The Importance of Moral Government for a Moral Capitalism

Much dissatisfaction with capitalism, as a system, focuses on economic inequity – some have more wealth than others.  But is it capitalism that has failed or the state in which capitalism is attempted, which has serious shortcomings?

The Caux Round Table has, for 20 years, pointed to the interaction of the state and the economy as driving social outcomes.  The failures of the state should never be overlooked in analysis and efforts at remediation of inequality.

An article in a recent issue of The Economist was a proof point for this argument.

In South Africa, the company, Gold Fields, proposed to build a solar plant to help power South Deep, one of the largest gold mines in the world.  But soon thereafter, the mining company began to receive extortion demands from “business forums.”  In 2019, such “forums” invaded 183 construction sites worth $4 billion in investment value.  Gun-toting forum members led to two firms pulling out of a project to build what would have been the highest bridge in Africa.

There is a lot of crime in South Africa.  The Global Initiative Against Transnational Organized Crime ranked South Africa ahead of Russia and Libya.  Wildlife is poached.  Drugs are transited. Kidnappings rose from 6,000 in 2021 to 10,000 a year later.  Mafia-like organizations run the mini-buses used by two-thirds of commuters.  The cash-only business model opens access to money laundering.  Tens of thousands of illegal miners work for criminal organizations, taking from the industry $7 billion a year.  Around 10% of South Africa’s chrome production is exported illegally.

In 1997, there was roughly one private security guard for every policeman.  Today, the ratio is 4 to 1.

It is a fundamental axiom of a government’s claim to be a legitimate sovereign that it has a monopoly of violence in the territory it purports to rule.  If the state cannot provide security for lives and property, how can wealth be created?

As Adam Smith taught us in 1776, the wealth of nations does not originate with criminal enterprises and lawless environments.  Those conditions rather call forth social Darwinism of the most stark harshness and injustice, where lives are “solitary, poor, nasty, brutish and short,” to quote another Englishman, Thomas Hobbes.