I noticed that a recent Forbes piece made the point that a certain amount of public virtue is assumed in order for free market capitalism to work.
"Yet those whose main concerns are with financial probity cannot afford continuing to neglect that capitalist economics presupposes a morally upright people." - Angelo CodevillaIt's true. Unbridled capitalism contains the seeds of its own destruction. This is because those who get to the top via the free market without ethical restraint will not hesitate to use their lofty position to pull the ladder up after them- lobbying government to put up barriers to entry for potential competitors. It is also true on the bottom, because stolen hubcaps are a good deal for the "free trade" going on between buyer and seller, but a mis-allocation of resources if the losses of the victim are factored in.
The free market requires public virtue to survive. That being said, commerce in this day is dominated by corporations, not individuals. It is well known that people operating in groups make more rash and less ethical decisions than they would operating on a one to one basis. Membership in the group to some extent buffers people from facing the fact they they are all making decisions with a moral component. Group absolution is a moral hazard.
"The greater good" argument also applies. A sage once noted that in Hamlet it might make sense for a man to go mad with guilt for taking one life to get to the top, but men who conned themselves into believing they were implementing some "greater good" beyond their own self interest slaughtered millions in the last century without blinking an eye. What made the Stalins and the Hitlers and the Maos so guilt free about their bloodshed? Well it helps being a sociopath, but along the way they had minions who were not sociopaths. They simply believed they were working for some higher good, which just happened to be coincident with their career interests. This gave them excuse to commit evils that they would never do strictly for their personal profit.
Corporations provide just such an environment. The executives don't want to do such and so, but they have a responsibility to the shareholders and so forth. Everything about them, especially the limiting of liability and the magnification of power through group action, serves as a moral hazard.
Localism does not ban corporations, but it does place certain restrictions on them. The book has the details. Corporations under localism are treated as fire, a dangerous tool but a useful one.