Capitalism is an economic system that can be summed up roughly by the intersection of three practices. The first is the holding of private property, and the right to keep whatever profit that property generates. The second is the practice of distributing goods through a process of voluntary exchange, in more or less free markets. The third is the idea that production within the economic system is reflective of demand: what goods or services are produced, and in what quantity, is in some way a function of what the purchasing public wants, rather than (for example) of what a ruler or government agency decides should be produced.
The key ethical debate regarding capitalism concerns whether it is fundamentally ethical or unethical. One view holds that capitalism is fundamentally unethical. Critics have argued that capitalism has an inherent tendency to generate great wealth for some people while leaving others much less well off. Critics also point to the particular unethical behaviours that private enterprise, and in particular the profit motive, tends to produce.
Often, critics who claim to be critics of capitalism itself are in fact criticizing particular unethical practices that may occur within a capitalist system, but that are not in fact part of capitalism itself. Critics typically also fail to suggest any real alternative to capitalism.
Another view holds that capitalism is generally ethically good. Proponents of this view point out that capitalism is driven by free choices (e.g., what kind of work to do, what kinds of things to buy), and the ability to make free choices is good. They also point out that capitalism has a very strong tendency to generate wealth and to increase human well-being. But sometimes, those who argue in favour of capitalism argue on the basis of how capitalism ideally “ought” to work, in a perfect world, and ignore or minimize the way the system works in the real world.
See also in CEBE:
- Adam Smith, The Wealth of Nations. 1776.
- John Micklethwait and Adrian Wooldridge. The Company: A Short History of a Revolutionary Idea. Modern Library, 2005.