Capitalism: Yes and No


Note: This article originally appeared in the February 1985 issue of The Freeman.

Some terms and phrases are well suited to lucid discourse and even debate. This is generally the case when they have a commonly accepted meaning, when they are generally used–or are capable of being used–with some precision, and when they are not overloaded with connotations. The fact that people differ as to the value or desirability of what the terms signify does not disqualify them. Otherwise, debaters would have to employ different terminology, depending on which side they were on. For example, it seems to me that “free market” meets the criteria of a phrase well suited to discourse and debate.

That is, “free market” has a commonly accepted meaning, can be used with precision, and is not overloaded with meaning so as to be value-laden. A free market is a market open to all peaceful traders, one in which sellers are free to sell to the highest bidder and buyers are free to buy what they will from whatever seller they will. Or, to put it another way, it is a market in which buyers and sellers are free to contract without obstruction or interference from government.

Thus when government intervenes in the market so as to restrict the number of sellers or buyers, to set prices, or to prescribe quality, it is not a free market. It is possible to oppose or favor such a market while agreeing as to what constitutes a free market. Nor do differences as to the extent of freedom entailed necessarily rule out the use of the phrase in discourse.

In a similar fashion “free enterprise” and “private property” generally meet the tests as terms of discourse. Enterprise is free when all who can and will may produce and dispose of their goods to willing buyers. The opposite of free enterprise would be government-granted monopoly over any field of endeavor, or the restriction of it through franchises, licenses, or other devices which exclude some enterprisers. The phrase can be used both by those who favor and those who oppose it, though those who oppose it might prefer other language. Private property is simply property that is privately owned, and the owner is protected in his enjoyment of it by government. I have not, of course, exhausted the distinctions nor covered all the areas about which disagreement may exist for any of these phrases, but it was my purpose only to make a prima facie case for them as terms of discourse.


Capitalism: A Value-Laden Word

The same does not go, however, for capitalism. It does not have a commonly accepted meaning, proponents of it to the contrary notwithstanding. As matters stand, it cannot be used with precision in discourse. And it is loaded with connotations which make it value-laden. Indeed, it is most difficult for those who use it from whatever side not to use it simply as an “angel” or “devil” word, i.e., to signify something approved or disapproved. Meanwhile, what that something is goes largely unspecified because it is hidden beneath a blunderbuss word.

My considered opinion is that capitalism is not a descriptive word at all in general usage. Dictionary-like definitions may give it the appearance of being descriptive. One dictionary defines it as “a system under which the means of production, distribution, and exchange are in large measure privately owned and directed.” On the face of it, the meaning may appear clear enough. We can come in sight of the difficulty, however, if we turn the whole thing around and look at what is supposed to be signified, shutting out of our minds for the moment the word used to signify it. Suppose, that is, that we have a set of arrangements in which the means of production, distribution, and exchange of goods “are in large measure privately owned and directed.” I am acquainted with such arrangements, both from history and from some present-day actualities.

But why should we call such arrangements capitalism? So far as I can make out, there is no compelling reason to do so. There is nothing indicated in such arrangements that suggests why capital among the elements of production should be singled out for emphasis. Why not land? Why not labor? Or, indeed, why should any of the elements be singled out? Well, why not call it capitalism, it may be asked? A rose by any other name, Shakespeare had one of his characters say, would smell as sweet. That argument is hardly conclusive in this case, however, nor in others similar to it. Granted, when a phenomenon is identified it may be assigned a name, and in the abstract one name will do as well as another, if the name be generally accepted. In the concrete, however, the name should either follow from the nature of the phenomenon or be a new word. Otherwise, it will bring confusion into the language.


Marxist Derivations

Capitalism, as a word, does not conform to these strictures. Its root is capital, an already well established word in economics, used to refer to one of the elements of production. Moreover, capitalism gave a form to the word that already had a more or less established significance. When an “ism” is added to a word it denotes a system of belief, and probably what has come to be called an ideology. It is highly unlikely, if not linguistically impossible, for such a formulation to serve as a neutrally descriptive word for the private ownership of the means of production, and so on.

But we are not restricted to theory in our efforts to discover whether capitalism is simply a neutrally descriptive word. It was given currency in the highly charged formulations of Karl Marx and other enemies of private property. Marx’s fame hardly stemmed from any powers he may have had for neutral description. On the contrary, he is best known for his extensive efforts to reduce all of reality and all relationships to the point where they fitted within the ideological scheme of class struggle. He had the kind of mind that reduces everything to a place within a single dominant system. Thus, the private production of goods is a system, a system reduced in his scheme to capitalism.

In discussing the dictionary-like definition of capitalism, I dropped the word “system” used in the dictionary and substituted the word “arrangement” for it. I did so because it seemed to me that a society could have arrangements in which the production of goods would be privately owned without this constituting a system. Arrangements for distinguishing between claimants of property and protecting such claims are necessary in society. But “system” is ominous when linked to capitalism on the one hand and the production, distribution, and exchange of goods on the other.

Private ownership of the means of production does not dictate any particular mode of production. In point of fact, a great variety of modes of production do occur under private ownership. A man may own his own land and cultivating devices and produce what he will by his own efforts. Many have, and some do. Or, to take the other extreme, production may be organized in great factories by intricate division of labor and under extensive supervision and direction. Between these two extremes, there are in fact a great range of ways in which production and distribution have been and are carried on. Indeed, it is only where private property is the rule that this variety is possible.

In Marx’s mental world this variety and diversity could not exist, or, if it did, it could not last. It must all be finally reduced to a single system–capitalism. And capitalism led to greater and greater concentrations of wealth until all was in a few hands. Then, of course, the apocalypse must come, the revolution, in which an impoverished proletariat would rise up in its wrath and seize the instruments of production, and so on and on through the whole Marxian scenario. The word capitalism still carries the overtones of this Marxian analysis. For example, the dictionary from which was drawn the earlier definition gives as further definitions of capitalism: “the concentration of capital in the hands of a few, or the resulting power or influence,” and “a system favoring such concentration of wealth.” Another dictionary says, “The state of owning or controlling capital, especially when tending to monopoly; the power so held.”


The High Cost of Salvage

In sum, capitalism gained its currency from Marx and others as a blunderbuss word, misnames what it claims to identify, and carries with it connotations which unfit it for precise use in discourse. Even so, there has been a considerable effort to reclaim the word for discourse by some of those who are convinced of the superiority of privately owned capital in the production, distribution, and exchange of goods. It is a dubious undertaking. For one thing, Marx loaded the word, and when all that he put into it has been removed, only the shell remains. For another, linguistically, it does not stand for private property, free enterprise, and the free market. It is false labeling to make it appear to do so. Capitalism means either a system in which capital holds sway, which is largely what Marx apparently meant, or an ideology to justify such a system.

It is not my point, however, that it might not be possible to use capitalism as a label for private property, free enterprise, and the free market. Indeed, I think it has been done at what I call the bumper-sticker level of discourse in the United States. Undoubtedly, if enough effort were put into it the name of roses could be changed to “tomatoes.” But I doubt that the game is worth the candle. Moreover, there is no real discourse, nor discursive reasoning, at the bumper-sticker level. Bumper stickers assert; they do not reason or prove. So do titles of books, for example. But labeling is an inferior art, and name-calling is a form of propaganda. Thus the problem of discourse with a word such as capitalism remains.

It is not my intention, however, to suggest that we should discard the word capitalism. Far from it. Rather, I see the need for the use of the word in its inherent sense in serious discourse. A word, certainly a word formed with an “ism” suffix, is governed by and takes its meaning from its root. Granted, words sometimes slip their moorings in the course of time and lose all connection with earlier meanings. This is apt to happen, I suspect, when the root word has fallen into disuse. That has by no means happened in the case of capital. Capital itself is as important today as ever, and the word is still in widespread use to describe it with considerable precision. Moreover, something that I would like to see correctly identified as capitalism is widespread, if not rampant, in the world.

Keeping in mind that capitalism, because of the “ism,” is ideological in form, it means most basically an ingrained preference for capital over the other elements of production. That is, it means an imbedded preference for (or commitment to) capital over land and labor. Considered as a system, capitalism is the establishment of that preference by the exercise of government power. To put it into more precise economic terms, it is the forced transformation of some greater or lesser portion of the wealth of a people into capital. In political terms, it is the legalization and institutionalization of a preference for capital.


State Capitalism

Ironically, in view of Marx and socialist doctrine generally, capitalism is most rampant in communist countries. It is there that the most extreme measures are taken to accumulate capital. The Soviet Union, for example, has long used slave labor to mine gold in forbidding climes. It has done the same for cutting timber in the arctic cold of Siberia and for reaching other hard-to-get natural resources. The basic aim of much of this is capital accumulation to foster industrialization. There is perhaps no better way to visualize the preference for capital over labor than political prisoners (slave labor) working in gold mines. But it does take other forms. There is confiscatory taxation, in which most of the wealth of all who produce is taken away for use by the state. The capital hunger in Third World countries is ravenous today, as they reach out to try to obtain it from countries in which there is more wealth. The thrust is for industrialization, and the industries are usually owned by the government.

Some writers who have noted this penchant of socialist and communist countries for capital have called it state capitalism. While the phrase is not objectionable, it may well be redundant. If my analy-sis is correct, all capitalism is state-imposed capital-ism. Otherwise, it is most unlikely that there would be an established preference for capital over land and labor.

Granted, some people in their private affairs do evince a preference for capital over other sorts of expenditures. I have known men, for example, who were much more given to buying tools and various equipment than clothes. But then the same men often spend more on automobiles, not usually capital expenditures, than on either. Nor is it likely that businessmen, however enamored they may be with machinery or computers, will make so bold as to ignore the market for long in determining the mix of the elements of production. Only governments, because they spend what they have not earned, can afford to do that or have the power to require others to ignore the market. Capitalism is a will-of-the-wisp unless it is established by the state.


A Red Herring

The notion that the conflict in the world is between capitalism and socialism is a Marxian red herring. Whether Marx deliberately conceived a perverse term to designate the conflict or not, it has had remarkable success in confusing the issue. In Marxian terms, capitalism is not simply the private control over the instruments of production. It is the effective ownership and control over the instruments of production by a few men with vast concentrated wealth at their disposal. In Marxian terms, again, this great wealth was obtained by the ruthless exploitation of workers. To argue the opposite position is to risk falling into a fairly well-laid trap. At the most obvious level, it is to take on a variation of the old conundrum of whether or not you are still beating your wife.

Thus the defender of capitalism begins by granting that, sure, nineteenth-century capitalists were a hard lot. But that has all changed in the twentieth century, he maintains; humane legislation and genteel businessmen have changed all that. To sustain this argument, he grants more and more of the Marxist, or at least the socialist, case and justifies the increasing government control over private property. Those who argue in this wise have taken the socialist bait and rushed headlong into socialism with it.

But the heart of the difficulty is that the word capitalism as it is employed is a semantic trap. On the one hand, it makes it difficult to keep the issues in focus, because it is used in a confusing and misleading way. On the other hand, it blocks from our view a mass of phenomena which we need to see clearly and which capitalism used in its root sense would help to do. The issue is not between capitalism and socialism. There is an issue about private versus public ownership of the means of production, but there is no logical connection between that and capital or capitalism.

Whatever Marx may have thought about capital–all too little apparently–there is no substantial difference among the leaders in the world today over the necessity for and desirability of capital to aid in both agri-cultural and industrial production. If anything, socialist countries are more determined to get their hands on accumulated capital and concentrate it than what remains of so-called capitalist countries.

Every device, ranging from the most sneaky to the most openly confiscatory, is employed in this quest. I nominate as the most sneaky the monetizing of debt, by which wealth in private hands is sopped up by a process of monetary debasement. There exists now a vast series of banking-like mechanisms by which this money is sopped up and transferred to countries around the world where governments more or less own and control the instruments of production. Capital is what much of this is about, and if we could call it by its proper name, it would be called capitalism. As matters stand, however, we are denied the use of the very word that could help to bring all this into focus.


Freedom Versus Tyranny

The issue, I repeat, is not between socialism and capitalism, in any meaningful sense of the words. In the broadest sense, it is between freedom and tyranny. As regards capital, it is between whether men shall be able to keep the fruits of their labor and dispose of accumulations of it as they think best, or have it confiscated and used for politically determined ends. It is between the free market and the hampered market. It is between free enterprise and state-controlled activity under the direction of a vast bureaucracy. It is between dispersed wealth under individual control and concentrated wealth used to augment the power of the state. It is between the right to private property and the might of centralized government thrusting for total power. There are other dimensions, moral and social, to the contest, but the above are the major economic ones. Capitalism, as currently used, tends to act as a red herring to draw us off the scent and draw attention to largely extraneous issues.

So, I conclude, as regards the use of the word capitalism, sic et non, or, in English, yes and no. No, to take that part of the equation first, the word cannot be effectively used in discourse and debate in its Marxian or socialist sense. It cannot be used with precision because it is a loaded word, loaded with Marxian ideology. It has been severed from its root and made to connote what it does not clearly do. Nor does it have a commonly accepted meaning, or set of meanings, for Marxists and non-Marxists. Its use obfuscates the issues and conceals a major aspect of socialism (i.e., its capital hunger).

No, capitalism is not an apt word for the use of defenders of private ownership of the means of production. Linguistically, it does not mean private ownership, nor does the case for private property hinge upon its potential use as capital. The right to private property is grounded in the nature of life and labor on this earth, and it is, therefore, a gift of the Creator. Its use as capital is one of the possibilities of property. To defend private property from the perspective of the advantages of privately disposed capital is to approach the matter wrong end to. In any case, capitalism is still a misnomer for what the defenders are discussing; their flanks are exposed to the adversary because it is his chosen ground; and when the defenders have loaded the word with their own meanings it does not have a commonly accepted meaning for use in discourse.


Socialists Seize Capital to Achieve Industrialization

Yes, there is a place for the word capitalism in the language. There is an ideology and there are practices which cry out to have this word stand for and identify them. The ideology is the established preference for capital over the other elements of production. In practice, it thrusts to the use of government power to concentrate capital, to promote its accumulation, and to confiscate the wealth necessary to that end. Used in this way, the word capitalism helps to identify and bring into focus developments which are otherwise difficult to construe.

We can see clearly that capitalism is a disease of socialism, not the offspring of private property. It is not a system in which the instruments of production are privately owned, but one in which private property is taken to provide capital for publicly owned industries. Perhaps the most dramatic examples of it at the present time are the grants and loans to Third World and communist nations by which wealth from the United States and European countries is being appropriated for their industrialization. That, by my understanding, is capitalism, and it should bear the name and onus.


May 2009

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