Thoughts on economics and liberty

Classical liberalism is compassionate, ethical (even religious) capitalism

Over the past few weeks it is becoming clearer to me that without a strong foundation in ethics and compassion, a purely market-based competitive approach could well take us into a moral black hole. Essentially this distinguishes utility into two types: utility that adds real value to mankind and utility that adds to one's pride.

In many ways, the idea of compassion is included under the concept of accountability and justice, but it is worthwhile to consider its implications separately.

Without such compassion, competition becomes cut-throat competition (literally cutting others' throats). Competition degenerates into competition for false pride. I particularly refer to the idea of nationalism/master race/religious pride, etc.

Without such compassion, scientific knowledge will become a tool for control over other humans.

Without such compassion, we will lose the only thing in us (our vision, humanity and kindness) that distinguishes us from mere animals.

I’m thinking here mainly about the evil of Social Darwinism and eugenics.

For someone to be killed just because he or she was a little bit disabled, or sterilised just because he or she was a little bit less able than the rest of us, is repugnant to the classical liberal. Founded as he is on a firm belief in the equality and improvability of EACH individual, and optimism for the future of mankind, the classical liberal is perhaps the most compassionate human being around.

His compassion is reflected in many ways, but by his desire to establish systems of governance and justice that allow each of us to achieve our potential.

He also insists on a social minimum for those who are entirely incapable of sustaining themselves without support. The eugenist would have none of this “wastage” of our resources – for a social minimum. According to him, if you can’t survive the competition of the economy and the competition of biological evolution, then you are a dead end and must be discarded.

The classical liberal entirely opposes such a view. He challenges us to find solutions that are consistent with the highest levels of humanity and ethics.

This view is consistent with the best idea in ALL religions. In that sense the classical liberal is extremely religious.

Sanjeev Sabhlok

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3 thoughts on “Classical liberalism is compassionate, ethical (even religious) capitalism
  1. Dr. Pawan Kumar Aryan

    Compassion contains protection of the weak-vulnerable-needy humanity and unresisting MOTHER NATURE.

    Competition brags for the ouster of uncompetitive (weak-vulnerable-needy) and ceaseless extraction from the womb of MOTHER NATURE.

    Is not the mid way lives Socialism?

    The legacy of Nehru-Gandhi.

    One of my cousin “Vijay” while pursuing his studies at Bangalore use to oppose Gandhi Ji and always labelled him as a BIG HYPOCRITE, due to his naked-attire.
    He use to support his argument, “do to others what you expect for yourselves” but Gandhi Ji’s wife delivered her progeny under the best medical care of the time, but he never took the cause of safe-deliveries.

    Since, being senior students, we used to oppose him on most of the occasions without fully understanding his part of the argument.

    Then, turning red hot, he use to address us, “GANDHI IS SLOWLY FITTING IN YOU,” you are at big risk of loosing your identity.

    Is Nehru slowly creeping in :-)?

  2. Sanjeev Sabhlok

    Dr Aryan, I would like to suggest that socialism is morally unsound and in the name of compassion is the greatest enemy of the poorest. There is a HUGE difference between ethical capitalism and state-driven socialism. 

    Gandhi was a classical liberal in many ways. I have few issues with him. But Nehru an enemy of India (through his bad policies, even though he thought he was doing good). Let’s not mix up the two.


  3. Mudit

    Dear Sanjeev,
    I don’t know if the following analysis is too simplistic but please respond if you find it to be fallacious.

    How free trade helps in redistribution of money from the rich to the poor.

    Scenario 1: India is a free market with strong police judicial systems in place.
    Two entrepreneurs Raj and Riya after surveying the market come to the conclusion that there is a demand for a particular variety of hair oil which isn’t provided by any company.

    After examining various cost estimates, Raj sets up his factory in Madhya Pradesh and starts producing the hair oil. Riya, however, sets up the factory in Bangladesh to make avail of the cheap labour. This allows Riya, to sell her product at a lower price in the market while maintaining the same or higher profit margin than Raj.

    Riya’s selling of the cheaper product forces Raj to sell his products at a discount. Let us assume that Raj makes Rs. 10 lac less because of competition from Riya. This means that Rs. 10 lac were transferred from Raj’s pockets to all his buyers.
    Raj and Riya also pay a corporate tax of 10% on their profits.

    Scenario 2: The same as above except that India isn’t a free market.
    Raj now approaches the Minister of Fair Trade/Economic Affairs/whatever and asks him to impose import tax on Riya’s products in exchange for some benefits. The benefits can be provided in many ways. They may not necessarily take the form of an upfront bribe. They could be the money spent on lobbyists. Or perhaps some money transferred to the minster’s campaign fund. Or perhaps some award given to the minister for promoting economic welfare. The point is, that Raj will have to spend some money to get the minister to impose tariffs on Riya’s products.*

    Let us assume that he spends Rs. 1 lac.
    Let us also assume that Riya pays Rs. 2 lac as import taxes.
    Now both Raj and Riya make an additional Rs. 10 lac each.

    The government collects taxes @ 10%.
    Additional taxes collected by the government:
    From Raj From Riya
    10 10
    (-1) (-2)
    10% of 9 lac 10% of 8 lac
    =90,000 =80,000
    Additional revenue of the government =Rs. (2+0.8+0.9) lac
    =Rs. 3.7 lac

    Let us assume that out of this amount the government spends Rs. 70,00 on its employees and redistributes the remaining among the poor.
    Compared to the previous case, the poor received Rs. 7 lac less.

    *What if the minster is completely honest? In that case he will always be thronged by petitioners seeking protection from competition. Raj will have to hire a lobbyist or get in the long line himself. If he decides to approach the minister on a personal basis, then Rs. 1 lac is the value of the opportunity cost.