By Steve Forbes

One of the great vulnerabilities of capitalism is the perception that it is somehow less than moral, if not positively amoral. A common view of business was depicted in the movie “Wall Street,” in which Michael Douglas’s character made famous the phrase, “Greed is good.”

Capitalism is widely seen as promoting selfishness. We tolerate it because it gives us jobs and prosperity, but many look on this as a Faustian bargain. Charity and capitalism are seen as polar opposites.

Thus there’s a phrase that’s often used today — I myself use it from time to time without thinking — which is “giving back.” If you’ve succeeded in business, it’s counted a good thing if you “give back” to the community. And charity is, of course, a good thing.

The problem with this phrase is its implication that by succeeding, we have taken something that wasn’t ours.

In fact, philanthropy and capitalism are two sides of the same coin.

To succeed in business in a free-market economy, one must meet the needs and wants of others. Even someone who makes babies cry is not going to succeed unless he or she provides a product or a service that people want. This system weaves intricate webs of cooperation that we don’t even think about.

Take a restaurant: Someone who opens a restaurant assumes that farmers will provide the food and that someone else will process and package it and that someone else will deliver it, having been supplied the fuel to do so by yet someone else, etc. These marvelous webs of cooperation happen every day throughout a free economy. No one is commanding it.

Free markets also force people to look to the future and take risks. Misers do not found companies like Microsoft.

Nor should we look on it as immoral for people to work for the betterment of themselves and their families. We are all born with God-given talents, and it is right to develop them to the fullest.

The great virtue of democratic capitalism is that it guarantees that as we develop our talents, we’re contributing to the public good.

Statistics show that the U.S. is both the most commercial nation and the most philanthropic nation in human history. And this is no paradox. The two go hand-in-hand.

Another vulnerability of democratic capitalism is that although it leads to progress and to an increase in our societal standard of living, progress is usually disruptive. This allows collectivists to play on people’s natural fear of change.

One can imagine what “60 Minutes” would have been investigating 100 years ago: the poor blacksmiths being put out of work by Henry Ford.

Likewise, when TV came along in the late 1940s and early 1950s, most movie theaters in the country went broke. Now the Internet is disrupting newspapers and Craig’s List is disrupting classified advertising.

Disruptions are inevitable in a free-market system. The political challenge is to allow these disruptions to take place — they are ultimately constructive, after all — rather than reacting in a way that stymies progress.

Another collectivist myth concerns trade. We are given the impression that a trade surplus is like a profit and a trade deficit is like a loss. But trade is not a transaction between countries. It takes place between parties.

For example, Forbes magazine buys paper. For all of the 88 years that we’ve been in existence, we’ve run a trade deficit with our paper suppliers.

If you look just at that trade deficit, you might think we are doing poorly. But if you look at the two parties involved, that turns out to be an illusion.

The paper supplier thinks he’s going to make money selling his paper. We think we’re going to make money by taking the paper and putting print on it, with value added. So it’s a mutually profitable transaction, even if it looks like a trade deficit.

Or consider a book printed in Taiwan. Looking at the trade number alone, it appears there is a two dollar trade deficit with Taiwan. Yet the book comes back here and retails for $24.95. The value added is in the U.S. The author gets a cut, the publisher gets a cut, booksellers get a cut, distributors get a cut, and remainder stores get a cut.

Something similar happened with iPods: A lot of its parts are made overseas, but where is most of the value added? Here in the United States.

North America has had a merchandise trade deficit for 350 out of the last 400 years, and we have done very well, thank you.

Adapted by the Georgia Public Policy Foundation from “The Great (and Continuing) Economic Debate of the 20th Century,” a speech by Steve Forbes, president and CEO of Forbes Inc., and editor-in-chief of Forbes magazine, delivered at Hillsdale College and is reprinted by permission from IMPRIMIS, the national speech digest of Hillsdale College. The full transcript is available at http://www.hillsdale.edu/imprimis/2006/March/.

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