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Faust in the Free Market

by Michael Austin, published
"I am part of that power which eternally wills evil and eternally works good.” --Mephistopheles in Goethe's Faust

Adam Smith was right and Karl Marx was wrong. Free markets are much better than command economies at creating wealth and distributing goods and services. The 20th century’s experiments with communism certainly proved this to most people’s satisfaction.

But why? The myth in America and much of the West is that this has something to do with the inherent morality of the free-market system. Capitalism, the story goes, is God’s economic system that relies on everything that is good in humanity, like industry, aspiration, and the desire to be better than we are. Communism, on other hand, is from Satan. It is a good story, but it is pure propaganda. It is, in fact, exactly the opposite of true.

Free-market systems work, and work well, because they operate on the (largely correct) assumption that human beings are acquisitive, aggressive, antagonistic, selfish, and proud. And capitalism derives its great strength form the depressing fact that very few people ever believe that they have enough stuff. The greedier we are, the more stuff the free market will create. Communism, on the other hand, can never work because it assumes that, once human beings have their basic needs met, they will stop trying to accumulate more and more for no apparent reason. Silly communists. Human nature does not work that way. As the great Harvard biologist Edward Wilson, who spent his career studying ants, once said, “ ”

But ultimately, unfettered capitalism does not have any better record than pure communism does in the "Creating Good Societies" department. Pure capitalism of the sort that existed in England and America for most of the 19th century is not a pretty thing. This is the society of Hard Times and The Gilded Age where a few people become extremely wealthy and the vast majority become an expendable pool of labor to be paid as little as possible and discarded when no longer useful. A majority of people in these societies lived below the poverty line, many of them well below it, and their lives were solitary, poor, nasty, brutish, and short.

We are not there yet, but we are closer than we have been in more than a hundred years. The levels of income inequality in America are approaching what they were before the Progressive Era — a time widely romanticized by those who understand it poorly and rightly feared by those who know what returning to this kind of society would mean for the majority of Americans, for whom unrestrained capitalism is not substantially different from the Hobbesian state of nature.

In using the right that our Founders claimed for us — the right to create whatever kind of society we want to live in—we face a dilemma because the economic system that works the best is also the one that requires human nature to be its worst. How can we use a free-market system without allowing it to create the kind of society that most of us don’t want to live in?

In many ways, this is the same dilemma faced by the necromancer Faust in the great literary works of Marlowe, Goethe, Mann, and so many others.

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