What Do You Mean by ‘Capitalism’?

Property market

Property market (Photo credit: Alan Cleaver)

It seems to me that the term “capitalism” has become so vague and slippery it’s almost like the term “God,” or as slippery as an eel!

It means so many different things to different people. In my experience, “capitalism” seems to be referred to in vitriolic superficial flame-wars in online discussions, or when the mainstream media want to quickly and efficiently stereotype, discredit and dismiss any critics of the economic status quo, as in “Anti-Capitalists today clashed with riot police …,” hence no need to report specifically what the protest was about.

In the typical right-wing argument, anything other than capitalism as currently practiced must mean soviet style state-socialism, and we all know how badly that went. Nevermind that it wasn’t really self-consistently socialist in principle or in practice, and nevermind that it was the state or centrally planned aspect that made it go so horribly wrong. Rather than the idea of designing some kind of economic system to serve society as a whole instead of designing it to serve entrenched privately vested interests, let’s just let that argument go and move on. I accept that overall, both for better and partly for worse, capitalism as conventionally practiced has functioned relatively better in terms of people’s needs and expectations than ‘socialism’ as conventionally understood by the mainstream and as practiced in the countries which claimed to be doing it. So let’s accept that the vague mixture called capitalism has at least some good bits, and now let’s try to be more specific what are the problems or “areas of room for improvement.”

I propose splitting up The Beast, the great mythical mysterious It, into its constituent ideas or structural principles, so we can get people debating the bits rather than the overly big and muddled uber-capitalism.

  • Private ownership of the means of production: Not necessarily a problem in itself, unless it’s excessively concentrated and polarized.
  • Free market: Freedom in what sense? Freedom to work for a personal and family livelihood (and optionally, for the common good as well) within a fundamental moral framework, or freedom to exploit and oppress others as far as the rules will stretch? Freedom as a right to free-ride on society without contributing a fair share in taxes? Free as in merely free of state interference, or free as in reasonably approximately equal negotiating power in economic interactions, with reasonable alternatives available if the deal is not sufficiently win-win for all sides?
  • Entrepreneurship: High cultural value and economic incentives attributed to entrepreneurial innovation and creativity.
  • Priority of capital: Capital owners are considered to have first right over surplus value, regardless of the real proportion of value they have contributed to making that surplus.
  • Lack of personal responsibility: A complete circle of alienating of responsibility takes place with the alienation of moral responsibility from the person to the corporation, from the corporation to the State, and from the State to the electorate, but the electorate has too dispersed control for it to feel worthwhile for individuals to invest the energy in investigating and making careful, socially responsible decisions.
  • Lending with interest: The original function of lending with interest was that early industrialisation required sufficient concentration of capital to enable industrial development and hence improvements on average in standards of living and life expectancy. However, the concentration of capital resources by private ownership is inconsistent with democracy, because it tends towards regulatory capture and exploitative control of access to capital.
  • Intellectual property rights: In principle, intellectual property rights (despite the name) are contrary to one of the founding principles of capitalism, the free flow of information. When what a society’s economy is producing is mostly information (and technology), if you maintain strict so-called intellectual property rights, then that is in practice seriously compromising the free flow of information and development.

Free markets do not necessarily require the doctrine of shareholder value and alienation of moral responsibility. The way economic activities become more than zero-sum or win-lose is by collaboration and cooperation. Post-industrial capitalism is the rise of absentee shareholder owners who take no responsibility. With limited liability, no one ends up taking any responsibility for anything other than the bottom line that fiscal year!

Credit: Raving Green, “What do you mean by ‘Capitalism’?” posted with permission

Raving Green scribbles mostly about economics and politics at his self-titled blog.

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