Advocating liberty means opposing the use of force to restrain peaceful, voluntary exchange. But it doesn’t have to mean calling a system of peaceful, voluntary exchange “capitalism.”
Some people, of course, think this is obviously what “capitalism” means. And I can’t prove they’re wrong, because the word means different things to different people. I’m confident, though, that even if advocates of liberty intend to communicate the message that they’re supporting free exchange by saying they embrace “capitalism,” it might make sense for them just to pick another word.
That’s because “capitalism” carries a lot of baggage—much of it negative. It is unclear when the English word “capitalism” was first employed. According to the Oxford English Dictionary, William Makepeace Thackeray used it (in a neutral sense) as early as 1854–55 in his novel The Newcomes. It was being used in a critical sense much earlier than that, however. For instance, it was repeatedly used with a negative connotation by the radical free-market writer Thomas Hodgskin as early as 1825. In his 1827 book Popular Political Economy, he even speaks, in surprisingly modern tones, about “greedy capitalists”!
Obviously, the fact that one pro-market writer used “capitalist” or “capitalists” negatively doesn’t prove that the word is irremediably tainted. But I’ve mentioned Hodgskin to point out that these words have been used pejoratively for a long time, and not only by opponents of free markets. Today, I think it’s pretty clear that many people who talk about “capitalism” or “capitalists” aren’t thinking about freedom at all.
For instance: Mainstream print and electronic media regularly use “capitalism” to refer to “the economic system we have now.” And it’s relatively common to hear “capitalism” employed as a synonym for dominance of workplaces and society by the owners of substantial capital assets. Advocates of liberty don’t need to be identified as supporters of capitalism in either of these senses.
As libertarian philosopher Roderick Long points out, a particularly mischievous use of “capitalism” occurs when people use the term to mean, in effect, both “free exchange” and either “the status quo,” “rule by capitalists,” or both. In this sense, “capitalism” is a “package-deal” concept that links two independent ideas and treats them as if they necessarily belonged together. Advocates of liberty have every reason not to support this use of “capitalism,” unless they want to endorse the dubious notion that free markets involve privilege and lead to hierarchy, abuse, and poverty.
To a very significant degree, the economic system we have now is one from which many peaceful, voluntary exchanges are absent. An interlocking web of legal and regulatory privileges benefits the wealthy and well-connected at the expense of everyone else (think patents and copyrights, tariffs, restrictions on banking, occupational licensing rules, land-use restrictions, etc.). The military-industrial complex funnels unbelievable amounts of money—at gunpoint—from ordinary people’s pockets and into the bank accounts of government contractors and their cronies. Subsidies of all kinds feed a network of privileged businesses and non-profits. And the state protects titles to land taken at gunpoint or engrossed by arbitrary fiat before distribution to favored individuals and groups.
No, the economies of the United States, Canada, Western Europe, Japan, and Australia, at least, aren’t centrally planned. The State doesn’t assert formal ownership of (most of) the means of production. But the State’s involvement at multiple levels in guaranteeing and bolstering economic privilege makes it hard to describe the economic system we have now as “free.” So if “capitalism” names the system we have now, anyone who favors freedom has good reason to be skeptical about capitalism.
The privileges that mark the existing economic order, whatever we call it, disproportionately benefit those with the most political influence and the greatest wealth. And the network of privileges preserved by the State tends in various ways to boost the privileges of capitalists in the workplace. As regards the workplace: State-secured privilege reduces the possibility of self-employment (by raising capital requirements and otherwise increasing costs of entry, while simultaneously reducing the resources people might be able to use to start and maintain their own businesses). It also imposes legal restraints on union activity that reduce workers’ capacity to bargain effectively with employers, including legislation like the Wagner Act, which tames unions and reduces their non-violent bargaining options. By reducing alternatives to paid work and reducing workers’ collective bargaining opportunities, the State substantially increases employers’ leverage. In short: Dominance of workplaces and of society by “capitalists” as it occurs today depends on government mischief. Again, if this is “capitalism,” proponents of freedom have no reason to embrace it.
Of course, someone could argue that, while “capitalism” is frequently used to refer to objectionable social phenomena, it just as frequently refers to an economic system to which freedom is truly central. Some people do use it this way. But the negative usage has been around for a long time and is very common today. The word is tainted. And when people in the streets of countries throughout the developing world chant out their opposition to “capitalism”—meaning, in reality, not genuine freedom but rather unjust dominance by Western powers and their privileged corporate cronies—I think it’s vital for advocates of liberty to be able to make clear that the system of statist oppression the protestors are naming isn’t the system we favor.
Contributors to the Wall Street Journal’s editorial pages, commentators on Faux News, and other spokespersons for the political and economic elite may continue to use “capitalism” for whatever it is they say they favor. They’re not libertarianism’s natural allies, and there’s no reason for libertarians to emulate them. Support for free markets is quite consistent with saying good-bye to “capitalism.”
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