Roger Scruton has written an excellent piece on the moral basis of free markets; it’s up at MercatorNet. He begins with the Islamic proscriptions of interest charged, insurance, and other trade in unreal things:

Of course, an economy without interest, insurance, limited liability or the trade in debts would be a very different thing from the world economy today. It would be slow-moving, restricted, and comparatively impoverished. But that’s not the point: the economy proposed by the Prophet was not justified on economic grounds, but on moral grounds, as an economy of righteous conduct.

Our long-term economic malaise may mystify world leaders, but Scruton sees its causes clearly: ways intended to speed economic development have become ways to acquire luxuries without payment; we have confused trade in debts with others’ assumption of our debts. This moral confusion is as much to be found in governments as it is in private markets, because the incentives are exactly the same — anyone who denies it is lying.

If you borrow money you are obliged to repay it. And you should repay it by earning the sum required, and not by borrowing again, and then again, and then again. For some reason, when it comes to the state and its clients, those elementary moral truths are forgotten.

Scruton concludes that morality is inescapable — though we may delay it, judgment will come.

The moral sense emerged in human beings precisely because it has proved to be, in the long run, for their advantage. It is the thing that puts a brake on reckless behaviour, which returns the cost of mistakes to the one who makes them, and which expels cheating from the fold. It hurts to be punished, and states that act wrongly naturally try to avoid the punishment. And since they can pass on their hurt so easily to the rest of us, we turn a blind eye to their behaviour. But I cannot help thinking that the result is at best only a short term economic advantage, and that the long term costs will be all the greater. For what we are seeing, in both Europe andAmerica, is a demoralisation of the economic life. Debts are no longer regarded as obligations to be met, but as assets to be traded. And the cost of them is being passed to future generations, in other words to our children, to whom we owe protection and who will rightly despise us for stealing what is theirs.

Read the full text here.


  • Roger McKinney

    Excellent article by Scruton! It is wrong to try to separate
    morality and economics. And the consequences are disastrous.

     Scruton: “Whether bubbles of the kind we have recently seen
    are a necessary part of the trade in unreal estate I do not know. I suspect
    that they are, and that the search for regulations that would prevent them is a
    futile use of public funds and political energy.”

     According to good economics, Austrian, such bubbles are not
    necessary. They result from credit expansion by the Fed, which brings up
    another moral issue. For much of human history money was a commodity and
    private property. When states took away that property, which is theft, they
    began to mess with its value, which is dishonest. Money is a measure of wealth.
    Changing the value of money is no different that using dishonest scales in retail.

     Today the state maintains a monopoly on the issue of money
    and manipulates its value to serve state purposes, which is immoral.

     Scruton: “And the cost of them is being passed to future
    generations, in other words to our children,”

     Exactly! Historians consider previous generations who
    insisted on a balanced budget to be Neanderthals. But in reality they just had
    morals.

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