In the contemporary parlance, it is largely supposed that a capitalist is one who favors a free market economic system, yet this wasn’t always the case. In the nineteenth century, as the descriptor capitalist came into more frequent use, it was virtually always deployed as a term of abuse, in identification of exploiters; it was simply not synonymous with free markets. In fact, using the word capitalism to signify free markets mostly evinces historical illiteracy and a willful ignorance of the anti-capitalist origins of libertarian thought. A capitalist is, practically by definition, one who exalts capital, who emphasizes the importance of its holders, as against the workers, in the process of production. Early liberals and libertarians never confused or conflated capitalism and free markets, and we shouldn’t either.
Before we consider capitalism as a term, a few words on libertarian are in order. Joseph Déjacque, the French anarchist and communist, is credited as the first to use the word libertarian, titling his radical periodical Le Libertaire (the French counterpart of the English “libertarian”) in 1858. In the preceding year, Déjacque had used the word in a letter to Pierre-Joseph Proudhon, rebuking him for his attitudes on women, describing him as a mere liberal, not a libertarian. If we honor its original use, then, libertarian is simply and straightforwardly a synonym for anarchist, one who opposes all forms of coercive authority, desirous of an anarchy that is, in Proudhon’s words, “the absence of a master, of a sovereign.” It is important to remind the contemporary reader of the birth of the word libertarian because of its historical association with anti-capitalist thought. As Iain McKay argues, the “original, correct usage” of libertarian is as “an alternative for anti-state socialist.” We cannot understand early libertarian thought (that is, early anarchist thought) without understanding its negative assessment of capitalist social and economic relationships.
It is noteworthy that the form capitalist long predates capitalism — by over two centuries, according to some accounts (see, for example, Fernand Braudel’s — and was originally reserved for describing the owners of capital, the employing classes, rather than more broadly denoting, as it frequently does today, capitalism’s ideological adherents. The renowned economist and historian Deirdre McCloskey observes that the Oxford English Dictionary places the first documented use of “capitalist” in 1792, in the agriculturist Arthur Young’s Travels in France. But even if the Dictionary is confining itself to English language uses, Jeremy Bentham, the father of utilitarianism, certainly availed himself of the term prior to 1792, engaging it to describe those who invest or employ capital. With few exceptions, the earliest uses, those prior to the twentieth century’s recasting the word as an equivalent of “free market,” identify the capitalist with the interests of capital, that is, the interests of the owning classes. And very often, particularly in the nineteenth century, with socialism in the ascendant, the term was used pejoratively.
Nineteenth century libertarians, many of them spokesmen for laissez faire, frequently used “capitalist” the way we might use “corporate” today, condemning, for example, “capitalist newspapers” as we might the “corporate media.” It just wouldn’t have occurred to libertarians at this time to praise the capitalist as an entrepreneur, an innovator, or a champion of free and open competition; they instead regarded the capitalist as one who aims to strangle legitimate competition with class legislation, as a rent-seeker using the power of the state to insulate his inequitable income streams. Thus, by the time capitalism comes into view, gaining currency in the popular discourse, it is decidedly not as shorthand for describing the liberal system of free trade. The nineteenth century, publisher, feminist, and libertarian Ezra Heywood, for example, described capitalism as a system that “masses … all the sources and instrumentalities of wealth into one gigantic system, to compel our people to pay tribute to the centralizing power of usurped property.” Capitalism, then, was merely an heir to the mercantile system and to feudalism before that—not a system of free exchange and widely distributed private property, but a “tyranny of capital” under which power and privilege are confined to a small group. Where competition would generally divide economic power and dissolve great fortunes, capitalism was designed to systematically favor the capitalist, to whom legislative and regulatory power were in service. For individualist anarchists like Benjamin Tucker, a capitalist is one who wrongfully extracts wealth from productive society “by abolishing the free market”; these radicals frequently compared the capitalist to the great landholder or feudal lord, whose economic power derived and was inextricable from political power, quite literally from the armaments of knights.
Braudel observes correctly that the term capitalism did not reach “full maturity” until the dawn of the twentieth century. Still, we find thousands of instances scattered throughout the preceding century, some of which appear earlier than William Makepeace Thackeray’s famous use in The Newcomes, often wrongly credited as the first. Free market propagandists of this period — whether individualist anarchist champions of socialism or liberal economists — did not confuse capitalism for the voluntary trade that they favored. As Elisabeth and Richard Jay note, “Radicals from Paine to Cobden, Bright and the Manchester School wielded ‘the laws of economics’ as a weapon against aristocratic privilege and patronage.” These early libertarians argued in favor of laissez faire free markets while determinedly attacking capitalism as a system of legalized theft. They argued that, in capitalism, coercive legal privileges limit the range of competition, advantaging the economically powerful and creating the bargaining power disparities that result in exploitation. Building from the foundations laid by early classical economists such as Adam Smith and David Ricardo, free market radicals like Thomas Hodgskin contended that workers were being deprived of their full reward, that the wage relationship was one of unequal and unfair exchange. Discussing Ricardian Socialists like Hodgskin, Brian Burkitt observes, “It is a short step from [the ideas of Smith and Ricardo] to an exploitation theory of capitalist income.” Classical political economy, particularly its labor theory of value, had an important and enduring impact on socialist thinkers as varied as Hodgskin, Pierre-Joseph Proudhon, and Karl Marx. Whether the Ricardian Socialist label applies accurately to Hodgskin is a question that we will not consider here. It will suffice to say that thinkers like Hodgskin demonstrate the blurriness of the lines separating liberalism, socialism, and nascent libertarianism in the early nineteenth century.
For the abuse of the worker, Hodgskin blamed legislation rather than the free operation of the competition and trade, writing that “[t]he passion of regulation everything … has now become quite a mania.” For Hodgskin, trade and commerce were part of a natural order that would by itself produce balance and a harmony of interests, independent of the “petty contrivances” of governments. Indeed, Hodgskin saw government actions as the source of the distorting privileges that yielded “much of the poverty and misery” suffered by working people. So deeply buried, so well hidden are these privileges that they have inclined many well-meaning ideological defenders of freedom to treat capitalism as the practical embodiment of their views. But capitalism and libertarianism were and still are fundamentally antithetical. Land theft, monopolistic charters, patents, subsidies, licenses, and all manner of legal protections have always defined capitalism as an observable historical phenomenon — and they continue to define it.
Capitalism, it turns out, is a phenomenon far more specific and complex than simple voluntary exchange, one that implies distinctive institutions, relationships, and activities. Like Thomas Hodgskin, today’s free marketers should, to the extent that their beliefs are sincerely held, defend labor against the claims of capital—rather than defending the profits of multibillion-dollar global corporations. The free market as a decentralist alternative to state-sponsored capitalist privilege is one thing; as a piece of rhetorical subterfuge, an apologia for exploitation and subjugation, it is quite another thing. Both capitalism’s defenders and its detractors should know what they mean when they use the word, conversant with its history and prepared to stand by their position.