Answer: "Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned. The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of government, in such a society, is the task of protecting man's rights, i.e., the task of protecting him from physical force; the government acts as the agent of man's right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control." ( Ayn Rand , "What is Capitalism?" Capitalism: The Unknown Ideal, poage 19)
The Objectivist political theory has three main elements, all of which draw upon the classical liberal political tradition. First, the foundation of the political system should be the fundamental right to live free from physical force. Second, government has the strictly limited function of protecting rights. Third, government power should be exercised in accordance with objective laws. Capitalism is the politico-economic system implied by these principles.
The Objectivist ethics holds that each person can live and flourish through the independent exercise of his rational mind. Economically, humans flourish through production and trade, as is evident from the fact that the freest countries are either the richest countries or are getting rich most quickly. Socially, trade is the model for how people can best deal with one another.
Trade is voluntary exchange to mutual benefit. We trade money for the goods we need. But we form friendships and join clubs and associations as a kind of trade, too, investing our time, money, and energy in a relationship, for mutual enjoyment or the advancement of a shared cause. Independent people are traders because they give value for the values they receive from others. They do not mooch off of their friends and relatives, and they do not loot the resources of strangers.
It is possible to live independently only if one is allowed to do so. One's choices must be voluntary if they are to be freely made. Fundamentally, only the threat of deadly force can undermine one's ability to reason and choose. Assault, murder, theft, fraud: All these are examples of the use of force to deprive someone of freedom, of goods, or even of life.
Normally, one employs one's mind to support one's well being. The threat of force makes one accept someone else's dictates, rather than one's own judgment. This was the way the totalitarian systems such as Soviet Russia, Nazi Germany, or Maoist China treated their citizens, and that is why the effect of those systems was a gray, uniform style of life, faltering production, and periodic bouts of mass imprisonment and slaughter. Because force is a fundamental threat to the independent life of production and trade, there is one fundamental principle of social organization that a just society must secure: the principle that no one may initiate the use of physical force against any other.
Objectivism is not a pacifist philosophy.
The principle of non-initiation of force does not prohibit its use in self-defense. Objectivism
is not a pacifist philosophy. A trader does not seek to profit from the use of force, but he is able and willing to defend himself, his friends, and his goods if they are threatened or attacked. The pacifist is right to recognize that violence is not the best way for rational beings to deal with one another. But when the rational and good fail to defend themselves from those who attempt to live irrationally through force, they are surrendering all that is decent to all that is not. Those who choose the life of the animal, the life of tooth and claw, deserve a response in kind, if that is what will eliminate the threat.
The individual rights to life, liberty, property, and the pursuit of happiness—mentioned in many American political documents—identify different dimensions of freedom and prohibit the corresponding types of force. "A 'right' is a moral principle defining and sanctioning a man's freedom of action in a social context," wrote Ayn Rand
. "There is only one fundamental right (all others are its consequences or corollaries): a man's right to his own life." To live, one must be able to take action, by one's own choice, in support of one's life; that is the right to liberty. We are material beings, and so we need the freedom to keep the fruits of our labor and use or dispose of them as we see fit; that is the right to property. And we live as ourselves, for ourselves, so we have a right to pursue our own happiness.
The power of government is the power of the gun. It has the power to enforce a set of rules in the territory it controls, a power that is often turned against freedom. Objectivism
therefore advocates a strictly limited form of government: a republican system that has only those powers and takes only those actions required to secure our rights to freedom from force. There must be a military force for defense against external enemies. There must be a system of legislation and law courts to establish the law and to adjudicate disputes in which force might be used. And there must be a system of enforcement of the law such as the police, to make sure the law is a social rule, not empty words.
No country today scrupulously respects rights, and indeed many people do not understand what rights really are. A limited, rights-respecting government would have no welfare system and no forced pension-paying system like Social Security in the U.S. It would not have agencies with open-ended and vaguely defined regulatory powers. There would be no anti-trust law, nor zoning laws, nor anti-drug laws. This does not mean that a free society would not have unemployment insurance or pensions, or that it would not have distinctive neighborhoods or public campaigns to reduce the use of dangerous narcotics. But if people wanted any of these things, they would have to organize and undertake them voluntarily, through individual contracts and free associations. And no one would have the right to enforce his preferences on someone else through violence. Free debate and rational persuasion would have to be the means a social organizer would use, and the result would be a system of freedom, in which each person would choose for himself the best course in life and would suffer or enjoy the consequences of his choices.
Civil law (primarily contracts, property, and torts) is government's main positive service. Civil law provides objective, just, and peaceful means of resolving disputes among producers and traders. In so doing, it provides the context needed for reliable long-term planning and contracting, which in turn are necessary conditions for the prodigies of global capitalist production and the wonders and conveniences of modern life. Police and the armed services, by contrast, serve in a negative role: They protect citizens from threats by criminals and foreign aggressors. In both civil and criminal realms, law functions by providing clear standards for determining which actions and interactions among people are consistent with individual rights. Without these legal institutions, society collapses into warring camps; each interaction invites violent dispute; and life becomes more inconvenient, less productive, and more brutal—at best.
Objectivity in the law is crucial to its function. The laws must be clearly expressed in terms of essential principles. The highly detailed, programmatic laws so common today violate this principle, as do the vague standards under which many regulations are issued. The law must be intelligible to the people on whom it is enforced. The law courts must be structured so that objectivity and impartiality are the hallmarks of any legal decision. And the law must always be grounded in principles of rights.
Thus capitalism is not merely a system of economic freedom, much less an economic system favoring big businesses. In its pure form, capitalism is a social system characterized by individual freedom, diversity, and dynamism. It is a system that treats people as individuals, with no ethnic, religious, or other collective principle enshrined in the law. It is the system under which each of us makes his own choices and must take responsibility for his own life and happiness. It is the system in which long-term peace and unbounded prosperity are possible, if people will work for them. As Ayn Rand said, it is the system of separation of economy and state, just as there is separation of church and state, and for the same essential reason: because each person has a right to think and to live as his own conscience dictates, and because we all benefit from everyone having that freedom.