DOES CAPITALISM NEED a moral defense? Do capitalists need a moral philosophy?

George Gilder’s book, Wealth and Poverty, was originally published in 1981, in a world much different from the one we encounter today. The threat of Soviet and Chinese communism loomed large. Japan seemed to be doing capitalism much better than America. Europe was wrestling with the consequences of excessive statism. At the dawning of the Reagan era, Gilder laid out a comprehensive detail-rich series of arguments that attempted to provide a rousing defense of pure capitalism, of the sort that had been lost under decades of government expansion in the US.

In 2012, the world looks considerably different.

Technology has fundamentally changed the way information and data moves from point to point, both in our day-to-day lives and in the business and financial world. Perhaps more importantly, the last 25 years have also seen belief in the discipline of market forces surpass its more obvious philosophical rivals. After decades of stalled growth and the accumulating byproducts of repression, a long list of totalitarian states that professed Marxist ideas, but ultimately made do with militarized garrison states, set aside their past mistakes and began taking steps towards open markets. Some even argue that capitalism no longer needs defending, having been adopted as the reigning economic approach by policy makers in all parts of the globe.

Capitalism prioritizes productivity over distribution and envisions an “open system” with innovation as a key component, regardless of the destructive power that it inevitably unleashes. Failure is an unavoidable feature of human existence, and rather than hide it or dissemble it away, capitalism acknowledges and accepts the risk of failure as crucial to achieving wider aims.

But the recent global financial crisis has given free marketeers a number of awkward questions to answer — questions about how markets operate in the real world, especially when governments and too-big-too-fail financial institutions begin to act in ways that shift losses away from those who have incurred them and onto the backs of others.

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Gilder, a moral philosopher at his core, has returned to revise Wealth and Poverty at a time when the “golden years” of the Reagan Administration have receded far enough into the background to have obtained an ivory-carved sense of inevitability.  The “new normal” that was established during those eight years have not yet been systematically rejected despite two turns in the White House by notionally populist Democratic successors. This “new normal” continues to be the base case for many (but not all) in 2012 when evaluating economic policy, tax reform and financial regulation.

To Gilder, capitalism is much, much more than simply the “least bad” system available to us. Capitalism is something more moral and more effective than the alternatives.

The 1981 edition of this book was a key component in the Reagan revolution that was about to unfold. As such, Wealth and Poverty will always hold a position of historic importance. Thirty years later, the Obama administration has begun to shift the direction of the country back towards the Keynesian consensus that held on both sides of the Atlantic for several decades. As a result, Gilder now seeks to re-introduce his thoughts to a new generation of questio...