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What is Capitalism, Really?

by | Aug 11, 2022

Praxis Circle interviews cover a wide variety of worldview topics, ranging from politics, philosophy, religion, and beyond. In under a few minutes, our Contributors will provide a balanced overview of the definition of capitalism using featured clips and corresponding transcripts below. As a disclaimer, these clips express the momentary thoughts of our Contributors only. They do not necessarily reflect the opinions of Praxis Circle, and they are intended merely to offer food for thought.

 

What is capitalism?

 

 

Anne Bradley:

 

Capitalism is a word that I do not like. You might say, wow, that’s kind of silly, because it’s on the front cover of your book. In fact, when we were thinking about the book, I said, oh, I don’t think we should use the word capitalism. But the whole point is, people are really starting to question capitalism again. They have, I think, forever. So, we said, okay, we’re going to deal, we’re just going to roll our sleeves up and get dirty and talk about what capitalism means. Capitalism is a term that originated, was originated by Karl Marx. It’s a derogatory term. If you know anything about Marx, he was someone who was very worried about excessive wealth accumulation. He believed work was inherently alienating. So, when I get into a commercial relationship with my employer, there’s a probability, a likelihood, that I’m going to be alienated from my work and I’m just going to, kind of, be a pawn, right? A cog in this machine.

 

And there’s no fulfillment in it. This is very different than the narrative that we talk about when we talk about work. And so, Karl Marx says, there’s the dirty capitalists, those are the holders of capital. That’s where this term comes into being. Capitalism as a system, what do we mean? And I want to be very clear about what the economic definition of this. The economic definition of capitalism is the private ownership of the means of production. Now what does that mean? It means that private individuals, as firms, right? Hold property rights and they make investment decisions based on their assessment of what people want and need. Meaning, the United States government doesn’t own all the farms, the United States government doesn’t own all the manufacturing plants, right? Apple is a private company and they make stuff.

 

How do they make those decisions? Well, they kind of try to figure out what consumers want. Sometimes they’re right, sometimes they’re wrong. So, capitalism is about that system of profit and loss. What’s profoundly important about capitalism, which Marx didn’t understand, is that it’s driven by consumers, it’s driven by you and I. See, if none of us go into Apple, the store, it’s not going to exist anymore or they’re going to have to change the way they do things, that’s the power of consumers. It’s very different than what Marx thought a capitalist system looked like. So, capitalism as a system hasn’t been around that long, it’s very much correlated with, kind of, the onset of the industrial revolution. And I would even say, there’s no system today that we can observe that’s perfectly capitalistic, right? Meaning, all individuals privately hold the means of production.

Watch the full interview by clicking here.

 

 

Michael Novak:

 

Yeah, I wanted to have a book I could put in the hands of friends of mine behind the iron curtain in Italy and Latin America, to explain the American system because most of the world has of America, a Marxist view. Marxism is essentially from the beginning anti-capitalist, that’s its main message. And even it defines its own system, socialism, by opposition to private property, to personal income and to free decisions, free random decision of people.

 

And, if I ask my research helpers to look up definitions of capitalism in dictionaries, we get eight or nine of them, then they all say capitalism is a free market, private accumulation, and market decisions. And, socialism is the opposite of all of those. And I said to myself that can’t be true. There have been free markets since the biblical times, Jerusalem was nothing but a marketplace between three continents. There’s no industry there. There’s a lot of desert around, the agriculture was poor, but it’s a marketplace and marketplaces in history are static. They do progress, every market has somebody competing they have found a new way of fashioning a sword or something else, or make it of a new kind of metal or a new way. And it becomes the marvel of that market. But it’s very, very slow. And yes, private property is very important.

 

Even in Jerusalem, “thou shalt not steal” makes no sense if there’s no private property and so forth, but that isn’t capitalism. Capitalism doesn’t come until Abraham Lincoln describes it in the Patent and Copyright Act, about which there was a huge argument among Jefferson and Madison and Hamilton about whether to have such a thing. And, the point of the Patent and Copyright Act is it finally made it possible to create wealth with ideas and to tip the balance away from people who own land. Usually those were the great military victors who as a fruit of their victories, received these lands from the Crown and tip them in the direction of a nobody who has this great idea for the automobile, for the telephone, for the steam engine, for whatever. My idea was capitalism begins in the head. It’s not a market system primarily it’s an idea system. It’s an invention. And, I think it is an accident that it’s named capitalism from “kaput” the head, but that’s where the dynamism comes from the invention, the discovery, the enterprise to see a new and better way of doing things.

Watch the full interview by clicking here.

 

 

Mary Eberstadt:

 

Well, I’m not an economist or any other kind of expert when it comes to talking about markets, but to me there’s a pretty obvious confusion out there between the word capitalism and the word consumerism. To me, capitalism is just the absence of constraint. It’s what happens when you don’t put outside burdens on economic transactions. It’s what people will do if they’re left alone. Pretty simple definition. But then we have consumerism. Consumerism is like any other ism. It’s something people do that can get out of control if they’re not disciplined. And when Pope Francis and other moral authorities tell us to be mindful of how much we are buying and how well we live compared to how badly most other people do, I think those are moral calls that everybody should be listening to, starting with myself.

 

But I regard those as calls against undue consumerism. So consumerism is just like any other kind of gluttony. Maybe it’s even a subset of gluttony. You can eat too much. You can drink too much. You can indulge yourself too much in lots of ways and consumerism is one of those ways. But what I find interesting is that when people go talking about how bad capitalism is, first of all, they’re not distinguishing capitalism from consumerism, but also they never apply that sort of reasoning to another realm, which is the realm of what you might call sexual consumerism, where we’re told that unlimited choice is the best thing. So there’s this interesting, again, disconnect where the people who are total libertarians in the sexual moral sphere really don’t want other people being total libertarians in the economic moral sphere. And I find that really interesting.

Watch the full interview by clicking here.

 

 

Walter Williams:

 

Well, I think the free market or capitalism means that there’s a private ownership of the means of production and people engage in peaceable voluntary exchange with minimal intervention by the government.

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Jonathan Wight:

 

I would say, as with all questions, it’s probably more complicated than that. I’ll give you a quick example. Milton Friedman and his wife were famous for their TV show and “Free To Choose,” and they highlight Hong Kong as being the freest place on the planet, for being a capitalist. And that sounds authoritative except when you dig a little bit deeper and you learn that the government controls all of the land. In fact, housing is subsidized, and healthcare is subsidized. So it’s creating a context in which people can go out and compete.

 

So again, it’s really probably wrong to say, “It’s just about freedom.” I think there are other institutions that are needed and are important like institutions of justice. We have to be able to enter into a contract to have a business, and yet who’s going to enforce that contract? There are private mechanisms of enforcement. Are they efficient? Do they work? Well, we typically have government kinds of enforcement mechanisms. And how do we prevent others from coming in and stealing what we’ve created through the marketplace? Adam Smith was very worried about this problem, because if you’re a successful rich nation, you are going to be invaded by the ghouls or by others who want some of that wealth. And so, you’re going to need some sort of national defense. And a private system can’t deliver as much national sense as is needed because of the externality problems.

 

So when you think about what is it that capitalism is, it’s a whole bunch of institutions mixed together. It’s not just freedom, but it’s a lot of other things involving justice and government. And to some degree in our world today, it’s a social safety net because capitalism, it’s ups and downs produces booms and busts, and we as a society are not happy with the busts. We would like to have some sort of minimum standard of living for our elderly or our children.

Watch the full interview by clicking here.

 

 

David Brat:

 

Yeah, no, it’s the right question. I use the term capitalism just to get people’s blood pressure up. The best thing for a student is to be awake. So if you say capitalism, that lights up everybody, because no one really knows what the definition is. And I taught economics for 20 years. There’s no such thing as supply side economics. There’s no such thing as trickle down economics. There’s no textbook on any of that. And capitalism is still a buzzword, but capitalism to me stands for all of human history, was poor until 1750. And then we went toward free markets. And China and India just did 20 years ago. And they’ve had the greatest increase in human welfare of any experiment in human history by far, by going toward free markets. We’re feeding two and a half billion people that used to be starving within 20 years.

 

So that is capitalism. Now what is capitalism? The ideal in the textbook is we want a large number of competitors duking it up. But when people at home hear cap, “Basically, it’s greed. Well, of course it’s greed. I brought up Genesis 2 before. In the Soviet Union, Putin is worth hundreds of millions of dollars too. It’s not like greed is just in Western society. There’s greed all over the world. And there’s dictatorships in Sub-Saharan Africa. There’s greed everywhere, so that’s not unique to capitalism. What’s unique about capitalism is we take the incentives embedded in human nature that includes greed and we make it work for the social good. That competition between a large number of people duking it out has produced outcomes you couldn’t dream of. And it presumes a large number of competitors. Now, Adam Smith, the founder of capitalism or free market economic said whenever two or three business people get together, look out, because they’re going to collude.

 

And so it’s government’s job when everything gets big, like it’s doing right now, big automobiles, big healthcare, big banks, big everything, big insurance companies. That’s not capitalism. That’s crony capitalism. That’s when the biggies have taken charge by grabbing industry through the government. They all have lobbyists. The little guy does not. So that is not capitalism. So it’s pretty easy to get it through, but a lot of it’s ideology. A lot of people are angry at rich capitalists, et cetera. Some of them are corrupt, a lot of them are not. A lot of people made money through genius and ingenuity and they deserve whatever they produced.

Watch the full interview by clicking here.

 

 

Deirdre McCloskey:

 

Well, I prefer to call capitalism, innovism, because the word capitalism was a word invented by its enemies. And it embodies a mistake that economics has made ever since, I’m afraid, Adam Smith. Which is to suppose that capital accumulation is how the world becomes rich. And it’s not. The world becomes rich, and the capital accumulation projects becomes sensible, only when you have an idea. Only when you have an idea, as I said, that you could open a hairdressing salon in this neighborhood, and that would be a good idea. Or you can invent a filament for an electric light, and try a thousand times to figure it out. So, the big difference is that innovism is a system of a liberal society. A society of free people, who are free to make trades with each other, and free to get together in corporations or partnerships, and free to try out stuff as long as the stuff doesn’t hurt other people.

 

Free to do things up to the point of other people’s noses. Whereas, socialism is the system that the bosses, the elite, the people in Washington or Moscow, make our decisions about what we’re going to do, what we’re going to invest in. So industrial policy, a popular phrase on the left of the United States, is a form of socialism. But so too, is military invasions, which is popular in the right. They’re both social. They’re both ideas that, well, you know this individual stuff, maybe we’ll let that go on a little bit. But mainly we’re going to have the government deciding what we’re going to do, the King, or the Congress. And I think that having that socialism is a big mistake. I believe in helping the poor. I believe that a very small part of what is government expenditure, indeed, does help the poor. Most of it goes to the middle class. I believe as a Christian classical liberal, that the main responsibility we owe to the poor is to allow them to work. Again, this word permission, that’s what we need to give people, not orders.

Watch the full interview by clicking here.

To read more Praxis Circle content on the secularization thesis:

Why I Dislike the Word ‘Capitalism’

Woke Capitalism

Renaming Capitalism – Part I of III

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