Ask More of Business

Asking More Commentary: Perspectives from Mendoza College of Business

Commentary Post - Paul H. Schultz

Why Michael Moore is wrong about capitalism

November 5, 2009

Michael Moore’s newest movie, “Capitalism: A Love Story” is anything but a love story. It is no surprise to anybody who has seen his earlier movies that Michael Moore holds a very low opinion of capitalism. Now, though, he is more explicit and direct. In an interview on the Larry King Show to promote the movie, Moore claimed that “capitalism, in the last year, has proven that it’s failed.” In the movie itself, he says, “Capitalism is an evil and you can’t regulate evil.”

I teach at the Mendoza College of Business at the University of Notre Dame. We are a business school in an ardently Catholic university, so we have thought a great deal about these issues. We have graduated many students who are both successful capitalists and good Catholics. Teaching these compassionate and intelligent business students has reinforced what I have learned in 30 years of studying economics – that capitalism is both the most efficient economic system, and the only one that encourages individuals to behave ethically. Moore is wrong on all counts.

He is wrong to claim that capitalism has failed. For most of us, the financial crisis of 2008 has meant disruption in our plans. For those who lost jobs and homes, the hardship has been stiffer and more enduring. But even so, the crisis hardly has amounted to a wholesale collapse in our way of living. Furthermore - although this will be a matter for study and debate for years - much of the responsibility for the financial crisis also lies with government. Artificially low interest rates, government pressure to lend to borrowers who were not credit-worthy, and the actions of government-sponsored enterprises were among the causes of the crisis.

If we take the long view, it is clear that capitalism has not failed but instead has been a roaring success. It is responsible for the great advancement in human welfare over the last 500 years. Capitalism has brought longer and healthier lives. We are better educated than ever before and we have more choices.  

Moore’s statement that “capitalism is an evil” makes no sense. Evil is a characteristic of people and their actions, not an economic system. People who work in business - that is, capitalists - are not inherently less moral than those who work in government or nonprofit organizations. In Aleksandr Solzhenitsyn’s words, “The line dividing good and evil cuts through the heart of every human being.”

The question, then, is whether capitalism does a better job of encouraging ethical behavior than other economic systems. I believe it does.

Moore has said that “Greed is the dark side of human nature. Capitalism is not a moral code that keeps greed in check.” Moore has it backwards. Capitalism is the only economic system that puts individual greed to work for the common good. Under capitalism, we pursue our self-interests by providing products and services that benefit others. Profits are earned in a capitalist economy by taking raw materials, labor and other inputs that their owners value at one rate, and combining them into products that society values at a higher rate.

Self-interests may have motivated the search for profits, but profits themselves make society better off. The inhabitants of socialist countries are not inherently less virtuous. Their greed, however, is channeled into bribe-taking, corruption, and influence peddling rather than the search for profits. It is no accident that the least capitalist countries tend to be the most corrupt.        

We are our brother’s keepers. We are, each of us, responsible for the well-being of others. In capitalist societies, people, as individuals, do take care of the poor and helpless. But, if a person is not responsible for his own well-being, how can we expect him to take responsibility for the well-being of others?

To paraphrase Churchill, capitalism is the worst economic system except for all the others that have been tried.