Capitalism, the state and society

Last week I had a conversation with someone who expressed a concern that libertarianism, by stressing the primacy of the individual, may come at a detriment to an overall sense of community. In a nutshell, my response was that I took an opposite view, with collectivism and government reducing a sense of community while individual liberty promotes civil society and voluntary engagement with one's fellow man.

I noted, for example, that government programs aimed at assisting the less fortunate mean that many citizens feel less of an obligation to help others since they may feel they have already done so through taxation. I further pointed out that when de Tocqueville visited the U.S. in the early 1800s -- at time when the country, with a much smaller and less intrusive government, was arguably the closest it has ever been to a libertarian society -- he remarked upon the number of voluntary associations formed by Americans for a wide variety of purposes.

I thought about that conversation when I read this piece on the role of capitalism in society:

Those people and firms that are the most successful in providing other people with what they want at the lowest cost are the most profitable and the most likely to survive. Capitalism rewards virtue and thus encourages virtue.

Socialism starts out proclaiming the virtue of sharing—giving—but does not reward it and thus provides little incentive to achieve it. In its fully equalitarian form, it provides no reward for harder work and effort at all, leaving every thing to our good hearts. Power—the control of the levers of government—displaces profit as the system’s most tangible reward. The best but imperfect example of a capitalist nation is the United States and of a Socialist nation was the USSR. The results speak for themselves.

...Beyond some point, a larger government, responsible for more and more of our needs and behavior, begins to displace and to undermine the morality that supports our prosperity. Our sense of self-reliance and personal responsibility begins to give way to reliance on others through state institutions. Profits become more reflective of the ability to gain favors from the state than from satisfying the wants of our neighbors. The incentives for corruption thus created bring forth more corruption. Capitalism begins to slide into socialism.

This is exactly right. Profit, after all, is nothing more than a reward for providing a needed service or good to society. This is why it is sheer lunacy to hear some people loudly proclaim that we need to "get profits out of health care." No, we need more profits in health care. We need to reward those members of society who render useful health care services and make products which improve the quality and length of our lives.

The encroachment of the state, meanwhile, tears at the fabric of society and our sense of community. Rather than seeking reward through the provision of needed goods and services, effort is devoted to maximizing one's share of government largess. Fellow citizens become less seen as a market to be served than competition for the goodies which spill forth from the government piñata. The proper metric of success becomes one's ability to curry favor with politicians instead of the quality of service to one's fellow man.

It must also be kept in mind that the high taxation levels required to sustain a large and intrusive government serve as a further disincentive to the most productive members of society. Profits, no longer properly viewed as a just reward for the provision of a valued good or service, are demonized as "obscene" and an evil to be eradicated in order to justify their confiscation (typically by those who possess nothing useful to offer society).

Capitalism and expanded personal liberty are not at odds with a close-knit society, they are its key supporting pillars.