Jonathan Haidht has examined how we view capitalism, and how liberal and conservative views describe it.

Liberal Mythos: Capitalism is Exploitation

Conservative Mythos: Capitalism is Liberation

Of course, this paradox exists because both sides have some truth. However, the question is, if we try to admit both possibilities, which should predominate in our approach to capitalism and freedom? Should they balanced 50/50? NO.

gdpgraph2As I wrote in Solving Spiritual Dilemmas Through Weighted Paradoxes, we need to choose the primary principle, and the secondary.

In fact, with most of these, the proper approach is to emphasize one almost to the exclusion of the other (like in a 90/10 ratio). The primary principle applies the majority of the time, but with appropriate limits set by the other principle for outlying, more extreme applications in which the secondary, paradoxical principle eclipses the main principle to keep it from being applied absurdly.

Assuming then, that this is true, which is the greater danger that we should avoid? And which has the greatest potential to help mankind? Haight says that, though he started out more liberal, when he read Adam Smith’s monumental work The Wealth of Nations (free online), and then saw the graphs (right), he realized that capitalism has lifted people out of subsistence living and reduced poverty dramatically from 95% in 1820 to 21% in 2010.

In the first graph, you see how the latecomers to capitalism don’t take off UNTIL they begin to move towards the capitalist model.

povertyEven more impressive is the dip in poverty which is correlated to these numbers. Now, economic socialists might want to respond with “correlation does not mean causation,” but in this case, that’s a hollow dodge.

Poverty has gone from being the state of nearly everyone to being the state of relatively few people. This is arguably the most important event in human history, but because it was spread out over 200 years, a lot of people missed it….There is no alternative but to start with the liberation story….The way capitalism liberates is by unlocking the incredible innovative spirit of humanity, and part of that innovation is clever new methods of exploitation….But what concerns me is not sleazebags that hang out at the edges of the markets…Business is about competition, but there is a lot more cooperation than competition….when you take a stakeholder view and value all of these relationships, the exploitation view becomes irrelevant.

But what’s been happening since the 70’s is a shift towards the shareholder primacy view….When you see the firm as owned by the shareholders….everyone else is a profit opportunity, and if you squeeze them enough, you can make shareholders happy. You can squeeze your employees…your customers…your communities….and your suppliers. So what are we to do?

Haidht publishes his research at yourmorals.org, and has spent a lot of time attempting to objectively examine the middle ground between the extremes, and where the emphases should lie. He recommends telling a THIRD story like this:

My view is that capitalism is liberation, it enables constant innovation including new forms of exploitation, so there is some truth to both stories. And we have to constantly be vigilant regarding these new forms of exploitation. We have to push back against them, ideally with social, moral, and financial means, and when necessary with legal means. What we’re hoping to get is dynamism with decency….if we can accept that is some truth to both stories…then our societies will flourish.

Note that legal means are the LAST resort if you want to preserve dynamism and freedom. And this is the correct emphasis if you ask me – freedom (and it’s dangers) first, rather than socialism (and it’s dangers) second.

Haidt’s examination of the narratives that we use to interpret and support various policies is really interesting. Here’s the full lecture: