Opinion Going all in

Capitalism needs a new moral narrative

February 22, 2014 12:19 AM IST First published on: Feb 22, 2014 at 12:19 AM IST

When Arthur Brooks was 24, he was playing the French horn in a chamber music concert in Dijon, France. He noticed a beautiful woman smiling at him from the front row, so, after the recital, he made a beeline for her and introduced himself. Within seven seconds he came to two realisations. First, he was going to marry this woman. Second, she didn’t speak a word of English, and he didn’t speak a word of Spanish or Catalan, which were her languages. When he got home, he realised that if he was going to have a chance with Ester he was going to have to show some commitment. So he quit his job in America, moved to Barcelona. Over the next few years, he learned Spanish and Catalan and Ester learned English. They have been happily married for 22 years.

Brooks later became a social scientist and is now president of the American Enterprise Institute, probably the most important think tank on the American right. He has emerged as one of the most ardent defenders of the free enterprise system. But the humanist that he is, he has primarily defended capitalism on moral terms. He’s criticised Republicans for defending capitalism on materialistic grounds — because it makes some people rich. Republicans, Brooks says, have an overly small-business focus.

The real moral health of an economic system, he argues, can be measured by how well it helps all people make an enterprise of their life. Whether they work at odd jobs or at a nongovernmental organisation or at a big company, do they get to experience the joy of achievement? He’s pointed out that the percentage of people in the world living on $1 a day has declined by 80 percent since 1970s, adjusting for inflation. That’s the greatest increase in human possibility in human history. The primary cause is globalised capitalism.

But now capitalism faces its greatest moral crisis since the Great Depression. The nature of that crisis can be captured in two statistics. When Facebook entered a deal to buy WhatsApp this week, it agreed to pay a price equal to $345 million per WhatsApp employee. Meanwhile, the share of the economic pie for the middle 60 per cent of earners nationally has fallen from 53 per cent to 45 per cent since 1970.

This economy produces very valuable companies with very few employees. Meanwhile, the majority of workers are not seeing income gains commensurate with their productivity levels. This puts a strain on the essential compact that you can earn your success. As Joel Kotkin has argued, the middle class is being proletarianised, and the uneducated class is being left behind.

To his great credit, Brooks is responding aggressively to this moral challenge. The big story here is that a major pillar of the American right is leading his institution to fully embrace capitalism, but also fully embrace government policies that will help the broadest number of people earn their own success. In this era, the invisible hand may not be enough. Sometimes you have to go all in.

David Brooks