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Capitalism: Not What It Used To Be

Actually Never Was

I no longer use the word "capitalism" to mean a "free market." A free market is an economic or business environment unfettered by any government intrusion, regulation, or interference. Where there is a government, a free market only exists if there is a separation of economy and the state in the same way as there must be a separation of religion and the state.

There is no free market in the world today.

But every day there are countless news stories about Capitalism, either extolling its virtues or condemning it faults. Since there are no free markets, what is this "Capitalism" that everyone is arguing about?

Capitalism today is always equated with "big business," which in this day and age, means business in collusion with, controlled and protected by government. There are some small businesses this description does not pertain to, but they are very few, because even most small businesses today are also regulated, controlled and protected (think licensing and permits) by government.

So, I'm opposed to Capitalism, opposed to all big business that advances financially by manipulating markets with government collusion and by gaining market advantage by means of legislation and government favors.

What Is Capitalism

It is unfortunate that people who ought to know better become so enamored of a word, that they would rather fight for the continued use of that word, rather than the principles it once represented, but no longer does. If they are the only ones using the word, with the meaning they would prefer, and if the rest of the world uses it with an entirely different meaning and intention, the continued worship of that word has become a kind of religious orthodoxy. People are welcome and free to cling to their orthodoxies, of course, but should not expect to make any progress in promoting any principles so long as they do. They are not going to convert the world into using and understanding language the way they would like.

The phrase, "laissez faire," is correct for what libertarians and Objectivists, for example, mean to convey by the word "capitalism," but it is, for most people, even more obscure than "capitalism." It means "hands off," which in a free market, is exactly what the government must do—keep its grubby paws of anything that has to do with how individuals deal with each other financially.

Capitalism Always the Incorrect Term

Technically, capitalism has always been the wrong term, because it does not mean a "free market." It is not a political term, it is an economic term, and describes a theory of economics necessary to certain kinds of economic and industrial development.

Suppose two grain farmers each have a good harvest, and one of the farmers sells his entire harvest and lives "high on the hog," as they used to say, celebrating the good times. The other farmer sells most of his grain, but keeps part of it, which he stores for planting next year. That stored grain is called "seed grain," or "capital." It is the means to continue business next year.

When the next planting season rolls around, the farmer that did not save any seed grain has to borrow some from his capitalist friend. His prudent neighbor is willing to lend the seed on the basis that part of the imprudent farmer's harvest will be given in exchange for it. The part of his harvest he must give in exchange for the borrowed seed is call "interest." It will be more valuable than the seed grain, and the capitalist farmer will have more grain to sell, because he can sell both his own harvest, and that part of the other farmer's harvest exchanged for the seed grain (capital) he had the forethought to save.

Capitol is nothing but money, or wealth, that is "saved" for use in future production and development. That capitol may be used by the one that saves it (as the farmer that used his own seed grain for next year's production) or may be lent out for another to use for production (as the farmer who lent his seed grain to the imprudent farmer).

This process of saving wealth to be used in future production of more wealth, goods, and services is capitalism, or, at least, what capitalism originally meant. It never meant a political system.

Obviously, capitalism cannot be practiced where a political system confiscates some or all of the capital. That is, if a government confiscates the "seed grain" of the prudent farmers, neither they, nor the imprudent ones will be able to grow anything next year. Capitalism is only possible where there is a free market, but that is the only requirement.

True capitalism is impossible under communism, socialism, or fascism, because all these confiscate capital. But capitalism is possible under any other kind of government, so long as it does not confiscate capital, including, parliamentary governments, republics, kingdoms, empires, even dictatorships. All of these political systems have other very serious problems with them, but none are inherently anti-free market (though all of them inevitably end up that way).

The issue is not the kind of government, but how much individual liberty the citizens under that government enjoy. To the extent individuals are free, economically, and the property and capital they accumulate through their own productive effort is not in danger of confiscation by that government, through any of it ruses, from taxes to eminent domain, the people will prosper and the economy will succeed. Since the word capitalism has come to mean the opposite of that kind of freedom, it is not a word any freedom loving individual ought to be willing to defend.

Capitalism has become the enemy of liberty, because in all its forms today, it means fascism, not a free market.

—(02/19/10)