Capitalism Defined

The very reason why statism or collectivism (translation: any form of collectivist socio-economic system such as socialism, fascism, communism, corporatism, Nazism, nationalism, etc.) is gaining ground the world over and why capitalism is being despised and discredited in the academe, media institutions, churches, intellectual hubs, entertainment centers, among others is  NOT because of the passion, determination and intellectual readiness of the enemies of the free market system, but mainly because of the confusion of its defenders, including its alleged ‘advocates’. Since the discovery of the concept of capitalism over 200 years ago, there have been many ‘capitalist intellectuals’  who defended and advocated this individualistic system on utilitarian grounds. These utilitarian defenders of capitalism claimed that the system is superior to socialism or to any variants of statist socio-political system, including mixed economy, because it is productive and it enables societies to achieve “the greatest good for the greatest number”. One of the most influential statists in the past century who critiqued capitalism by purging its alleged “utilitarian” foundation was John Rawls, a Harvard academic who introduced the anti-concept of “social justice”, which is the intellectual basis of a new political theory called “comprehensive welfare state”.

Adam Smith, who defended capitalism on utilitarian grounds, claimed that so long as markets were free and unregulated, the actions of individuals, fueled by rational self-interest or “enlightened greed”, would work together for the greater good of society. In his critique of Smith’s works, Karl Marx, who actually coined the term “capitalism”, recognized and understood the productiveness of the free market system, saying it “has accomplished wonders far surpassing the Egyptian pyramids, Roman aqueducts, the Gothic cathedrals… [D]uring its rule of scarcely one hundred years, it has created more massive and more colossal productive forces than have all preceding generations together.” However, he rejected capitalism and instead advocated his own brand of collectivist system because it is “immoral.” Yes, Marx sought to destroy capitalism on moral grounds. Relying on the works of Hegel, Immanuel Kant, and other intellectual god-fathers of sacrifice and collectivism, Marx declared that property is theft and capitalism would ultimately result in the “alienation” of the working class.

Take, for example, Obama’s latest and most controversial speech in which he outed himself as an unapologetic Marxist. He claimed that a limited government that preserves free markets, which “speaks to our rugged individualism” [as Americans] “doesn’t work” and “has never worked”. He then urged Americans to look to a more activist government that taxes more, spends more and regulates more if they want to preserve or serve the middle class. Obama was not merely channeling Franklin D. Roosevelt, but also Karl Marx (the founder of Marxist communism), Immanuel Kant (the intellectual advocate of duty and self-sacrifice), and John Rawls (the proponent of social justice and the intellectual founder of comprehensive welfare state).

Thankfully in the past century, a man- or a woman– came to defend capitalism or the free market system on moral grounds. Ayn Rand, who was the strongest advocate of reason and individualism, claimed this socio-economic system is moral NOT because it represents the best way to achieve “the common good”, but because “it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is: justice.”

In her essay titled What is Capitalism, Ayn Rand wrote:

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.

Now, I am glad to say that Ayn Rand’s highly valuable ideas and philosophy are now being discussed in the media, academes and other social and political institutions. Forbes Magazine recently published an article written by Richard M. Salsman, president and chief market strategist of InterMarket Forecasting, Inc.

The following are excerpts from Mr. Salsman’s article titled Capitalism Isn’t Corporatism or Cronyism:

Capitalism is the greatest socio-economic system in human history, because it’s so moral and so productive – the two features so essential to human survival and flourishing. It’s moral because it enshrines and fosters rationality and self-interest – “enlightened greed,” if you will – the two key virtues we all must consciously adopt and practice if we’re to pursue and attain life and love, health and wealth, adventure and inspiration. It produces not only material-economic abundance but the aesthetic values seen in the arts and entertainment.

But what is capitalism, exactly? How do we know it when we see it or have it – or when we haven’t, or don’t?

These aren’t easily-answered questions, because for more than a century capitalism has had more critics than champions, and because the critics have given biased or bigoted portrayals of what they feel is a demonic system. These critics despise capitalism’s root ethic (self-interest) as “evil” and then blithely presume the system harms human beings or sabotages societal peace and prosperity. Anti-capitalist prejudice has been perpetuated for decades by parents, teachers and preachers alike, who claim that to benefit yourself (egoism) is bad, but to benefit and serve others, especially at our own expense or sacrifice (altruism, or “other-ism”) is good – that it’s better to give than receive, to be our “brother’s keeper,” to serve or suffer rather than profit or enjoy. In truth, capitalism, the free society, means people trade value-for-value to mutually beneficial gain.

Historically, capitalism is only about 250 years old – a mere flick of the clock hand relative to mankind’s total time on earth so far (roughly 200,000 years, and only 15,000 years in the Americas). Capitalism arose during the Renaissance (1500s-1600s) and Enlightenment (1700s), which entailed a re-birth of reason, self-confidence, culture, and commerce – in short, the pursuit of one’s own personal happiness. This was in sharp contrast to what had preceded it for a millennium: zeal and faith, superstition, ignorance, oppression, torture, and economic poverty, imposed by church and state alike, amid religious Medievalism and the Dark Age. Capitalism has been co-extant with the Scientific Revolution, the Industrial Revolution and the Political Revolution, the last of which was realized in the U.S. Constitution (1787), which soon also abolished slavery.

The question of “what is capitalism,” exactly – and likewise, regarding its main rivals, what is “statism,” “socialism,” “social democracy,” “communism,” “fascism,” or “corporatism” – shouldn’t be a matter of mere semantics. These are real political systems affecting real people, whether for good or ill. Political systems are free, un-free and oppressive, or mixed. We cannot legitimately make up terms or equivocate (i.e., switch meanings from one argument to the next, to evade or twist the logic) about these political systems.

Capitalism has been blamed for the Great Recession of 2007-2009 and for the financial crisis and bailouts of 2008, but it’s not “capitalism” but the mixed economy and corporatism-cronyism that did it. We’ve had corporatism in the U.S. for roughly the past century, and it’s getting worse over time; it’s also the system we’ve seen in Europe since at least the time of Germany’s Otto von Bismarck, who launched the womb-to-tomb welfare state in the 1870s. In the interim, of course, Europe also imposed communism, socialism and fascism. The result, we know, was mass murder, world war, and the continent-wide destruction of wealth.

Capitalism’s greatest intellectual champion, Ayn Rand (1905-1982), once defined it as “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.” This recognition of genuine rights (not “rights” to force others to get us what we wish) is all-crucial and it has a distinctive moral foundation, according to Rand:

The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.” “The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve “the common good.” It is true that capitalism does—if that catch-phrase has any meaning—but this is merely a secondary consequence. The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is: justice.

Elaborating, Rand explained in Capitalism: The Unknown Ideal (1966) that historically, politically, economically, and morally, capitalism was the superior socio-economic system, yet also how, for decades, its achievements and virtues had been hidden and buried deliberately in an avalanche of prejudice, distortion, and falsehood. Rand argued that capitalism is a moral ideal yet also was made real, and to the greatest extent, in America in the 19th century, especially during the Gilded Age (1865-1890). Thus she called the U.S. “the greatest, the noblest and, in its original founding principles, the only moral country in the history of the world.”

Most people today can’t even fathom (let alone endorse or advocate) a government that’s strictly limited to protecting each person’s right to life, liberty, property, and the pursuit of happiness. They assume a government must be controlled by some pressure group or another, in a “zero-sum game” of unavoidable exploitation – that “power” is ubiquitous and ineradicable, while the only question is who wields it and whose head gets bashed in. They say “timocracy” is rule by the military for the sole benefit of the military, that “plutocracy” is rule by the rich for the sole sake  of the rich, that “socialism” is rule by labor for the sake only of labor, that “capitalism” is rule by capitalists (or Wall Street bankers) for the singular benefit of capitalists, and that “democracy” is rule by people (i.e., the majority) at the expense of the minority (true!).

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