Economic Nonsense: 18. Capitalism is disreputable because it is based on greed


This is a misinterpretation. Capitalism is based not on greed but on the legitimate aspiration of people to better their lives. Adam Smith spoke of "The uniform, constant, and uninterrupted effort of every man to better his condition," and of course it applies equally to women. It is this desire to better their circumstances that leads people to forego present consumption in order to achieve greater returns in the future. They invest in order to increase their wealth. That investment supplies funds to companies and provides the capital which they turn to advantage for the benefit of their investors. This is not greed; it is one of the most benign things that people have done. Far from showing greed to the detriment of others, it gains its returns by providing the goods and services that people want and need at prices they are prepared to pay. It is based not on selfish greed but on co-operation to mutual advantage. The investors make it possible for consumers to satisfy their wants, and they themselves make gains in the process.

Capitalism is benign because it is based on trade, and every act of trade is an exercise in co-operation in which people exchange what they have for what they prefer. Capitalism has to be social; that is how it works. Greed is selfish, not social.

The desire of people to better their lives is part of what it means to be human. We do not adapt to the environment as other animals do; we adapt the environment, and we do it in ways that are calculated to improve our lot. We seek greater security, greater command of the essentials of a decent and acceptable life. Capitalism is the most efficacious way we have yet found of achieving these objectives.