"Does the free market corrode moral character?" is a nice little book from the Templeton Foundation that contains responses to this question from a variety of prominent thinkers. I quite like books like this because they open my eyes to new angles or schools of thinking, reminding me that different people have different ideas and that we all see things from different perspectives.
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Some quotes from "Does the free market corrode moral character?":
John Gray
It is important to avoid thinking in terms of ideal models. In recent years there has been a tendency to think that free markets emerge spontaneously when state interference is removed. But free markets are not simply the absence of government. Markets depend on systems of law to decide what can be traded as a commodity and what cannot. Slavery is forbidden in modern market economies; so are blackmail ...
Free markets always involve some moral constraints of this sort, which are policed by governments. More generally, free markets rely on property rights, which are also enforced - and often created - by government.
The traits of character most rewarded by free markets are entrepreneurial boldness, the willingness to speculate and gamble, and the ability to seize or create new opportunities.
Free markets demand a high degree of mobility and an ingrained readiness to exit from relationships that are no longer profitable. A society in which people are constantly on the move is unlikely to be a society of stable families or to be notably law-abiding.
Tyler Cowan
In matters of morality, the free market functions like an amplifier. By placing more wealth and resources at our disposal, it tends to boost and accentuate whatever character tendencies we already possess. The net result is usually favorable. Most people want a good life for themselves and for their families and friends, and such desires form a part of positive moral character. Markets make it possible for vast numbers of people, at every level of society, to strive for and achieve these common human ends.
Robert Reich
Great deals also frequently come at the expense of our Main Streets - the hubs of our communities - because we can get lower prices at big-box retailers on the outskirts of town. As moral actors, we care about the well-being of our neighbors and our communities. But as consumers we eagerly seek deals that may undermine the living standards of our neighbors and the neighborliness of our communities. How do we cope with this conflict? Usually by ignoring it.
Our market transactions have all sorts of moral consequences we'd rather not know about. We may get great deals because a producer has cut costs by setting up shop in poor nations and hiring children who work twelve hours a day, seven days a week, or by eliminating the health and pension benefits of its American employees, or by cutting corners on worker safety. As moral beings, most of us would not intentionally choose these outcomes, but as seekers of great deals we are ultimately responsible for them.
If the market mechanism were so transparent that we could not avoid knowing the moral effects of our buying decisions, presumably we would then have to choose either to sacrifice some material comforts for the sake of our ideals or to sacrifice those ideals in order to have the comforts. That would be a true test. Absent such transparency, we don't need to sacrifice either. We can get the great deals and simultaneously retain our moral scruples without breaking a sweat.
John C. Bogle
But in recent decades we have become an agency society, one in which corporate managers hold control over our giant publicly-held business enterprises without holding significant ownership stakes. Call it managers' capitalism. Similarly, the financial intermediaries that now hold voting control of corporate America are agents for the vast majority of individual investors. In the early 1950s, individuals held 92 percent of all U.S. stocks, and institutions held just 8 percent. Today, individuals hold only 25 percent directly while institutions-largely mutual funds and pension funds - hold 75 percent.
But these new agents haven't behaved as agents should. Too frequently, corporations, pension managers, and mutual-fund managers have put their own financial interests ahead of the interests of the principals whom they are duty-bound to represent, those 100 million families who are the owners of our mutual funds and the beneficiaries of our pension plans. This failure is hardly a surprise. As Adam Smith wisely put it, "managers of other people's money (rarely) watch over it with the same anxious vigilance with which...they watch over their own.... [T]hey very easily give themselves a dispensation. Negligence and profusion must always prevail."
"Fettered" capitalism has indeed corroded our moral character, by both privatizing the rewards of the market and (in the form of federal bailouts) socializing its risks. Both are betrayals of the free market and its genuine virtues. Our society has a huge stake in demanding higher moral values in a less fettered market system.