Classical economics posits that aggregate financial wealth is a proxy for aggregate social well-being. Thus, more consumption is always better than less, GDP growth represents the sum of individual improvements in well-being, and a businessperson’s sole social responsibility is to strive to maximize his corporation’s profits. This is the basis for Milton Friedman’s argument that it is antidemocratic for businesses to attempt to solve social problems. Yet the “consumption assumption” underlying Friedman’s logic does not survive scrutiny; a high-consumption lifestyle does not actually guarantee social or individual well-being. According to a recent study by the U.K.-based New Economics Foundation, the converse is also true: a high level of well-being does not require a high-consumption lifestyle. Indeed, overconsumption of natural resources is itself a social problem that cannot be solved by an exclusive focus on financial profitmaking.
If we define social problems as either “market failures” or “externalities,” then we must rely on governments and charities for solutions. But would the world’s problems disappear if governments and benevolent billionaires succeeded in providing universal access to vaccines and computers, as Bill Gates seems to suggest? Gates’ concerns with inequities in the distribution of wealth and information are legitimate. However, his conclusion that Capitalism’s worst flaw is the exclusivity of its benefits, is unproven. Arguably, Capitalism’s greatest flaw is one of overpenetration rather than underpenetration. Capitalism encourages industrial expansion unconditionally, relying on governments, charities, and technological innovations to remedy industrialism’s social and environmental costs. At a time when human consumption e ...