Milton Friedman once said that every time capitalism has been tried, it has succeeded; whereas every time socialism has been tried, it has failed. Yet President Obama has oddly claimed that we've tried free-market capitalism, and it has never worked. This is rather remarkable. Since 1800, the world's population has increased sixfold; yet despite this enormous increase, real income per person has increased approximately 16-fold. That is a truly amazing achievement. In America, the increase is even more dramatic: in 1800, the total population in America was 5.3 million, life expectancy was 39, and the real gross domestic product per capita was $1,343 (in 2010 dollars); in 2011, our population was 308 million, our life expectancy was 78, and our GDP per capita was $48,800. Thus even while the population increased 58-fold, our life expectancy doubled, and our GDP per capita increased almost 36-fold. Such growth is unprecedented in the history of humankind. Considering that worldwide per-capita real income for the previous 99.9 percent of human existence averaged consistently around $1 per day, that is extraordinary.

What explains it? It would seem that it is due principally to the complex of institutions usually included under the term "capitalism" since the main thing that changed between 200 years ago and the previous 100,000 years of human history was the introduction and embrace of so-called capitalist institutions—particularly, private property and markets. One central promise of capitalism has been that it will lead to increasing material prosperity. It seems fair to say that this promise, at least, has been fulfilled beyond anyone's wildest imagination. Yet people remain suspicious of capitalism—and more than just suspicious: as the Occupy Wall Street movement is only the latest to have shown, we seem ready to indict capitalism for many of our social problems. Why?

A widespread consensus is that capitalism might be necessary to deliver the goods but fails to meet moral muster. By contrast, socialism, while perhaps not practical, is morally superior—if only we could live up to its ideals. Two main charges are typically marshaled against capitalism: it generates inequality by allowing some to become wealthier than others; and it threatens social solidarity by allowing individuals some priority over their communities. Other objections include: it encourages selfishness or greed; it "atomizes" individuals or "alienates" (Marx's term) people from one another; it exploits natural resources or despoils nature; it impoverishes third-world countries; and it dehumanizes people because the continual search for profit reduces everything, including human beings, to odious dollar-and-cent calculations.

The list of charges against capitalism is long. But some of the charges are not as strong as might be supposed. Take community. Capitalism gives us incentives to trade and associate with people outside our local community, even complete strangers, not on the basis of our love or care for them but out of our own—and their—self-interest. So capitalism enables people to escape the strictures of their local communities. But is that bad? Capitalism creates opportunities for people to trade, exchange, partner, associate, collaborate, cooperate, and share with—as well as learn from—people not only from next door but from around the world—even people who speak different languages, wear different clothing, eat different foods, and worship different gods. The social characteristics that in other times and under different institutions would lead to conflict—even violent, bloody conflict—become, under capitalism, irrelevant—and thus no longer cause for discord. Capitalism encourages people to see those outside their communities not as threats but as opportunities. It gives us an incentive to look beyond our narrow parochialisms and form associations that would otherwise not be possible.

READ FULL REPORT