Capitalism isn’t an inherently negative economic system. Like most systems, it is only as negative or positive as its users allow it to be. If capitalists are greedy and evil then capitalism will appear greedy and evil. If capitalists are giving and good then capitalism will appear giving and good. I like to say that capitalists serve themselves best when they serve others. But I am not so naive to believe that everyone would agree with me about that.
I got to thinking about this after reading an open letter to John Oliver on the Cafe Hayek website. In case you missed it, John Oliver had a segment on his show this weekend which highlighted the poor work conditions that many US corporations exploit in third world countries. This open letter is from an Austrian economist whose argument boils down to the idea that the corporations are doing these workers a favor by offering them a job and wage rate that they couldn’t otherwise obtain. Basically, the free market is working and we shouldn’t get in its way.
Personally, I find this perspective consistent with the greedy and evil version of capitalism I described above. The reason is simple. We should not accept the exploitation of other people in the name of free markets and higher profits. In compromising our morals for profits we comprise the very system of capitalism. Yes, it is true that these corporations are providing a superior alternative in most cases. But this is no excuse to support working conditions that, in many cases, are literally killing workers.
The thing is, these US corporations can afford the first world working conditions, but choose to save the money to exploit workers in third world working conditions. I don’t think it would be too much to ask these corporations to meet somewhere in the middle and ensure that their third world workers are working in reasonable conditions. They don’t have to circumvent domestic laws or provide these workers with first world working conditions. But they can and should do more to ensure that these workers aren’t being exploited. Best part is, it’s still a win-win. The workers get better wages and work conditions than they’d otherwise have, the domestic economy gets the added investment and infrastructure and the US firms get the cheaper labor.
I wish that all capitalists were giving and good. Unfortunately, they’re not. And the free market doesn’t always reward giving and good. In fact, in many cases, it rewards greedy and evil. And that’s precisely why we shouldn’t support perspectives that moralize inhumane working conditions in the name of making a profit. If we allow capitalism to become greedy and evil it becomes part of the problem and not part of the solution.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.