We hear a lot of talk these days about the need for a "moral defense of capitalism." This language has migrated from Ayn Rand style libertarianism into mainstream conservatism.
You can see the need. The financial crisis of 2008-2009 exposed shocking behavior in the mortgage and banking industries. The economic downturn has darkened the lives of tens of millions of people. And even before the downturn, the wages of the typical worker had stagnated for a generation.
Yet I admit to feeling a qualm when I hear this phrase, "moral defense." It reminds me of the dying phase of socialism.
A century ago, socialists promised that their planned utopia could deliver more prosperity and faster growth than the chaos and inefficiency of a market economy. Economists like Cambridge's Joan Robinson argued that private-enterprise economies would systematically under-invest in infrastructure as compared to state-led economies, because only the state could capture positive externalities. As late as 1949, the anti-Communist liberal Richard Grossman could write of the "terrifying efficiency" of the Soviet economy.
By the 1970s and 1980s, however, Soviet comedians were joking that if communism came to the Sahara Desert, there would soon be a shortage of sand.
Leftists—real leftists, that is, not the technocratic liberals who have that label hurled at them today—ceased defending socialism's material benefits and instead focused on the injustices of capitalism. They began making what you might call a "moral defense of socialism."
In economics, you only mount a "moral defense" when you feel you are losing.
Delivering a high and rising standard of living to the great majority of a population is self-evidently a good thing. The trouble comes if your economic system ceases to deliver benefits to the great majority. However, the outcome described by the chart below is not so easy to vindicate:
Better than excuses for such outcomes would be reforms to improve them. When defenders of a market economy can say again that life is getting better year by year for just about everybody—that the spectacular gains of a few should not distract us from the steady gains of the many—that will be a moral defense that will overwhelm all objections.