What is Good Capitalism?

This is the first of many to come articles that spins capitalistic economics into a spiritual interpretation. The Catholic Church has abstain from endorsing a singular economic institution as being the best. I don’t believe the Catholic Church should endorse a singular economic system. Via Negativa is the Catholic Church’s preferred method of arriving at truth by denouncing certain ideas as being false or against human nature. The church has offered some institutions as against mankind’s best interest: Communism (Divini redemptoris), Marxism (Rerum Novarum), and Liberalism (Libertas). As for Capitalism, I believe there is a lot of good that can come from the economic system focused on man’s intellect and free will. There is bad capitalism, but what is good capitalism?

The foundational principle of capitalism is mutually beneficial consensual exchange that profits the individuals involved in the exchange for the long term. I will take future articles to break that down more. But Good Capitalism leads to the benefit of the individual which in turns leads to the benefit of the society at large. Capitalism acknowledges that humans work towards their own self-interest. Capitalism then empowers the individual to act upon their own free will and intellect to bring about utility as either a buyer or a seller. The quality of living made possible in the past century is a testament to what can be brought about by good capitalism. However, there is bad capitalism and I want to be clear that bad capitalism deserves to be denounced and legislated against. If we still don’t quite know what good capitalism is, then let’s walk through some bad capitalism.

Unfettered capitalism (liberalism) is not good capitalism. This capitalism is called “laissez fair” capitalism. 100% free market without government intervention will naturally lead to monopolies being formed or quality standards reaching inhumane levels. A Catholic inspired capitalistic system would welcome government intervention within reason. Often time, consumers can only vote with their dollar, but they can’t choose what they can vote for. Governments allow for a way for consumers to be represented and advocated for. Businesses ought to provide excellent goods and services, but not all businesses are excellent. The government provides a way to punish or eliminate cancerous business practices.

Taking advantage of workers and suppliers is not good capitalism. “Taking advantage” is a vague term and deserves greater specification. The key principle is mutually beneficial exchange. If a business leverages either their workers or suppliers to work against their self interest, then that is bad capitalism. Monopolies have the ability to dictate terms, but there must be a benefit for both sides. This is not a moral argument. If workers or suppliers have less than they need from an exchange, then they could lose the ability to provide for themselves. For businesses, that could mean bankruptcy. For employees, that could literally mean death if they are not able to provide for themselves or a family. It is in the best interest of all companies to make sure their employees and suppliers have long term success.

Lobbying government policies to benefit a single industry at the expense of the population is not good capitalism. Lobbying is necessary in a representative democracy. There is a space for advocacy groups trying to bring attention to issues that otherwise would be drowned by the sheer quantity of problems faced in society. However, if the lobbying leads to policies that only benefit the few at the expense of the many, then that is bad capitalism. If the policies lead to greater benefit to all, then that is good capitalism. Companies should welcome competitions and high quality standards that governments ought to enforce. Ideally, well crafted government policies would lead to better products and better capitalism. Although, government policies that hinder good capitalism ought to be avoided. Knowing what policies would benefit the most is a difficult question and one that should be handled with mutual respect and creativity from multiple parties involved.

Usurious practices that leave people destitute is not good capitalism. Companies have been known to offer poor quality products or to charge the absolute highest prices that they can get away with. Companies also have been known to take advantage of high demand during disasters. Companies should care about the long term success of their buyers. If their product or prices will lead to the ruin of their customers, then that is bad capitalism. The company may make a short term profit but in the long term, their usurious practices raises poverty and tragedies in society. The company itself will need to close it doors if their actions lead to the destruction of the society that they operate in.

Living above your means is not good capitalism. It is not just companies that do bad capitalism. The customer also has a responsibility to make mutually beneficial exchanges. The customer has an obligation to be educated, knowledgeable, and wise enough to function in a capitalistic society. A beauty of capitalism is that it requires intelligence among the everyday worker. Buyers must work towards their actual self-interest and must not be controlled by their vices. Customers are known to be self-destructive in their purchasing practices. Good capitalism requires customers to make decision that is for their long term benefit. Bank runs, bubble bursting, and financial imprudence are examples of customers failing to act in a mutually beneficial way. The entire capitalistic society collapses if the individual fails to participate in sustainable purchasing practices. Just because you can pay for something does not mean you can afford it.

Artificially creating monopolies and driving out competition is not good capitalism. There are companies that excel far beyond their competition. They are able to work harder, smarter, and over come obstacles that their competitors cannot. These companies have the tendencies to create monopolies in practice if not actual monopolies by definition. Competition should be welcomed in good capitalism. Monopolies should arise due to identical products and universal need. Such monopolies are best run by government institutions to protect the universal need of the societies. Utilities are an example of monopolies that can exist in good capitalism. Good capitalism is focused on delivering good products for a mutually beneficial price. Profits should be a result of mutually beneficial exchanges. If a company’s profits are solely due to its monopoly power, then it is a good sign there is abuses taking place somewhere in the business model.

Valuing short-term profits over long term profits is not good capitalism. Capitalism is good when all decisions are made with the long term in mind. There have been grave consequences to businesses that value quarterly profits more so than profits ten years down the line. CEOs that lay off employees to make profit goals will experience future loss of productivity. Suppliers may offer cheap prices for a short time, but could drop a company as a customer if the company abuses their purchasing power. Rich now and poor tomorrow is bad capitalism. Companies that have the most respect in a capitalistic society are ethical and long lasting. Companies that make short term profits and go bankrupt are most likely run by scammers or con artists. Capitalism relies on mutually beneficial exchange if a company goes bankrupt from their own strategy, then it is bad capitalism. It is the obligation of good capitalism to filter out reckless short term focused companies.

This is but a short list for a much grander topic. There is a beauty to Capitalism, but it can be corrupted easily. I would say Capitalism is the best system we have for fallen man. I mean best because there may not be a “good” system out there yet. I mean “fallen man” because we all have original sin. If we were all angels, then our society wouldn’t have any of the injustices that we must fight against. Capitalism allows for individual free will and intellect which is essential for an economic system that respects the dignity of human life. My ideas on this topic is still being formed and would welcome feed back and research suggestions.