[Smart Economics] Capitalism Drove the Spread of Liberal Democracy

The Driving Force Behind a Better Life Is Human Self-Interest and Passion

In the Middle Ages, when asceticism and restraint were emphasized, a remarkable work appeared arguing that greed for money and individual vice actually drive society forward. It was Bernard Mandeville’s *The Fable of the Bees*, published with the subtitle “Private Vices, Public Benefits.” Mandeville argued that what makes the economy and society function is not human morality, charity, or goodwill, but human self-interest. In this, his view closely parallels that of Adam Smith.

Mandeville himself said of *The Fable of the Bees*: “People do not exert themselves fully unless they are seized by desire. Unless something awakens dormant desire, human excellence and ability will remain forever undisclosed, and a body without passion is no different from a windmill standing heavily still in the absence of even a single breeze. If we are to make human society strong, we must stir its passions.” The “human desire and passion” that Mandeville pointed to are precisely the prototype of what Smith described as “self-interest as the driving force leading to a better life.”

That is why Smith had earlier argued as follows: “You believe that well-intentioned laws and regulations are helping the economy. But they are not. Let it be. Do not interfere; leave it alone. ‘The oil of self-interest’ will make ‘the gears of the economy’ turn so well that it will seem almost miraculous. No one needs a plan. Nor is the rule of a governor necessary. The market will resolve everything.”

Capitalism as the Basic Order of Our Lives

The economy refers to human activity that produces and consumes goods. The economy is the foundation of human life, and economic activity is one axis of human behavior. Accordingly, economics cannot but be a profoundly human discipline, because it is a field concerned with human life and with finding ways to make a better life possible through economic activity.

Throughout history, humanity has gone through countless trials and errors in search of ways to allocate and use diverse resources most efficiently. In the process, it developed a system that does not run counter to human nature and ways of living, and that operates in the most rational and efficient manner. That system is capitalism.

Today, capitalism is the most widely applied economic principle on earth and the only economic system that continues to evolve. Fredric Jameson once said, “It is easier for us today to imagine the end of the world than the end of capitalism.” Capitalism was able to establish itself as the most successful economic system precisely because it faithfully reflects the principles by which we live.

Capitalism voluntarily channels humanity’s innate self-interest and instinct for exchange through the market, guiding economic activity in a moral and rational direction and generally producing positive and productive results. In particular, it linked humanity’s fundamental desire for a better life than the present to productivity, thereby driving explosive economic growth. For that reason, capitalism carries important meaning and value as “the least bad system” and as “a system that continues to evolve.”

The Spread of Liberal Democracy Was Made Possible by Capitalism

Some people occasionally criticize capitalism as an immoral and anti-communitarian system, but this is a misunderstanding arising from a confusion between individualism and selfishness. Capitalism is based on individualism and guarantees private property rights and freedom of choice within the bounds set by law. Capitalism’s reward system, which recognizes the legitimate results individuals earn as they are, provides the motivation for effort and serves as the foundation for growth; it is by no means a breeding ground for absurdity and depravity.

It is also wrong to accuse capitalism of causing the collapse of basic communities. As economic growth promoted the social division of labor, families became differentiated, shrinking from large extended households of three or more generations into nuclear families. This is a phenomenon arising from differences between premodern and modern ways of living and economic activity, not something that can be called a harmful effect of capitalism.

Modern society, through capitalism and liberalism, has called the individual out from confinement within the collective and placed that person at the center of life as a self-willed agent. Unlike in the past, when life was determined according to the principles of the community, individuals are now given the rights and responsibilities to shape their own lives independently on the basis of economic freedom.

Historically as well, the reason liberal democracy—under which individual human rights and freedom are respected—was able to spread was entirely because of capitalism. It can be stated unequivocally that capitalism is the very foundation of a life in which human beings can live most fully as human beings, and the system that established the basic order of such a life. Therefore, the question we should be discussing is not “capitalism or not,” but how capitalism can be fully realized.

△ Please remember

Capitalism voluntarily channels humanity’s innate self-interest and instinct for exchange through the market, guiding economic activity in a moral and rational direction and generally producing positive and productive results. In particular, it linked humanity’s fundamental desire for a better life than the present to productivity, thereby driving explosive economic growth. Unlike in the past, when life was determined according to the principles of the community, individuals are now given the rights and responsibilities to shape their own lives independently on the basis of economic freedom.

Sung-no Choi, President, Center for Free Enterprise (CFE)

---

Original title: [스마트 경제 읽기] 자유민주주의 확산 이끈 자본주의

Author: Sung-no Choi

Date: 2021-01-18

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=5&idx=23421