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Need for Virtuous Capitalism

March 21, 1994

The excerpt of Michael Novak's remarks on winning the Templeton Prize identifies the dangers for a democratic capitalist society adrift of its moral and ethical moorings ("The Urgent Need for Virtuous Capitalism," Commentary, March 13). However, he neglects to offer a viable intellectual basis for the "virtuous cultural awakening" required for free societies to survive. The strength of Weber's "Protestant Ethic" is founded on individual responsibility and accountability. The theory of the firm does not dispel this maxim. It is when human associations and institutions depart from individual responsibility and accountability that society's moral bearings begin to fray. Such is the root of the tyranny of bureaucracy, the torpor of socialism, the hubris of unchecked political power and the corrupted ethics of free enterprise.

The costs and benefits of human action must be internalized and borne by the individual actor whenever and wherever possible in order to promote prudent social behavior. This is an economic, legal and moral basis for justice in a society that seeks to ensure individual liberty and individual preference.


Santa Monica

Michael Novak has his work cut out for him if he is going to reconcile Catholic theology with capitalism.

The problem is not that it is impossible to imagine moral ways of acting within capitalism if one should choose to do so; people can always choose (and some have chosen) to act morally. The problem is that the system of capitalism itself does not require moral action outside the context of its own operation. Honoring contracts, for example is "morally necessary" for capitalism to work, but having economic hardship for someone else result from one's actions has no moral force in capitalism. The potential problem with Adam Smith's "invisible hand" has always been that it might crush us.

In reference to Novak's description of "the distinctive capitalist social invention, the business firm held together by voluntary consent and teamwork," this is more of a political economist's ideal than a reliable generalization about the real world. It is possible to see one's work as being part of a team, but the concept of mutual loyalty and interdependence between worker and company in fact only fully exists in those economic situations which are controlled markets rather than free markets.

It is precisely in paternalistic, mercantilist economies, the sterling example of which is Japan, that such relationships can be pursued. I don't see how this squares with Novak's otherwise laissez-faire description of how capitalism properly works.


Los Angeles

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