Capitalism: Self Interest or Selfishness?

One of capitalism’s major criticisms centers around selfishness and greed. Supposedly, free markets promote selfishness and greed in such a harsh, dog-eat-dog world. Driven by the almighty dollar, we’ll all become so consumed with clawing our way to the top of the success ladder that we ruthlessly shove aside anyone who gets in our way. Capitalism, people argue, allows bigger corporations to dominate smaller, less well-endowed individuals or companies. See this video from the London School of Economics with Professor Ha-Joon Chang for a more detailed explanation of this argument:

The logic there might seem solid. But the argument ultimately collapses because of fundamental confusion between selfishness (i.e. greed) and self-interest.

As Anne Bradley (Ph.D. from George Mason University, VP of Economic Initiatives at the Institute for Faith, Work & Economics, visiting professor at Georgetown University) points out, “Self-interest is part of our design… greed is the result of our own selfish desires.”

In other words, we’re all inherently self-interested, but that self-interest doesn’t automatically equate with greed.

She continues: “In an economy in which you trade with others, your well-being increases only if it benefits others in the process.”

Consider entrepreneurs. They’re driven by profit, but profit only comes when their service, commodity, or product solves a societal problem, adds value to the customer, or provides a service. The entrepreneur’s desire for profit motivates him or her to innovate in a way that enhances the well-being of individual consumers and broader society.

Simply—to be financially successful, you must look outside yourself. You must meet other’s needs. It’s simple supply and demand.

Is free market capitalism completely perfect? Certainly not. All economic systems have their flaws.

But take a quick glance at history: the single economic system that has lifted the most people out of poverty is not communism, not socialism, but capitalism—in one form or another. Look at this article from the National Review Online for the specific numbers.

The point is this—capitalism is the one economic system that aligns natural self-interest with the drive to practically improve society.

Check out this great pamphlet from the Institute of Economic Affairs for more.

 (Originally published on AllRight Media)