumes that every person is rational and capable of making the right decisions on his own; a social conservative believes that human nature is wicked and fallible and must be somehow restrained or guided.
I understand the impulse of Mr. Murdoch to try to defend the morality of free markets – the case has to be made to protect the current system, however imperfect, from slipping into any alternative social order. But Murdoch solution to bring a moral message to those downtrodden, the waitresses, the service employees that free market is good for them will not resonate. It’s not that they’re not getting the message; they’re getting it and they disagree with it. To be moral one needs time, money and some certainty. All lower and middle class receive today are lectures on morality.