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What is Capitalism?

It is interesting that the definition of capitalism owes more to Marx than Smith.  Private ownership of the means of production comes of course from Marx.  Recent obsessions with markets is perhaps an attempt to return to Smith, though in practice Smith favored more government action (protectionism) than might be comfortable for today’s conservatives to accept.  On the face of it, there seems to be any number of quite different business approaches that all are being claimed as capitalism.  Let’s explore some of them.

Mercantilism represents perhaps the earliest form, and elements of this system still exist.  Most nations pay attention to money supply and balance of trades, though imperialism has morphed somewhat into less political and more economic forms—a distinction lost perhaps on the exploited areas.

Laissez-faire, free-market, capitalism is most closely associated with Smith and largely accepted as what we practice in the United States, though strictly speaking it isn’t even close to today’s  capitalism.

Social-market capitalism is largely associated with the Nordic and European countries.  As such it is bad, very, very bad; unless you live there.

State capitalism is the bastard child that is generally ignored by anyone who likes capitalism, except when it worked for Milton Friedman to use it to impose his economic theories.

Finance capitalism is sometimes invoked to distinguish the strange world of financial alchemists.  It still exists, independent (?) of the other forms.  Recently Matt Taibbi described Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”  So presumably this would be vampire squid capitalism.  Enron and Bernie Madoff have shown us that there can be Ponzi capitalism.  Certainly there seems to have a deep misunderstanding of the concept of spreading risk in finance capitalism.  It ought not to mean that everyone ends up with a lot of risk.  Actually it is now argued all capitalism is now finance capitalism—this is probably not a good thing.

Corporate capitalism is what we most often think of and talk about today, but historically this group has been as diverse as the previously types.  Early corporations were chartered by Kings, as today they are by governments. Most early ones were granted monopolies, and later when not explicitly set up as such, they pursued monopoly.  Then we in the U.S. decided that was bad and thus corporate capitalism agreed (under force of law) to only pursue market share.  At some point corporations decided to “influence” the political system that had prevented it from monopoly and we got bribery capitalism.  Recently they have been endowed with personhood and freedom of political speech by The Supreme Court.

A lot of types, but presumably they involve capital (mostly money) and often you will hear about capital flows determined by market forces.  Being who I am, I would prefer markets forces since tend to see multiples when others see unity.  We have a number of combinations of these types of capitalism.  For better or worse, we have them all and quite a bit of things that are not capitalist at all.

I have often wondered why the private vs. public distinction is so absolute an element for many when such clear distinctions have never existed.  (As mentioned earlier the government, whether King, totalitarian or democratic state have each played their role in close coordination with capital.)  I have never understood what kind of market would exclude a party that has always been present.  Of course, governments are never actually excluded as corporations have always simply tried to avoid what they deemed unhelpful, well unprofitable.  But then what exactly does profit mean??????


3 thoughts on “What is Capitalism?

  1. The only definition which makes any sense is ‘voluntary transactions in a free (ie non coercive/ non violent) marketplace’.

    Any prefix to capitalism (like the ones you listed) is just using the idea of capitalism (as per my definition) to justify or disguise some degree of coercive and violent behaviour.

    In this way capitalism might be thought of as being like ‘lovemaking’. Both are based on voluntary transactions. If a rapist can convince people he is involved in some kind of ‘lovemaking’ he is less likely to be condemned by society. Perhaps this rapist might be able to invent the category ‘coercive lovemaking’ or ‘non negotiable lovemaking’. That doesn’t sound too bad, if you don’t think too hard about what it really means.

    In the same way ‘state capitalism’, ‘finance capitalism’ and ‘corporate capitalism’ don’t sound too bad, if you don’t think too hard about what they really mean.

    “…But then what exactly does profit mean??????..”

    In a system based on voluntary transactions in a free (ie non coercive/ non violent) marketplace profit is just how we reward that which we desire and appreciate. Profit is the ultimate form of ‘democracy’ (provided no force is being initiated).

    As long as there is no coercion or violence involved every transaction in a free market is a ‘vote’ which has a direct and immediate effect and does not rely on the worthless promises of politicians.

    • I don’t disagree, unless you believe any such type of capitalism every existed. Smith is much closer to your description than is generally allowed (he was a moral philosopher). Much of this is concerned with problems of idealism that I am working on in my history blog. If I get that figured out perhaps I can use it here as well. Thanks for your well thought out comments.

  2. “…I don’t disagree, unless you believe any such type of capitalism every existed. …’

    Oh god no! 😉

    Certainly not in our recorded history (except probably in pockets when people first settled in new lands). The spread of Europeans to the New World and the spread West once they got there was (among other things) our ancestors’ final attempt to escape coercive rule and theft of their productivity by the monarchy/ state….. and live in peace!

    But now there is nowhere left for people to move to in order to escape the coercion and violence of the ruling classes who operate through (our acceptance of) violent, coercive governments. The only escape possible now is a philosophical/ moral/ personal revolution of the mind…. something akin to accepting that overt slavery is fundamentally immoral (and silly) and must end, or that women not having equal status as men is fundamentally immoral (and silly) and must end.

    The next stage in our evolution (if we dare) is for us to finally accept that granting one group a monopolistic legal right to *initiate* force against other people is fundamentally immoral (and silly). We’re 99% of the way to a free society…… we already recognise that no individual or group has a right to initiate force (coercion, murder, theft, torture, persecution, harassment, kidnapping etc) against anyone else ….. except we make one special exception when it comes to the group which calls itself a ‘government’.

    There is no practical reason why this group needs to conduct itself outside of the basic moral rules which define civilised society (moral rules which our laws are supposed to reflect). Many of the services government provides existed long before government took them over by force and monopolised them into crappy, dysfunctional, inefficient, ineffective and often destructive activities (state controlled education, defence, energy, industry regulation, the economy etc etc etc).

    Now that there’s nowhere left to run, as it were, I think we are left with two choices: either we accept tyranny forever, which is now frighteningly easy to impose onto the masses thanks to new technology (1984/ Brave New World style) ….. or else we extend basic universal morality just that tiny bit further so that it applies to everyone (er…. universally), including governments and their agencies.

    And yes, a society based on universal moral rules (reflected in universal laws which apply – gasp! – equally to everyone!) has never happened before. It is a new and strange (and for some unsettling) concept …

    …. just as not owning human slaves or not treating women as second class citizens was also a new and strange (and unsettling) concept for people just a few generations ago! 🙂

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