Capitalism means human individual freedom, especially in the sphere of striving to become prosperous. To defend the system is a challenge because of its ties to individualism, even ethical egoism. For centuries the ethical and moral guidelines people have been urged to live by have been some kind of communitarianism, such as altruism, utilitarianism, socialism, communism, etc. The individualism associated with capitalism had been thought as atomistic, seeing people as isolated from and indeed hostile toward one another.

Socialism is the political economic order that sees human beings as part of a larger entity, society, to which they are all beholden and which they must serve not of their own free will but as a matter of coerced duty.

The common sense appeal of communal systems as guiding human action comes from the historical need for collective conduct in the face of threats from groups that would overpower those who are vulnerable. (F. A. Hayek makes this point well in his works.) Once it turned out that individuals who unite of their free will provide better protection to the group, individualism began to gain support. It is better suited to human life, with individuals being the source of solutions to most problems.

In time individualism surpassed other schools of ethical thought, especially once it became evident that voluntarily choosing to be part of a group − tribe, clan, nation − ensured greater loyalty than is possible via coercive unisons.

It also became evident that all the talk about the need to unite and sacrifice for the group has served largely to secure power for a few over the rest. Thus individualism became more civilized, less primitive. As public choice theory suggests, efforts to serve the public interest usually come to no more than serving the interest of influential, powerful people at the expense of others.

Protesting about having to serve the public or community is difficult because the alternative, of serving oneself, the individual, seems to be arbitrary and self-indulgent. But today a sophisticated ethical (as opposed to psychological) egoism, such as what we find in David L. Norton's Personal Destinies, A Philosophy of Ethical Individualism (Princeton UP, 1976), can overcome all known objections to individualism. (See, also, Tibor Machan's Classical Individualism [Routledge, 1998].) This, however, hasn't reached popular consciousness. Iinstead, most people are schizophrenic and preach collectivism while practicing individualism.

The individualism or egoism forged most fully by Norton, as well as by Ayn Rand in her book, The Virtue of Selfishness, A New Concept of Egoism (1967), and others, stresses an Aristotelian idea of the human individual, not a Hobbesian one (which is found mostly in economics). An implication of this is that virtues such as generosity, kindness, gregariousness, etc., are entirely compatible with seeking to flourish as the human individual one is and self-interest is understood by reference to what is proper for a rational animal, not a beast driven to seek power over others.

This development, though not yet widely acknowledged, puts an end to the charge that egoism or individualism, as a central element of free market capitalism, must be a crass, anti-social viewpoint and must generate a social climate of mutual hostility and alienation.

When it comes to competition in the free market, for example, the model isn't the boxing ring, as widely assumed in caricatures of capitalism, but the marathon race! Thus, for instance, friendship would easily be seen as fully compatible with individualism, indeed, implicit in it. (See also the work of the philosopher Neera Badhwar for this.)

The dignity of the human individual is far more elevated than that of the human social animal as seen in socialism and other collectivist political regimes. The hallmark of this social-political outlook is that individuals come together voluntarily and aren't herded into communities by rulers or dictators.