09/03/2013 12:13 pm ET | Updated Nov 03, 2013

Does the Free Market Corrode Moral Character?

Yes, it does.

But there are a few problems with my answer. First, what is a free market? Second, what does corrode mean? Lastly, what is moral character?

First, let's be honest. Theoretically, the free market is amoral. What makes it moral or immoral is the morality of the individual players in the free market. The free market is simply a marketplace or system in which buyers and sellers set their own prices based on competition, supply, and demand without state regulation or restriction. It is possible to experience moral or immoral outcomes in such a free market. However, the unregulated, ideal free market does not exist. Every actual "free" market system, today, exists within some regulatory context from state to state. So, for the purpose of this question, we will look at practical "free markets" which have "little" regulation, or at least relatively less regulation compared to socialism, communism, or considerably controlled forms of capitalism. On to our main question: Does the free market corrode moral character?

Economist Qingliang He uses China as an example of a country with an increasingly free market but with instances of declining moral order and business ethics while economist Jagdish Bhagwati cites Vietnam as an example in which "free" markets have led to instances of highly moral outcomes. Whom do we believe?

The question would be relatively easy to answer if all we needed were examples of two countries with free market systems in which country A has high corrosion of moral character and country B has low corrosion. If that were so, the answer would seem to be no: Free markets don't corrode moral character. The major problem is that even if the free market does corrode moral character, there can be counteracting factors. What if the free market corrodes moral character and country B simply has an amazing, mandatory child, youth, and adult national service program that builds up moral character? The only way to truly test the question would be to run a tightly controlled statistical experiment in multiple societies in which you control for everything, only allowing the market system to differ (which naturally changes other things in society). How do you do that? Without such an experiment, it's hard to say if other confounding factors are also affecting the moral character of country B or if another factor is affecting both the market system and moral character.

Instead of trying to prove causation which is very difficult, let's focus on the practical, correlational question: Does moral character tend to erode in societies with free markets? Again, I say yes, but it depends on our next sub-questions: What does corrode mean, and what is moral character?

Much of the debate over the main question is settled when you define the time scale. If "corrode" means the erosion of moral character over a few years or in the first generation of a free market system, you might answer the main question with a resounding no: Free markets don't corrode moral character. Look at the move from European feudalism or Japanese isolationism to their "free" market systems of today, you might suggest. And it's true that in the first generation(s) of a free market system you do see individuals displaying good moral character through risk-taking, industriousness, forward-thinking, and perseverance. However, when someone pulls herself up by her bootstraps, makes a living for herself, and betters her life, those qualities do not always pass down to her children or progeny who are now born into families with much more disposable income, reserve capital, and wealth. The descendants do not necessarily have to work hard, take risks, or be innovative. Sociologist Daniel Bell noted the cultural contradiction of capitalism due to the cyclical decay in moral character after generations of wealth accumulation because incentives change through the generations. Some are rebellious, some resent the family wealth, others take wealth for granted, etc. When someone says that moral character has been built up in a particular society experimenting with a free market system, I ask, "Have you observed it long enough?" I'm interested in long-term effects on the society.

Still, no matter the time scale, the answer to the overall question depends on the final point: what is moral character? It all depends on your moral system as Ayaan Ali and Professor John Gray point out. On one hand, if freedom is the highest aim in your moral system, then a free-market system might be morally improving upon human character. Markets can improve certain morals. Markets are a means of social integration. People come together and interact, learning collaborative skills. It's possible to learn empathy, form bonds, create trust, and experience solidarity. To be part of a market as a producer, you must work hard, take risks, be innovative, set visions, think ahead, stake out the playing field. It can develop within you a strong work ethic and increase your industriousness.

At the same time, other negative traits can be pronounced in a free market system. The gains and risks in the free market can be so high that people distrust one another, betray allies, and conceal plans. Pressure to succeed kicks in and we have extreme public examples of moral failures like Enron, the Great Recession, and the Madoff scandal. There are huge incentives and tremendous pressure to break the rules of moral conduct and then justify the breaking of that conduct just to reach the bottom line as Professor Michael Walzer explains.

However, even if it does corrode moral character, Philosopher Bernard-Henri Levy says the free market is the best system we have: If the free market corrodes human character, other systems corrode it absolutely or to a greater extent. I don't like this statement as an answer because the question is not relative. We are not trying to find out if the free market is the least bad of all options, we are only asking if it corrodes human character. If it does, we should improve upon it, look for a better alternative, or create a better system.

Still Henri-Levy's answer does excite me because it gets to the heart of my answer. Free market apologists tend to criticise systems like communism on the basis of its communal corrosion of character. Implicitly they understand that there is such a thing as communal moral character. Critics like Levy and Garry Kasparov point to the experience of loss of aspiration and degradation of character due to the loss of freedom in authoritarian economic regimes: The USSR experienced communal terror and an entire culture in East Germany lost the ability to make decisions. Far from critiquing any individual loss, Levy and Kasparov are making statements about communal effects that trickle down to most citizens in the country. Criticisms of individual moral failures in authoritarian regimes are usually applied to corrupt officials or authoritarian leaders. The bulk of the critique is on the communal effects.

However, when we talk of the moral failures of free market systems, it is usually applied to individuals. Kay Hymowitz provides an example of a critique on communal character by noting the communal decline of the family and marriage in our post-marital society. Still usually, the critique is about individuals, individual freedoms, and individual mistakes. The communal critique is lost.

It's not just that a single person, like Bernie Madoff, has an incentive to conceal, deceive, and steal to make his bottom line, but that in the same way, we do not call it communal stealing when money can be shifted from the poorer classes to the rich as in predatory lending (and now predatory microfinance in which organizations can charge 100 percent interest rates). As Michael Walzer explains, we regulate theft and extortion on individual levels but there are forms of market behavior which fall under extortion or theft (such as the ability of big business to unfairly influence the price of the goods they sell) which are not regulated or not regulated well enough. Entire pockets of society can lack access to markets or submarkets (like the health market) based on socioeconomic levels: They cannot even participate. These examples display a type of degradation of communal human character that I see, a type we do not name as readily as individual character mistakes and flaws, due to a love of individualism -- the supremacy of individual freedom. What I look for, find beauty in, and prefer is individuality without individualism, a type of unity-in-community, being-in-interbeing, to use a Brian McLaren phrase. Without individualism, we are more than individuals, we are interdividuals (René Girard<). It's this aspect which seems to be missing from our understanding of the effects of the free market. For me the identity of an individual is only defined within community, not in isolation. So communal character effects are prioritized for me; they influence individual moral action. And it is this tendency toward the corrosion of communal character in today's actual free markets, that makes me answer the question yes.

Still, I do not necessarily advocate a different political economy. I actually do not know what system would be better, though I am willing to work with others to create one. Perhaps, a possible solution is more subtle than a change of systems. One of the communal moral corrosions that I see all around will help explain this -- a lack of satisfaction.

I never have enough. Larger incomes demand larger expenses. I am always looking to the next promotion, the next salary increase, a better job, a bigger house -- something else or something more that I don't have that will satisfy me. We try to (temporarily) satisfy these cravings through various offerings: money, fame, power, sex, food, etc. But we still want more. Peter Rollins points out that some faith groups substitute God as another offering in the vending machine of (dis)satisfaction. However, the truly radical Christian move is to see God (as experienced through Christ) as destroying the entire vending machine of (dis)satisfaction. Instead of offering another (dis)satisfying option, in radical Christian theology, Christ can be seen as one who embraces fragility, brokenness, dissatisfaction, and vulnerability and invites us to do the same. Yet, there is a kernel of hope. It is in this embracing of brokenness and dissatisfaction that you find freedom, as you come alongside others who are suffering, simply be present, share yourself, and suffer with them; there is love. And where there is love, there is an experience of what Professor John Caputo calls the event of God.

Inside macroeconomic free market systems, I have met pockets of communities, today, that practice countercultural redistribution. Like a 1st century community recorded in Acts, there share everything they have and there is no one needy among them. Compare that with extreme economic examples: capitalism (great at production, poor at distribution) and communism (great at distribution, poor at production). What is striking is that ideal communism forces people to share when they don't necessarily want to do so. Ideal capitalism gives people the freedom to share when they do not necessarily want to do so. These countercultural micro-communities stand at a strange contrast between the two ideal extremes because they show a people who are free to share and actually choose to share. They have not enacted a change in economic systems, they simply have a transformation of heart. So it is in these spaces between the margins in which I find hope. They possibly foreshadow a time, as Shane Claiborne says, when free market capitalism is obsolete and communism is unnecessary.