Recovering the Case for Capitalism

Spring 2010

For friends of capitalism, the last two years have not been pleasant. First came a cascade of market calamities that seemed almost designed to confirm the worst clichés about free enterprise. The crisis had it all: reckless investors, careless lending, irresponsible borrowing, wild speculation, charlatan financiers, signs of under-regulation, retirees losing their life savings while Wall Street fat cats got their bonuses, and even the sight of Alan Greenspan apologizing to a congressional committee for keeping the reins too loose.

Then came the response from Washington. By the middle of last year, the federal government essentially owned the nation's largest bank, largest insurance company, and largest automaker; managed a substantial portion of the financial sector; and was declaring winners and losers in massive corporate deals ad hoc. Meanwhile, government spending soared, and lawmakers were busy planning new entitlement programs even as our existing ones were falling into bankruptcy.

For a moment, it seemed as though all of this would cause the American public to lose its faith in the market economy. Indeed, last April, pollster Scott Rasmussen found that only 53% of Americans agreed with the proposition that capitalism was better than socialism.

That moment eventually passed, and has now been replaced by a wave of populist discontent directed as much at the government as at the market. But the defenders of free enterprise should not take too much pleasure from this turn in public opinion. While it suggests that people are uneasy with the instability of the day, it has not formed itself into an argument in defense of American capitalism, or even a coherent case against the intentions of the liberal majority in Washington. To direct the public toward such a case, we will need to explain what is at risk, what is at stake, and why it matters.

Such an explanation is no simple matter. After decades of defending one tree or another, many friends of capitalism have lost sight of the forest — of what democratic capitalism is, of its virtues and vices, its strengths and weaknesses, its political and moral as well as its economic justifications. Our first task now is therefore a recovery of that understanding, which will clarify both our objections to the policy direction of the moment and our prescription for a better way.

ADAM SMITH AND THE MODERATE VIRTUES

A recovery of the case for capitalism should begin at the beginning. As always when we want to become reacquainted with ourselves, we Americans would be wise to start with a refreshing dip into the late 18th century, when our way of life was born. In this case, we should begin by dipping into Adam Smith, and the original case for capitalism, before returning to our own time.

The father of modern economics was a moral philosopher, a student of human nature and social institutions. His theories of political economy were thus one element of his larger project for the direction of human passions and appetites.

Smith began with a middling view of human nature, neither utopian nor cynical. He believed that even though human beings are fundamentally self-interested, we can be guided toward sympathy and benevolence. Our sentiments, he said, begin with a powerful self-regard that expresses itself in our desires for attention, praise, and recognition, and motivates a great deal of human behavior. Even our sympathy for others begins with ourselves: We feel compassion for someone in distress because we can imagine ourselves in his predicament.

But for Smith, the fact that our self-regard finds expression in a desire for approval offers an opening for moral education — for moderating both our passions and our animal appetites to make civilized life possible. Our ability to step into someone else's shoes allows us to reflect on our own behavior, and to ask: "How would what I'm doing look to someone else observing me?" In that question — about that imaginary "impartial spectator," as Smith put it — is the beginning of social order and of self-restraint, and so the first impulse to moral conformity and common social norms.

This is how, in a well-functioning society, our sentimental tendencies to self-regard can become inclinations to sympathy and decency. But that well-functioning society takes work; it requires social institutions designed to channel the sentiments toward this kind of moral formation. Those institutions were Smith's life-long obsession. He was above all a scholar of how social arrangements shape human souls. "The great secret of education is to direct vanity to proper objects," he wrote in his first book, The Theory of Moral Sentiments, published in 1759. Note that he said education. The idea was not to fool men into acting well, or to put the products of their acting poorly to some public end. The idea was to shape character and behavior, and to channel human passions toward a public good.

This is a peculiar kind of moral education. Smith said plainly that there is no use in trying to persuade men to be virtuous. No amount of rational argument or recitation of a catechism will do the trick. Rather, it is the experience of life in society, and the modest sympathy and conscience that develop through that experience, that build in human beings the moderate virtues that he thought of as essential — prudence, restraint, industry, frugality, sobriety, honesty, civility, and reliability. These are the virtues of the liberal society. They are solid virtues, and yet low ones, attainable by more than just a noble few. They allow for stable and productive lives, helping to form people who can be trusted with a great deal of freedom, and so make moral coercion by the state less necessary.

These moderate virtues are in a sense all just versions of one larger virtue: self-command, or self-control. This is what Smith thought of as the key to the liberal society. "Self-command," he wrote, "is not only itself a great virtue, but from it all the other virtues seem to derive their principal lustre." And he defined self-command as the capacity for delayed gratification and restraints upon the appetite — in a word, discipline.

Smith's great project, then, was the transformation of self-regard into self-command by means of social institutions that direct our vanity to proper objects. By arranging human relations so that there is praise or benefit to be gained by discipline, he hoped to allow free people to exercise virtue and so to improve their circumstances. Smith's ambitions were very practical: Life in a free society, he wrote, consists of "the uniform, constant, and uninterrupted effort of every man to better his condition." The moderate virtues make that kind of improvement possible, and the wise legislator will therefore arrange things so that those moderate virtues are valued and rewarded.

Smith knew that this arrangement would not be a matter of direct coercion or management. Social life is much too complicated for that. Like his teacher Adam Ferguson and others of the Scottish Enlightenment, Smith was endlessly fascinated by the vast divide between the intentions motivating our actions and the consequences of those actions. So rather than by coercion, such an arrangement would be accomplished through enticement — using institutional forms that established rules of the game intended to draw self-interested people toward decent means of advancing their interests but without forcing particular outcomes.

Smith made the case for this general approach in his Theory of Moral Sentiments; four years later, in a series of lectures on jurisprudence, he sought to trace how social norms created this way come to be formalized into laws in specific areas of public life. He then collected and expanded the portions of those lectures dealing with questions of labor and commerce into a book about political economy — a book called The Wealth of Nations.

Smith's economics was just one element of his larger vision, but it was a particularly important one. As a good liberal, he believed material prosperity was essential to happiness, and so should be at the center of moral philosophy. He also thought wealth was a precondition for a decent society: We can't care for others if we ourselves are hungry. His vision of social life therefore required a developed economic teaching built around some institutional arrangement that could help produce prosperity while encouraging discipline and the moderate virtues by making self-command a means of bettering our condition. In The Wealth of Nations Smith outlined just such a teaching, and identified just such an institution: the market.

THE COMMERCIAL SOCIETY

The Wealth of Nations begins with a fact, not an argument: the fact that the division of labor, which had been growing for centuries in European economies, made possible enormous improvements in the efficiency and quality of production. Dividing and subdividing manufacturing processes into specialized tasks saves a great deal of time and effort, and more important, it creates greater specialization and expertise. Rather than each man knowing a little about a lot, each becomes an expert in something in particular and sells his expertise to others in return for money or someone else's expertise. That way, all work is done by specialists, and so is done better. And because each person can trade on the value of his expertise, he has added reason to improve his prowess and his products.

Smith called this process of exchange "the market." It forms the arena in which labor, capital, goods, and services are valued, traded, and bartered, and it lies at the heart of the modern economy. But the rules of the market are not self-legislating or naturally obvious. On the contrary, Smith argued, the market is a public institution that requires rules imposed upon it by legislators who understand its workings and its benefits.

And this is where his great insight comes in. In Smith's time, under the reigning economic philosophy known as mercantilism, each of the European powers set market rules that served the interests of a few large domestic manufacturers and trading companies that worked closely with the government — putting economic policy in the service of what they took to be the national interest, in order to advance the nation's trading position. Instead, Smith argued, legislators should govern the market in the interest of the common consumer. He wrote:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer.

By turning the logic of mercantilist economics on its head and establishing a market designed for the good of the consumer, Smith believed governments could both unleash immense productivity and wealth and create economic institutions that encouraged discipline, moderation, and order.

Serving the good of the consumer would mean imposing uniform rules of open competition on all buyers and sellers, which would lower prices and spur economic growth. These rules, which Smith called "the system of natural liberty," would allow participants in the market to set prices and values by open and free negotiation, in which no player would be allowed to use political muscle or other coercion to compel a price other than that determined by the free work of the market.

The system involves "natural liberty" not in the sense that it is somehow a work of nature, but rather that no player or outsider (and especially not government) may impose artificial prices, so that only the "natural price," the price arrived at by the buyer and seller on the ground, may prevail. This would make pricing more efficient, reducing costs for consumers; would direct capital more efficiently than a legislator could; and would help the best producers prosper too. That does not mean that it would serve every individual's self-interest: Many merchants would certainly be better off without competition, and in fact large merchants often seek to use their power or to call on friendly politicians to help them avoid competition. But a system of uniformly applied rules, that doesn't prefer large or powerful merchants, would better serve most people, and so better advance the wealth of the nation as a whole.

Smith had an unusual definition of the wealth of a nation. "The wealth of a state," he wrote, "consists in the cheapness of provision and all other necessaries and conveniences of life." So a nation is wealthy, in effect, when consumer items are inexpensive, at least relative to the means of the common people; that is, a nation is wealthy when a comfortable life is within the reach of most. This is a very democratic, even populist, notion of the purpose of the market.

The broader the reach of the market, moreover, the more efficient it will be. So Smith wanted it to encompass everyone, and to have society become one large market in which every man "lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society."

Such a commercial society, Smith insisted, would also be a good society. Wealth is necessary for a good society, because it reduces the misery of the poor and it allows everyone to be more sympathetic and generous. "If our own misery pinches us very severely," he argued, "we have no leisure to attend to that of our neighbor." And at least as important, the market is not just a mechanism for wealth production, but also a civilizing institution.

For one thing, it makes human relations more dignified, Smith argued. The system of exchange, as opposed to the more aristocratic system of owner and tenant, allows even the less privileged to address society in terms of what they have to offer, rather than what they need. As Smith put it in one of his most famous passages:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens.

Smith was not arguing that benevolence is degrading, but that abject dependence upon the benevolence of others is demoralizing. Extending the rule of the market to all helps most men avoid this fate and so allows them to function as dignified equals.

The fundamentally popular or democratic character of the system he proposed was also an important moral point for Smith. "No society can surely be flourishing and happy of which the far greater part of the members are poor and miserable," he wrote. His system would allow those who lived off wages, not property, to benefit more than any other economic arrangement would.

Most important, the market is well designed to harness self-regard to produce self-command. Market players have a powerful incentive to consider what others will think of their actions, since they have to appeal to those others as customers. And the virtues most valued in sellers and buyers are precisely Smith's moderate virtues: prudence and thrift, honesty and reliability, civility and good order — in short, again: discipline.

The market, as Smith saw it, is a powerful tool of discipline. It demands and rewards habits of peaceful order, and can spread these into the larger society. "When the greater part of the people are merchants," Smith wrote, "they always bring probity and punctuality into fashion, and these are the principal virtues of commercial nations." As it turns individual self-interest to the general good, the market might also turn the common man's individual avarice into a source of productive energy and discipline. And for the greater-than-common man, for whom the moderate virtues may not be enough, the market puts a premium on risk-taking, venture, and enterprise combined with self-command — and so turns great ambition to the greater good.

It is crucial to see that self-command and discipline, not freedom, lay at the heart of Smith's case for capitalism. Yes, the market involves free competition, but that means free of the undue influence of some competitors or their political patrons, not free as an existential (or ideological) matter. In fact, the competitors are forced into the pen of the market by government power, and kept in it by regulation and law for the greater good. As the University of Chicago's Joseph Cropsey has put it, "Smith advocated capitalism because it makes freedom possible, not because it is freedom." And it makes freedom possible by guiding people to choose to restrain their appetites and obey the rules. Smith's idea of liberty — which is of course central to his case for capitalism — was not unbridled license but ordered social life, in which the people's basic rights are protected by government, and the people's self-command makes state coercion unnecessary.

The question Smith sought to answer was, given that men are profoundly imperfect, can they be made to want to do good, so that they do not have to be forced to do good? Smith insisted throughout his writings that the answer is yes, and that the free market is one important means of making that happen. It involves the direction of appetite, not an unleashing of appetites. It is a case for the possibility of discipline and self-restraint, not an argument against the need for them.

But as Smith might be the first to say, the fact that this was his intention hardly guarantees the consequences. And without question, the moral case for capitalism — and especially the case for capitalism as a system of discipline — has long been subject to serious criticism. To recover the case for capitalism beyond Adam Smith's original formulation, we have to take those criticisms seriously.

THE TROUBLE WITH CAPITALISM

There is not today, and perhaps there never has been, a serious economic critique of the fundamental tenets of capitalism. There are only moral critiques. Even those opponents of capitalism who proposed alternative systems — like the socialists and communists of centuries past — generally offered moral systems, and not genuine economic theories.

The moral critiques of capitalism have tended to fall into two categories. One, popular with those socialists and communists as well as with many less hostile liberal critics, is that capitalism is unjust to the poor. This meant at first that capitalism degraded the condition of the poor: Some early critics of capitalism contended that the circumstances of workers, especially in manufacturing occupations, were worse than anything the poor had ever experienced before the advent of free-market economics and the Industrial Revolution. But no such case could be sustained today. It is true that inequality persists, of course, but the standard of living of the poor has risen dramatically under capitalism, and the potential for escaping poverty is nowhere greater than in capitalist economies. So today, the focus of such critics is on inequality itself. The condition of the poor, they say, generally does not improve as swiftly as that of the rich, so that the gap between the wealthiest and poorest is expanding — to the detriment of social cohesion and basic justice. There is some truth to this, at least sometimes, but it only amounts to a moral indictment of capitalism if we believe that an equality of conditions is the essence of justice. Otherwise it would be foolish to reject the greatest source of material progress for the poor in human history on the grounds that it allows others to progress even faster. Moreover, it is far from clear that some systemic feature of the market economy holds back the poor. Today in America, the causes of persistent poverty have far more to do with culture than with economic injustice.

But that very point brings us to the second and more serious moral critique of capitalism: that it empties social life of any higher meaning, and so leaves society morally bankrupt even as it grows materially wealthy. Is capitalism in fact just a means of replacing material poverty with spiritual poverty? Is the market a money-making machine that burns social capital for its fuel, leaving in its wake a society of opulent nihilists?

This line of criticism has a long pedigree on both the right and the left — from some of the earliest critics of capitalism to the present day; from romantics to moralists; from post-modernists to neoconservatives. It also recalls the classical and Christian critiques of merchants as lacking in moral bearing, and especially in discipline. "Trade aimed at profits," wrote Saint Thomas Aquinas, "is most reprehensible, since the desire for gain knows no bounds."

Adam Smith expected, on the contrary, that the market would discipline society and set bounds on our appetites. But as it turns out, our capitalist age is generally not an age of discipline. Far from it: Our society in most respects is a study in unbounded appetite. Our chief public-health problem is obesity. Our foremost social pathologies result from an absence of sexual restraint and personal responsibility. Our popular culture much of the time is a diabolical mix of Babylonian decadence and Philistine vulgarity. And our public life is a gluttonous feast upon the flesh of the future — we use more than we need, spend more than we have, and borrow more than we can pay. For all of our immense wealth, we somehow manage to live far beyond our means. In fact, it is almost fair to say that we lack for nothing except discipline. But as Adam Smith could tell us, discipline above all is what we require to be free. This is no small problem for the case for capitalism.

So what happened? In part, Adam Smith surely understated — and perhaps underestimated — the challenges of sustaining moral norms amid economic dynamism. His expectations rested on an assumption of what to us seems like exceptional social and moral consensus, but what to him was the reality of British life in the late 18th century. The loss of such consensus, brought about in no small part by our capitalist economy itself, is a defining fact of American life in the 21st century. And the challenge of sustaining our way of life in light of that loss is the defining problem of our political economy.

Moreover, an economics of growth and an ethic of restraint make for an awkward match, and the disciplining signals of the market alone are not enough to bridge the gap. Indeed, the ethic of the capitalist producer and the ethic of the capitalist consumer are in some ways worlds apart. The prosperity engine of capitalism depends on consumer desires that exceed pure needs, and so on some spirit of excess that has to be kept in balance by a spirit of temperance.

At the very least, Smith was mistaken to assume that capitalism could produce sufficient moral authority to provide that balance on its own. Such authority would have to come from more traditional moral and cultural institutions beyond the market. And our case for capitalism must therefore also be a case for those institutions — for the family, and for religion and tradition. Democratic capitalism at its best combines the strengths of these institutions with the power of the market — never an easy mix, but one America has often managed.

But in part, we have also corrupted Smith's vision of capitalism in ways that undermine precisely its civilizing powers, and that make it increasingly difficult for us to reap the benefits of the market system as we correct for its deficiencies. The two key moral features of Smith's political economy — its democratic or popular character and its disciplining effect — have been under assault in our time: the first by a growing collusion between government and large corporations, and the second by a welfare state expanding its reach well beyond the needy. The case for capitalism is nothing if not a case against these two ruinous trends — trends that have long been with us, but have dangerously combined and intensified in the age of Obama.

THE TECHNOCRATIC TURN

Neither trend would have shocked Adam Smith. He knew that some among the wealthy and powerful would always look for exemptions from the rigors of competition, and he urged legislators to resist the pressure to grant such exemptions. Though he was a champion of free markets, Smith was no fan of big business. Large merchants and principals of "joint stock companies" (or corporations), Smith wrote, are "an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." This does not mean they should be oppressed in return, only that they should be subject to the rules of open competition without exception — rules that will turn their self-interest toward more constructive paths. Otherwise, both the efficiency of the market and the public's confidence in the fairness and legitimacy of the system will be dangerously undercut. Capitalism is a fundamentally populist enterprise governed in the interests of the mass of consumers, and it depends upon a clear separation between government and business. If that line is blurred, many of the benefits of the system — both economic and moral — are badly undermined.

Meanwhile, Smith also makes clear that the near-universality of the market is essential to its civilizing effects on individual workers, as well as large companies. As more individuals, too, are shielded or excluded from the market, the organizing and disciplining power of the system will wane dramatically, leaving a vacuum that will no doubt be filled by eager legislators brimming with bad ideas. The modern welfare state has just this effect.

Welfare arose as an understandable response to the dislocations wrought by capitalism and to the poverty that we will always have with us. And when it comes to the poorest of the poor, who cannot subsist without help, a decent society is not only right but obligated to offer help. But the modern welfare state extends well beyond the indigent. The largest portion of our entitlement system by far is directed to the elderly, and is not means-tested to ensure that only those among them who need help receive it. Other middle-class entitlements abound, and policymakers in Washington today are busy designing even more. The way they are now constructed, these enormous entitlements are not paid for, and their imminent bankruptcy (Social Security, for example, will begin running deficits this year) casts a giant shadow over the future of our country. But even if they were paid for — as they probably will be someday, by an enormously expanded tax burden — they would undercut the basic logic of the capitalist economy: Citizens would increasingly give over their wealth to legislators who would then decide how to allocate it, rather than letting the market play the mediating role.

This is not about public aid for the destitute. It is a gradual but unmistakable transformation of the character of our political economy. It is, at least implicitly, a reaction against the very essence of capitalism: a system that leaves economic decisions in the hands of the mass of consumers and subjects nearly everyone to the uniform rigors of market rules. Both the growing collusion of big business and government and the growing middle-class welfare state are expressions of a longstanding technocratic distaste on the left for the market economy, and especially for the democratic character of capitalism. They are attempts to allocate capital more efficiently than the whims of consumer preferences could, and to provide material benefits to the public without the discipline of market rules.

The core of Adam Smith's argument, borne out by two centuries of evidence, was that such micromanagement and concentration of power are neither more efficient nor more benevolent than the market. Smith was scornful of the statesman who is confident he can get it all just right:

He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon a chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.

Legislators simply cannot know enough, and cannot sufficiently avoid the influence of political motives and interests, to micromanage the market successfully. But the technocratic itch persists, because capitalism can never be tidy enough to satisfy the deep progressive urge for rational control.

This is an old story. The modern age from its beginnings has involved two great forces pulling in different directions: We might call them, very crudely, science and democracy. Science says there is hard verifiable knowledge available to us about the workings of the material world, and that the material world is all there is, so we would best meet our needs by letting ourselves be guided by technical expertise. Democracy says we should let ourselves be guided by the preferences and wishes of the people, and mostly leave individuals free to pursue their happiness as they wish. These two forces are rooted in some core truths, of course, and each has been immensely beneficial but at times also immensely problematic. They are not always at odds, but they often are. And in the struggle between them, capitalism is certainly on the side of democracy, and of the peculiar, implausible, but evidently true insight that lawful chaos — rather than managed order — is the way to balance liberty and prosperity, justice and wealth.

For all the quantifiable variables available to modern economics, capitalism is not a technical or scientific system; it is basically a system for diffusing authority and decision-making power, and letting people have what they want. It argues that since market success is a matter of speaking to people's preferences, leaving decisions at the level of the individual exchange is almost always going to work better — to produce more wealth and more happiness. That doesn't mean society has to live at the mercy of base and degraded preferences, but it means we get beyond them by educating people's preferences and judgments, rather than by taking them over — by moral education, not by rational control.

This is why the technocratic turn in federal policy is such a problem for capitalism, and why the populist flavor of the reaction to that turn these days is the appropriate flavor. But it is also why that reaction needs to be informed, refined, and elevated by a coherent argument — a case for capitalism. Domestic policy in the age of Obama is, simply put, a combination of corporate-government collusion and the expansion of the middle-class welfare state. In the past year, following a crisis that was itself made possible by decades of increasingly cozy relationships between government and big finance, some of the largest corporations in America have become wards of the state — shielded from the consequences of their own actions and decisions, and subjected to the control of the political class. Meanwhile, the technocratic logic of the welfare state — "give us the money and we will spend it properly" — has become the overarching vision of American public policy. It is a course sure to drain our economic dynamism, but at least as important are its moral consequences — its effects on the ability of the market to exercise discipline on our commercial society and encourage the moderate virtues.

DEFENDING THE MARKET

Grim as this tale may seem, it also gives us cause for hope. Grasping the strengths of the market economy can help us build on those strengths; seeing its flaws and the threats to its character can help us address them.

America has great reserves to draw upon in doing both. To begin with, it is crucial to see that for all the problems it faces, the free-enterprise system works, and works well. It produces immense wealth, for one thing. Even in the midst of a recession, the sheer productivity and prosperity of our country is staggering — and just as Adam Smith imagined, that wealth also allows us to attend to those in need, at home and abroad. Americans gave more than $300 billion to charity last year, and tens of millions volunteer their time and skills.

The market also continues to work as a civilizing institution that instills the moderate virtues, even if the degree of its effectiveness is constrained by the welfare state and crony capitalism, and even if it alone could never be enough to civilize society. The freedom to innovate and to risk makes our prosperity possible. And the pressure to be honest, reliable, responsible, orderly, civil, and decent in order to win a customer or keep a job makes an enormous difference in American life — helping to keep our society lawful, pleasant, and free. It has proven especially important in changing the lives of the poor for the better — as we can see, for instance, in the success of welfare reform, which over the past two decades moved millions into jobs, and helped many of them replace dependency with dependability. There is a great deal to build upon there, and to defend.

Clearly, the case for capitalism requires us to roll back policies that have distorted the market's ability to produce this wealth and cultivate these virtues. The American welfare state needs to be dramatically trimmed and reformed — aimed at helping the needy become more independent rather than making the middle class less so. The cozy relations between government and big business must be rolled back as well, lest the system cease to serve the common consumer, and so lose his allegiance. Friends of capitalism have grown increasingly alert to this danger in the wake of the recent economic crisis, and are beginning to formulate the arguments and develop the means to resist it. The distinction between "pro-market" and "pro-business" will be an important part of the case for capitalism in the years to come, and American history offers useful examples of how it can be drawn responsibly.

Properly understood, the case for capitalism is not a case for license or for laissez faire. It is a case for national wealth as a moral good; for the interest of the mass of consumers as the guide of policy; for clear and uniform rules of competition imposed upon all; for letting markets set prices, letting buyers make choices, and letting producers experiment, innovate, and make what they think they can sell — all while protecting consumers and punishing abuses. It is a case for avoiding concentrations of power, for keeping business and government separate, and for letting those who can meet their own needs do so. It is a case for humility about our ability to know, and therefore about our capacity to do.

And it is a case for the moderate virtues, encouraged by market pressures but finally drawn from deeper wells — from the wisdom of tradition, the love of the family, and the divine and mysterious tug of a love beyond love, all of which must in turn be supported, encouraged, and strengthened. This is perhaps the most daunting challenge confronting the friends of capitalism today.

Adam Smith was right to say that the virtues of self-command and discipline are utterly essential to capitalism and to the liberal society more generally. But he was wrong to think that democratic capitalism could produce them on its own. These virtues in fact sometimes run against the grain of our liberal capitalist culture, and so have to be sustained by a constant resistance and friction, and a constant recurrence to older pre-liberal sources of wisdom. This can be unpleasant, and it is a duty all too easy to shirk. The cause of restraint, frugality, and discipline certainly lacks visceral appeal. Even many of those in our society most likely to be drawn to such a cause — social and religious conservatives — have in recent years tended to avoid it in favor of bolder and more heroic humanitarian missions, like addressing the plight of the sick and the poor, especially abroad. These are noble and necessary callings, but they ought not come entirely at the expense of a more commonplace resistance to the decadence of our times. Without that resistance, we could not hope to remain strong and wealthy enough to be of use to the poor of the world. Free and prosperous societies are in constant need of a prosaic social conservatism to remind them of the less-than-obvious truth that their freedom and prosperity depend upon restraint and self-command.

But on this front, too, our country is well suited to the challenge we face. Americans are a churchgoing people, with a long-running strain of social conservatism and a history of moral revivals geared toward bolstering a humble self-command. Our social indicators are by no means on a one-way trip to the abyss — indeed, we have seen some important ones, like crime, drug use, and teen pregnancy, improve in our time, and we know that dramatic changes for the better are possible. We should look for ways to encourage such changes, but must also know that for the most part they will not be matters of public-policy prescriptions but of moral and cultural progress. Of course, we cannot simply will a moral revival into being. But we can help prepare the ground, and can encourage its likely sources — which, if history and the state of our own culture offer any guide, will include in particular the nation's evangelical churches and their message of humble restraint and pious self-help.

Such a message would not produce a social revolution, but could provide some subtle ballast. We are after all in need of balance, not of transformation — of securing and reviving what we have, not looking for a new ideal. The fact is that the American case for capitalism in all of its facets, and even in our difficult time, is a case for preservation more than a case for change. It is a conservative case — both economically and morally, and one that should help fiscal and social conservatives see that they are fighting the same fight, on the same side.

American capitalism is in trouble today because we have grown forgetful of the case for it. It is under assault not by socialist ideologues, but by misguided technocrats. The public is unhappy, even angry, at the sight of their recklessness. But anger alone will not suffice, and could just as easily come to be turned against the market as marshaled in its defense. Outraged as we are, we must be clear about our purpose.

Our purpose is to protect and strengthen our way of life, to stand up for a social and economic system that has lifted billions out of poverty and vastly improved our world in countless ways, and to avert a careless slide toward social-democratic melancholy and decline. This general purpose, of course, has to take form in specific instances and choices, and exactly how the broad conceptual argument for capitalism should be translated into policy is always a matter of case-by-case prudence. But that does not mean that we can do without the broader argument — the argument first framed by Adam Smith, and refined by two centuries of theory and practice, especially in our country. It is an argument for individual freedom amid moral order, and for prosperity sustained by sympathy and discipline. It is an odd modern hybrid: a conservative case for the liberal society. As such, it is also an integral piece of the case for America.