With Oliver Stone’s sequel to Wall Street hitting theaters last weekend—perhaps the capstone to the public beating capitalism has received in more than a few corners over the past few years—one might be forgiven for thinking capitalism exists so that greedy people can feed their greed for more and more stuff, to the detriment of the poor. And indeed—greedy or otherwise—we see people, ourselves included, ever-investing in cooler gadgets, trendier clothes, bigger houses, faster cars, nicer restaurants, etc.
And yet, despite the stubborn endurance of this idea in the popular imagination, the chief case for capitalism is moral and cultural, not economic. Of course, capitalism is a fantastic system for creating wealth, and wealth is important, even critical, to a nation’s success (even one that has more than it knows what to do with). But the wealth itself is not the primary point.
This subject was expertly explored earlier this year by the journalist and policy analyst Yuval Levin in a speech entitled “Recovering the Case for Capitalism.” In his speech, Levin re-introduces the American public to Adam Smith, the 18th-century author of The Wealth of Nations, who is widely viewed as the father of modern capitalism. Perhaps contrary to expectation, Smith was a moral philosopher, not an economist. Levin describes Smith as “above all, a scholar of how social arrangements shape human souls.”
In his work, Smith sought not to create the most efficient economic engine possible, but instead a system that would shape virtue and character, a system that would channel individual human passions towards the common good and thus build stronger communities, both human and political. This required, as Smith saw it, certain “moderate” virtues that are essential for a well functioning society—in his speech, Levin lists prudence, restraint, industry, frugality, sobriety, honesty, civility, and reliability. By forming stable and productive lives in citizens, and thus making coercion by the state less necessary, these virtues make a “liberal”—which literally means ‘free’—society possible.
But how to inculcate such moderate virtues? That was the question to which Smith set himself. Given his understanding of human nature, he knew there was no use trying topersuade people to be virtuous—as Levin says, “No amount of rational argument or recitations of a catechism will do the trick.” Neither is coercion an effective means of growing virtue. Rather, Smith saw the need for institutional forms that would draw people toward decent and virtuous means of advancing their interests. In other words, citizens’ pursuit of their own good, through these institutional forms, would help instill in them the moderate virtues and thus also benefit the common good.
The Wealth of Nations offers just such an institution: the free market, oriented to the interests of the common consumer—a notably democratic, even populist, notion of the market. (In Smith’s day, by contrast, a system known as ‘mercantilism’ reigned, where the interests of manufacturers were paramount.) Such a system would lead not only to “immense productivity and wealth” (indeed, throughout history capitalism has lifted billions of people out of poverty) but, more critically, encourage discipline, moderation, order, and self-control—those virtues critical for a free and well-ordered society.
No “-ism” is perfect, of course, and by no means do I wish to deny capitalism’s possible shortcomings. (Pope John Paul II once wrote of the “human inadequacies of capitalism,” for example, perhaps referencing the way it seems to encourage individualism, inequality, materialism, and a dehumanizing fetish for technology.) But it is vitally necessary people recognize that the market is not only—not evenprimarily—a means to create prosperity, but more fundamentally a civilizing, virtue-forming institution. Capitalism aims to align man’s moral and material advancement, so that at the same time he seeks wealth he also becomes a better citizen. Rather than Hollywood’s Gordon Gekko, capitalism’s real heroes are honest, hard-working entrepreneurs or shopkeepers, ever-improving their businesses as they seek to serve their customers.
Indeed (and this deserves fuller development), I have a hunch that most popular rebellion against capitalism, such that we see in movies like Wall Street, stems more from the problems of our worsening culture (most recently manifested by the widespread—as in, not only the housing and financial industry—recklessness that led to the housing collapse) than weaknesses inherent to capitalism itself.
(In this entry I realize I omitted the specifics of how exactly capitalism accomplishes its civilizing function—asserting, rather than demonstrating, that it does. In the future I hope to return to the subject and finish the job.)
 This does not mean, as Levin writes, that Smith believed the rules of the market are “self-legislating or naturally obvious.” No, “the market is a public institution that requires rules imposed upon it by legislators who understand its workings and its benefits.” Perhaps in contrast to some proponents of capitalism today, Smith did not see government regulation as inherently wrong.