Can Capitalism Survive?

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to use its control of some basic raw materials to capture a greater share of global wealth. One illustration of the size of the threat is the disruption of Western economies caused by the huge price increases of the Organization of Petroleum Exporting Countries, most of whose members have centrally run economies. The oil-price crisis has slowed the economic growth that is one of capitalism's main justifications for existence.

British Historian Arnold Toynbee has glumly predicted that the commodity-producing nations will launch a kind of economic siege warfare against the Western capitalistic world, which will react by putting its own economies "in irons"—that is, dictatorially regulating all production, consumption and investment. U.S. Economist Milton Friedman, a disciple of Adam Smith, darkly suspects that capitalist freedom will turn out to be "an accident" in the long sweep of history, and that humanity will sink back into its "natural state" of "tyranny and misery."

It is a little early to write off capitalism. The system has survived wars, depressions, the loss of colonial empires—even the accession to government power, in such countries as Britain, France and Germany, of parties that called themselves socialist but proved unable or unwilling to dismantle the system.

Today, ironically, the strength and adaptability of capitalism are appreciated most by fervent socialists who would like to destroy the system but realize they are nowhere near their goal. New Left Philosopher Herbert Marcuse denounces capitalism's profit motive as "obscene" but concedes that it is so powerful that the downfall of capitalism "is not imminent." Michael Harrington, the pre-eminent American socialist, concedes that capitalism "has shown remarkable resiliency" and predicts that it "will spend and plan its way out of the present situation."

It Started with Self-Interest

Capitalism's whole spirit is growth through adaptation to ceaseless change—in prices, profits, technology, consumer tastes. In fact, its intellectual history begins with Adam Smith's effort to explain why and how the natural instincts and capabilities of free men cause economies to change and progress. All this is worthy of being recalled today because it remains little understood.

Smith was not the first to catch glimmerings of the potential power of a free economy. Some scholars argue that he did no more than pin down and define the rationalist, antiauthoritarian ideas that were in the air 200 years ago. But Smith did that with such mastery that he produced the world's first complete and coherent theory of economic behavior, establishing the starting point for all subsequent capitalist thought.

In Smith's view, the great motivator of economic activity is "the uniform, constant, and uninterrupted effort of every man to better his condition"—or, bluntly, self-interest. Only this drive moves men to produce the goods that society needs. As he put it: "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." (Smith, observed English Economist Walter Bagehot in 1888, "thought that there was a Scotchman inside every man.")

Self-interest expresses