Generosity in the Free Market

We all know the narrative – capitalism is greedy, and socialism is compassionate. Right?  At first blush, it kind of makes sense.  Capitalism is all about self-interest, while socialism is about taking care of everyone.  So how can capitalism possibly allow for more compassion than socialism?

For one thing, socialism doesn’t work the way it says it will.  Every time socialism has been tried, it ends in people being poorer and generally worse off than their free market counterparts. (If you’re thinking “what about Denmark, Finland, etc.?” read Debunking the Northern European “Socialism” Myth.) So while socialism may seem more kind in theory, in practice it harms the very people it claims to take care of.

But capitalism isn’t kinder just because it works (although it totally does, which we cover in Lifting People Out of Poverty Through the Free Market), but because of one key ideal that the free market allows for in a way that socialism can’t:

Generosity.

But wait, if socialism is about making sure everyone gets what they need, isn’t that a more generous system?

Nope.  Just the opposite; under socialist policies, in which people are forced by the government to make sacrifices for the good of others, true generosity goes out the window. Generosity necessarily involves choice. Socialism eliminates that.

Now obviously, that’s not to say that individuals living under socialism can’t have generous hearts. What I am saying is this; as much as a person may want to be generous, socialism limits an individual’s opportunity to do what they see fit with their money — including how much of it they give away and to whom.

Think about it this way; in a free market system, every one of your dollars and all of your time belongs to you. You get to decide what to do with them — what to invest (whether that’s investing money or working — investing time), what to spend, and what to give away. This gives you the freedom to support the causes you care about personally, as well as the freedom to make decisions that might increase your earnings, like investment or a job change — and when your earnings go up, your giving potential also goes up.

Okay, you say, that all might be great if people were actually generous, but people aren’t naturally generous; socialism ensures that people’s needs are met without relying on generosity. Here are two reasons why that doesn’t quite pan out:

Socialism is generous with other people’s property, until soon there is none left.  When people aren’t free to make their own decisions, not only are their individual rights being violated (they’re being stolen from), but production inevitably goes down. We’re left with bare shelves and crumbling streets. Eventually nobody’s needs are met.

The data shows that in fact, people living in free markets are actually pretty generous! While charitable giving can be a tricky thing to measure, most major studies show that free-market countries are among the top givers in the world. Despite numerous variables such as religion, culture, and measurement methods, countries like Ireland, Sweden, and Australia (all of which have a high score on the Heritage Foundation’s Index of Economic Freedom) rank high in their charitable giving per capita, across multiple reports. Are the populations of these countries better people? Or do they just have more freedom with their money? If socialism is to be believed, we should expect to see the lowest giving from the freest markets. Yet, who do we see coming dead last in nearly every generosity metric? That’s right, China. A nation with an abysmal economic freedom score. In fact, according to the World Giving Index, China is outdone in generosity even by Yemen, a country so war-torn that the Heritage Foundation has not been able to report on its economic freedom since 2015. Does China lack resources? Certainly not.  But the people of China do lack the freedom to choose their own destiny, much less the destiny of their dollars.

So yes, capitalism allows for and depends upon each individual pursuing his own success (often leading to mutual benefit) but it also allows people the freedom to give to others as much as they choose.

So the next time you hear socialism touted as “more compassionate,” remember the likely ramifications of forced redistribution, and ask yourself — is socialism really more generous?

For more on why the free market is good for the world, explore the Gratefully Helena blog, where we cover topics like Common Free Market Myths and How the Free Market Embodies the Golden Rule.

Written by Becca Weigel for Gratefully Helena.