[Smart Economics] The Spirit of Capitalism and the Market

Why America Is Strong for Reasons That Cannot Be Explained by Territory or Population

Without question, the world’s greatest capitalist country today is the United States. What, then, was the driving force that enabled the United States to rise as the foremost economic power after World Wars I and II and to reign as the leader of the global economy ever since? As the world’s largest multiethnic nation, it has a large population and the world’s third-largest land area. Of course, these may be contributing factors, but they are not the fundamental reason. If they were, one could not explain why Russia, with the world’s largest territory, or China, with the world’s largest population, have lagged behind the United States in economic development.

What other countries such as Russia and China do not possess—and cannot fully internalize as their own even if they try to imitate it—is the very force that elevated the United States to the center of the world economy: the spirit of capitalism.

The American Spirit of Capitalism

What is capitalism? Dictionaries define it as “a socioeconomic system in which capitalists who own the means of production are guaranteed the freedom to engage in production activities for profit.” But this is only a half-definition that views capitalism solely from a structural perspective. To understand capitalism accurately, one must reflect not only on its form but also on its essence—in other words, on its spiritual dimension as well. In The Protestant Ethic and the Spirit of Capitalism, Max Weber wrote that the “Puritan ethic” was precisely the spirit of American capitalism. The Puritans were a Protestant sect that emerged in rebellion against the Church of England in the late 16th century. In 1620, 102 Puritans fled persecution by the Church of England, boarded the Mayflower, and migrated to North America, thereby writing the opening chapter of America’s pioneering history.

A defining characteristic of the Puritans was that they inherited the thoroughly ascetic work ethic of Calvinism. Calvinism, by nature, rejected luxury while emphasizing diligence, frugality, sincerity, self-restraint, and entrepreneurship, and it religiously and morally legitimized the creation and accumulation of wealth, making a decisive contribution to the establishment of capitalism and the rise of the bourgeoisie. The Puritan ethic, grounded in Calvinism, thus inherently contained both capitalism and a civic spirit. In the same vein, the contents of Edward C. Stewart’s The American Way are also worth noting. Used at Harvard to teach foreigners what kind of people Americans are, the book identifies five elements of the American capitalist spirit: first, constant self-improvement; second, material success; third, hard work and self-discipline; fourth, philanthropy; and fifth, repentance and rebirth.

Doesn’t that seem a bit strange? Constant self-improvement, material success, hard work, and self-discipline make sense, but deeply religious elements such as philanthropy, repentance, and rebirth seem wholly out of place with the capitalism we ordinarily know. Did Stewart make a mistake? The answer, in short, is no. The reason is that the Puritans, the protagonists of America’s pioneering history, originated in Christianity, whose roots go back to ancient Rome. Accordingly, the final product formed by the combination of the Christian spirit, the Puritans’ distinctive sense of calling and doctrine of vocation, and the frontier spirit of the New World is precisely the American spirit of capitalism that underlies today’s U.S. economy and Americans’ way of life.

The Market That Realizes Capitalism

So far, we have examined the American spirit of capitalism. If that spirit served as the energy that advanced individual lives, actual economic growth was achieved only through the market. In other words, it was only through the market that the American spirit of capitalism could fully blossom.

Not only in the United States but also in European history, we can find examples in which economic scale expanded and capitalism flourished through the market. For example, in 17th-century Amsterdam, the emergence of the art market owed an enormous debt to the genius painter Rembrandt. Rembrandt worked tirelessly to transform the existing art world—dependent on the patronage of wealthy aristocrats—into a free and competitive market supported by a broad base of art buyers. As a result, he became the greatest portrait painter of his time by creating a new type of portrait for the emerging middle class, gaining both wealth and fame. At the same time, he overcame the conventional constraints that had forced many painters to depend on aristocratic patronage and opened a new horizon in art history in which free creation became possible.

A similar case can be found in the history of music. In the 18th century, the German composers Handel and Telemann refused to remain employees of aristocratic patrons and began venturing into the open market. Austria’s genius composer Mozart wrote the following in an 1781 letter to his father: “Believe me, my sole purpose is to make as much money as possible. After health, is not money the most important thing?” Unlike earlier composers who transferred their works to patrons, Mozart secured ownership of his compositions and collected royalties, thereby gaining creative freedom and independent initiative through the market.

In this way, capitalism naturally recognizes individual desires. It channels private desires—the desire to develop oneself, realize the self, and achieve worldly success—into economic energy. At this point, an individual’s ceaseless desire for self-improvement includes not only the material but also the spiritual sphere, and by allowing economic rewards to accrue to those who continually strive for greater self-improvement than others, capitalism generates even greater momentum for growth. This is the basic principle of capitalism, and what allows capitalism to function fully is precisely the mechanism of the market. Is not even the world of art—which we might casually regard as wholly unrelated to economic logic—actually governed by market mechanisms?

Economic activity is fundamentally based on exchange. The purpose of exchange is to buy and sell value and earn profit, and exchange becomes more active when greater profits can be created. This applies equally not only to our daily lives but also to the arts, including music, painting, and literature. The place where exchange occurs, where profit is pursued through exchange, and where the spirit of capitalism is realized—that place is the market.

△ Remember This

Without question, the world’s greatest capitalist country today is the United States. The final product formed by the combination of the Christian spirit, the Puritans’ distinctive sense of calling and doctrine of vocation, and the frontier spirit of the New World is precisely the American spirit of capitalism that underlies today’s U.S. economy and Americans’ way of life. The American spirit of capitalism could fully blossom only through the market.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

---

Original title: [스마트 경제 읽기] 자본주의 정신과 시장

Author: Sung-no Choi

Date: 2021-05-17

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=4&idx=23708