Capitalism is an inherently political system. It is superfluous to speak of “political capitalism” when there is only one kind of capitalism to begin with. But there is often a great deal of confusion on this point. Most have been raised and intellectually bred to believe that capitalism is solely an economic system – that it can exist regardless of any political context. This is fundamentally false.
Examples of this line of thought are too numerous to list in entirety. Still, there are some examples worthy of note. One example includes the assertion that America is (or used to be) a capitalist country, or that Europe or some of East Asia is capitalist. Others contend that capitalism can exist under a dictatorship like Saudi Arabia or Singapore. Others still argue that the People’s Republic of China is capitalist, or even that Nazi Germany had a capitalist economy [!]. Most simply rely on the fallacy that any economy in which money is exchanged for goods and services is, by definition, capitalist.
Some of these conclusions require deeper levels of evasion than others, and at least more than one is likely a thinly veiled smear against capitalism rather than an actual criticism. Nonetheless, each of these criticisms exists, and they are amalgamated here from a number of sources as far reaching as professors at the University of Georgia and the far-left blogosphere.
Ultimately, each of these criticisms shares one error in common: a profound misunderstanding of the nature of capitalism. To many of the arguers, capitalism is a purely economic system, the definition of which they are only able to provide hazily without much precision. More rational evaluations of the nature of capitalism usually include statements about how capitalism involves free trade, free markets, or some manner of property rights. Those less rationally inclined will likely either state that it is a system involving some sort of bourgeois oppression or that it is an “umbrella term” for basically any post-feudal politico-economic system in the West except socialism.
The group which treats capitalism as a purely economic concept will be addressed later. In the meantime, examine the nature of the second group. Within their ideology not only exists a misunderstanding of capitalism, but an utter hatred for it. Their arguments are built upon entirely different premises than those of the first group, and they make their assertions for different reasons.
As mentioned, the members in the second group accept that capitalism is a politico-economic system rather than a purely economic concept. Taking after their political forefather Marx, they accept that capitalist ideals were a result of the Enlightenment and brought an end to feudalism. Moreover, they agree that capitalism is the result of treating man as “an independent and egoistic individual,”1 politically isolating man from men. But this is where any semblance of rationality ends. From then on, their view of capitalism is nothing but contradictions on an Orwellian scale.
Marxist political tradition holds that man leads a dual life in two separate societies: political and civil. Under feudalism, “[t]he old civil society had a directly political character; that is, the elements of civil life such as property, the family, and types of occupation had been raised, in the form of lordship, caste and guilds, to elements of political life.”2 In simpler terms, everyday life and political life were one in the same – property, family, and business were not a sphere set apart from politics. This much Marx admires.
But these elements of civil society and man’s relation to them “determined… the relation of the individual to the state as a whole.”3 The result of this was the creation of “distinct societies within society,”4 meaning that there was no “general civil society” to which everyone belonged. Man’s relation to his social group – his family, caste, occupation, etc. – outlined his “separation and exclusion from the other elements of society.”5 Marx argues that “the vital functions and conditions of civil society remained political. They excluded the individual from the body of the state, and transformed the particular relation which existed between his corporation and the state into a general relation between the individual and social life, just as they transformed his specific activity and situation into a general activity and situation.”6 More simply, the individual’s relation to society as a whole was determined by his group’s relation to the state. Politics, however, remained “separated from the people” as a private affair of the monarch and the nobility.7
The American and French Revolutions of the late 18th Century, argues Marx, “made state affairs the affairs of the people, and the political state a matter of general concern, i.e. a real state, [and] necessarily shattered everything – estates, corporations, guilds, privileges – which expressed the separation of the people from community life.”8 These revolutions “dissolved civil society into its basic elements, on the one hand individuals, and on the other hand the material and cultural elements which formed the life experience and the civil situation of these individuals.”9 As Marx believes that man was nothing more than the product of social relations and the material/cultural elements of his time, this produced a problem: the egoistic man.
The state and political life, i.e. the general concerns of the people, were separated by constitutional law from the affairs of individual men. “A specific activity and situation in life no longer had any general relation between the individual and the state as a whole.”10 Rather than man and society being treated as the natural results of material and cultural elements, man was treated as “the foundation and presupposition of the political state. He is recognized as such in the rights of man.”11 Marx critiques such rights by saying the following:
“Liberty is, therefore, the right to do everything which does not harm others… But liberty as a right of man is not founded upon the relations between man and man, but rather upon the separation of man from man. It is the right of such separation. The right of the circumscribed individual, withdrawn into himself… The right of property is, therefore, the right to enjoy one’s fortune and to dispose of it as one will; without regard for other men and independently of society. It is the right of self-interest… It leads every man to see in other men, not the realization, but rather the limitation of his own liberty. It declares above all the right ‘to enjoy and to dispose as one will, one’s goods and revenues, the fruits of one’s work and industry… The term ‘equality’ has here no political significance. It is only the equal right to liberty as defined above; namely that every man is equally regarded as a self-sufficient monad… None of the supposed rights of man, therefore, go beyond the egoistic man, man as he is, as a member of civil society; that is, an individual separated from the community, withdrawn into himself, wholly preoccupied with his private interest and acting in accordance with his private caprice… The only bond between men is natural necessity, need and private interest, the preservation of their property and their egoistic persons.”12
Though oppression by the state was ended by the revolutions of the late 18th Century, the “egoistic spirit of civil society” was unleashed.13 “Thus man was not liberated from religion; he received religious liberty. He was not liberated from property; he received the liberty to own property. He was no liberated from the egoism of business; he received the liberty to engage in business.”14
The solution, as Marx cites from Rousseau, is “transforming each individual who, in isolation, is a complete but solitary whole, into a part of something greater than himself, from which in a sense, he derives his life and his being… [The] task, in short, is to take from a man his own powers, and to give him in exchange alien powers which he can only employ with the help of other men.”15 This means placing civil society, the culmination of all human relationships, above man himself and thus using political society, the state, to direct those relationships.
“Human emancipation will only be complete when the real, individual man has absorbed into himself the abstract citizen; when as an individual man, in his everyday life, in his work, and in his relationships, he has become a species-being; and when he has recognized his own powers (forces propres) as social powers so that he no longer separates this social power from himself as political power.”16
But until such a time, the state of civil society is, according to Marx, “bellum omnium contra omnes.”17
Though it is clear to rational observers that nations like Nazi Germany and the People’s Republic of China met Marx and Rousseau’s criteria of “human emancipation,” meaning the subjection of the individual to the state for the fabled “good of society,” Marxists will (and do) deny that either nation (or any nation) is an accurate representation of Marx’s theories. While ignoring that the “property rights” under Nazi Germany were merely nominal and the state could, in fact, take anything it wanted at any moment for any purpose, the Marxists scream that this “recognition” of property rights proves that “capitalism” existed in Nazi Germany. Despite that businessmen in China, foreign and domestic, are only able to run their businesses with permission from the government rather than by “right,” the Marxists lament the “stranglehold” that “capitalists” have on the Chinese working class.
It is by accepting such a level of doublespeak and ignoring the contradictions therein that one can conclude something as absurd as “capitalism existed under Nazi Germany,” or under the People’s Republic of China, or under any other government that does not meet the Marxist ideal of “true” Communism. In fact, there is and will never be any government which the Marxists will accept as “true” Communism. The end of altruism, of which Communism is the consistent application, is death – this does not change simply because the Communists themselves do not see it or refuse to see it. Arguments that Marxism “works well in theory” rather than in practice are equally invalid – a theory derived without reference to the facts of reality can claim no rational basis.
That aside, there are points of value from Marx’s analysis of the modern state when separated from his inherently negative moral judgments toward them, not to mention the metaphysics on which those judgments rest and the epistemology by which he claims to know them. He is, at the very least, accurate in identifying his enemy and the basis for capitalist society: the egoistic man. He recognizes the essence of liberty, that is, to pursue one’s self-interests in any manner that does not harm the right of others to do the same. Even more surprisingly, he recognizes both the positive and negative nature of individual rights (e.g. the right to run a business separated from violations by other men).
But as stated, it is Marx’s analysis of these facts (among other things) that demonstrates his irrationality. Marx’s vociferous support for altruism is evident throughout his writings, even in his early essays like “On the Jewish Question” from which all the quoted material is drawn above. As an altruist, the notion of an individual pursuing his self-interests is repugnant to Marx. As it was mankind that spawned him, man has a duty to serve mankind – or so goes Marx’s argumentative form. A refutation of this notion can be found in my essay the “Robinson Crusoe Fallacy.”
This is not the sole basis for Marx’s altruist beliefs, however. In fact, it is his subjectivist philosophy. In Marx’s subjectivist mind, right and wrong (both morally and with regards to matters of fact) are shaped on the cultural, societal, and material conditions of man’s existence. These conditions change generation after generation. The intellectual end of these changes, therefore, is progressing to the point where man realizes he is but a product of those things, accepts it, and then “does what is best” by subjugating his own life in the service of those things, which ultimately means in service to “society” which Marx saw as their producer. That Marx ignores that human progress is only possible through individuals seeking their own interest is not of primary importance here. Rather, what is important is recognizing that, so long as the “material and cultural conditions” of man’s life calls for it, any action is justified. This is how the “peace-loving” Communists were able to kill more innocent human beings than any other political movement ever seen on the face of this earth – it was “justified by the times.”
Moving on from Marx, his philosophy, and his analysis of capitalism through the lens of that philosophy, the notion that capitalism is solely an economic system must be defeated. This notion is one of the most pervasive errors among conservative, libertarian, and Tea Party circles. This error is also prevalent among Leftists, though often as a means of irrationally trying to make capitalism and welfare statism appear compatible so as to avoid censure. Whatever the reason, by arguing that capitalism is only an economic system, one extends undue assistance to its opponents and credence to the political philosophy of a mixed economy.
For the sake of argument, assume that the proponents of this view give a complete definition of capitalism, not one of the aforementioned “half-definitions” about free trade, etc. Princeton University’s WordNet lexicon defines capitalism as “an economic system based on private ownership of capital;” this is by far the most Marxist of all the definitions listed here. The online encyclopedia Wikipedia defines capitalism as “an economic system in which the means of production and distribution are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the market rather than by central planning by the government;” it should be noted that this is Google’s summation of what capitalism means based on the Wikipedia entry. Google’s own definition in its dictionary application states that capitalism is “economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.”
Though each of these definitions is worded differently, each is 100% correct in its evaluation of a certain aspect of capitalism. Make no mistake, I find each of these definitions inadequate for their purpose – that is, to properly define the concept of “capitalism” – but none of them inherently contradicts the nature of capitalism.
But just because they do not contradict the nature of capitalism does not mean they are not dangerous, especially the first. Each of these definitions fails to identify the fundamental essence of capitalism – that one trait which separates capitalism from all other concepts. As such, not one of the given definitions inherently leads one to an accurate understanding of capitalism as it is. They are imprecise and can lead to vast epistemological errors, ones of the “Nazi Germany had capitalism” variety.
To prevent these errors, I will first dissect each of the three given definitions for capitalism, identify their shortcomings, revisit the “half-definitions” and analyze their faults, and lastly provide a complete definition of capitalism such there can be no ambiguity on capitalism’s political nature.
Let us begin with the first. There is no doubt that the “private ownership of capital” is essential to a capitalist system, but it is not capitalism’s defining characteristic. Before moving on, I want to elaborate on what, exactly, “ownership” entails:
“Ownership of a piece of property means that it belongs to one specific individual – or a group of individuals who agree on the terms of ownership volitionally – and that no other individual or group has the ability to take control of someone else’s property without their consent. Usage of a piece of property means that the owner’s will and the individual rights of others are the sole determinant factors on how that property is to be enjoyed by the owner – if individuals wish to spend hundreds of dollars on the latest Apple product only to smash it outside the store for fifteen seconds of fame on YouTube, then they have that right. Lastly, disposal of a piece of property means that the owner is at liberty to use a particular piece of property until the end of its existence (as individuals do with the gasoline in their vehicles) or to get rid of that property, and consequently revoke ownership of it, in any way that the owner sees fit to employ (e.g. charity, transfer of estates, abandonment, destruction).”
If a man’s property can be taken from him at any moment without remuneration, then can it truly be his? If he is unable to use his property and enjoy the benefits of it, does he really “own” it? If he cannot discard property in his possession when he desires to do so, is he the one in charge of it? Only the laws which govern reality, including man’s rights, outline what cannot be done with man’s property, but this does not injure his ownership. Such laws simply are; they are not imposed.
Everything in reality acts in accordance with its nature. If one drops a ball of glass and a ball of rubber from the top of the building onto concrete below, each will respond according to its nature: the glass ball will shatter and the rubber ball will bounce. This can be done an infinite number of times, and each time the results will be the same. Unless an extraneous force interferes with the balls, the act of dropping them, their falling, or their impact, the results will be the same each time – the glass ball will not behave in the same manner as the rubber ball, and vice versa. In essence, they will act as they are – more simply, A is A.
Would one argue that these laws were “imposed” on the two balls? Could one say that these laws are “unfair” to the glass ball since it is unable to bounce unharmed after being dropped onto concrete? No – it is simply a fact.
Man’s rights are of the same status. Man’s nature delimits those actions which are permissible and impermissible for him to take as based upon the requirements for maintaining his own existence. In a social setting (i.e. a setting involving two or more men), these requirements are called “rights,” meaning those things which one man must be allowed to do without inference by other men. Nor can one man violate the same rights of other men lest he deny and injure the conditions necessary for his own existence. These requirements are not thrust upon man. They are inherent within his nature.
This much is included in the first definition, if understood consistently: the concept of ownership. Those recognized as the “owners of capital” own it absolutely. But who are these private owners, and how much capital is privately owned? These deeply important questions go unanswered.
In reality, all men are owners of capital. The capital man possesses in himself is unequivocally his own – his body, his labor, his skills, and his mind belong to no man but himself, nor can they. By extension, all that he produces through the use of those things also belongs to him. After all, if he owns them, then he owns the products created through them.
But this is not what the definition says. The first definition merely states that capitalism is an “economic system based on private ownership of capital.” Because the definition did not say all capital nor did it define how that capital came to be owned, this definition does not preclude the existence of publicly owned capital or of capital obtained through illicit means. If this is the case, then what truly differentiates capitalism from other systems of government? Capital was privately owned under feudalism by the nobility who obtained it forcibly form the serfs who were certainly not considered the owners of their own capital, that is, their own lives and labor. Capital was privately owned by southern plantation owners who obtained it forcibly from their slaves who were denied ownership of their capital. In the modern day, we are granted only a majority share in the ownership of our own property, meaning that we are only truly considered the owners of that which is not taxed from us – do the math and count the hours you spend each year earning money for the government for taxes rather than for yourself.
The first definition is anti-conceptual. This definition for “capitalism” is equivalent to defining a “dog” as a “creature with four legs” – such a definition is nebulous enough to falsely include horses, cats, alligators, giraffes, and any other quadruped (which is any creature with four legs) under the single word “dog.” In the same manner, this definition of capitalism serves as a sufficiently vague umbrella term which can cover practically any economic system that has ever existed.
And, certainly, there are neo-Marxists who paint any private ownership as proof the existence of capitalism despite that capitalism has not been identified by the first definition. All the first definition does is declare that capitalism can exist so long as some people privately own some capital. This does not distinguish capitalism from practically any system, economic or otherwise, except socialism’s many manifestations, and it should be disregarded.
The second definition is more specific: “an economic system in which the means of production and distribution are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the market rather than by central planning by the government.” This definition is actually so specific that one can reach an understanding of capitalism through a series of logical steps. Such steps should not be necessary and, again, demonstrate the weakness of this definition, but it comes closer to identifying capitalism’s nature than the first.
For one thing, this definition privatizes all property. By using the definitive article “the,” this definition means that anything relating to the “means of production and distribution” are privately owned, not just a portion of them. This is reinforced by the second half of the definition which states that “decisions regarding supply, demand, price, distribution, and investments,” i.e. the usage and disposal of property, are made by “private actors.” As such, the government is relegated to the role of being an impartial arbiter to solving disputes and instituting justice when someone’s “ownership” is injured by another. Such is required by the concept of “ownership”: remediation when one’s ownership has been injured. If one accepts the natural ownership every man has over himself, then capitalism is the result. But this definition remains improper because it begins with the derivative traits – private ownership – which one must then use to work upward to the fundamental trait: a recognition of every man’s life as his own.
The third definition has no additional errors apart from the other two. Though trade and industry may be privately controlled, this does not exclude the government from directing things considered “external” to trade and industry – i.e., the government is permitted to violate the rights of ownership to some extent. Moreover, it epistemologically inverts the derivative and fundamental traits of capitalism.
The “half-definitions” are, surprisingly, more promising than the “official” definitions. The reason for this is that two of these “half-definitions” are actually synonyms for capitalism, while the other properly identifies capitalism’s distinguishing characteristic.
The first is that capitalism is a system of free trade. This is absolutely true. If there is to be truly free trade, then all trades must be made without coercion or force, i.e. freely. In other words, the rights of all parties involved must be respected when making a trade. For this to take place, there must be a system of justice to solve disputes when one party claims injury on the part of another. In order for justice to be legitimate, it must be based on objective law which properly recognizes the aforementioned rights. Simply by examining the word “free trade” we have moved from the economic aspect of capitalism – economic transactions between individuals – to the political aspect of capitalism – a system of objective laws recognizing man’s rights.
The same can be done for the term “free markets.” As markets are merely a place where trades take place, both literally and in the abstract economic sense, a “free market” means a place where “free trade” takes place. The logical progression from there is the same as above.
The last example properly identifies the distinguishing characteristic of capitalism: it is a system of property rights. “A ‘right’ is a moral principle defining and sanctioning a man’s freedom of action in a social context. There is only one fundamental right (all the others are its consequences or corollaries): a man’s right to his own life.”18 All other rights are derivative from this first, fundamental right.
Because man’s life is his ultimate value – meaning it is the only metaphysical end in itself, the value without which all other values would cease to exist – man must be able to pursue it. His rights are the conditions universally necessary to all men to pursue their own lives in a social context.
All man’s rights are property rights, derived from the property right man has to his own life. All man’s rights are positive rights, that is, they are rights for him to act – to maintain, use, or dispose of his property (including his own body and life) as it suits him. All man’s rights are also negative rights, that is, they forbid other men to use force to interfere with the positive aspect of his rights. Moreover, all man’s rights are equally applicable to all other men; all men must survive by the same means, meaning the employment of their rational faculty, and so to deny the conditions necessary for one man to live is to deny the conditions necessary for one’s own existence.
If capitalism is a system which recognizes property rights consistently, then there must be a series of protections to prevent violations of these rights. This means instituting a system of government which erects objective laws banning every manner of initiated force against man’s rights. Above the government should be an erected an explicit set of objective constitutional laws which act in accordance with natural, moral law – that is, man’s rights – to prevent initiations of force on the part of the government.
The definition which properly identifies the essence of capitalism is written by Ayn Rand as follows: “Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”19
The reason Rand describes capitalism as a “social system” rather than a political or economic system is because the word “social” applies to all human interactions. True though it is that capitalism is a system of “free trade” and “free markets” in an economic sense, not all trades are economic – nor are all markets for that matter. Justice Oliver Wendell Holmes once mentioned the “free trade in ideas” in one of his Supreme Court opinions on First Amendment Rights, and Justice William J. Brennan, Jr. described the “marketplace of ideas” in one of his own. The word “social” incorporates all forms of human interactions under a single word rather than requiring logical extensions to reach those conclusions.
But the political implications of capitalism do not change based on the nature of a trade. The nature of capitalism – that is, a system based on the recognition of individual rights in which all property is privately owned – calls for a very specific kind of government and a very specific set of governmental policies.
Capitalism requires the complete recognition of individual rights – not just nominally, but in fact. Since man’s existence on earth, he has not successfully achieved a government that has fully recognized his rights. There certainly have been examples of governments that have respected his rights more than others, but that does not mean they respected his rights completely. Others may claim to respect his rights while actually holding over his head the authority to abnegate them at any moment. These too are not capitalist governments (see “Republican Necessity”). Anarchists, on the other hand, argue that man’s rights can be fully “recognized” without an objective set of laws to defend his rights. Thus, his rights are rendered impotent and that “bastardized anti-concept commonly referred to as ‘anarcho-capitalism’” must also be excluded from a legitimate manifestation of capitalism.
There is only one kind of capitalist government: a constitutional republic that holds a monopoly on retaliatory force and wields it to institute justice to remedy injuries of individual rights. If someone thinks it could be otherwise, he should ask himself what is the character of an honest man who only lies some of the time? Now change the question: what is the status of a free market system that only violates man’s rights some of the time? Just as an honest man who lies is not actually an honest man, so too is a capitalist government which violates rights not a capitalist government.
In reality, there is no economic system that can exist independent of a corresponding political system. This is not to say that every economy has precisely one accompanying form of government, but it does mean that there is no such thing as a “purely economic” system without any regard to the governmental system which exists alongside it. A capitalist economy cannot exist under a socialist government, a consistently Communist government will not allow for a mixed economic system, and a capitalist government cannot produce a socialist economy. Capitalism is, however, unique in this regard, as there is precisely only one political system that can result in a capitalist economic system, and a capitalist economic system can only exist under a single form of government.
We currently live in a mixed economic system, that is, one which partially recognizes man’s individual rights (as under capitalism) and one which partially violates man’s rights (as under one of the various socialist forms of government). This is the problem that must be confronted – not the size of our government, but its nature.
Many conservatives and libertarians think that the solution to today’s political situation is “small government.” They fail to realize that “smaller government” is not equivalent to a “moral government,” meaning one which respects individual rights. The size of our government is not the fundamental problem we face today; what our government does is far more concerning.
But in order to reign in the government such that it is limited to its proper functions, man must first be able to identify what those proper functions are and how they are to be carried out. Capitalism does both. In order to properly understand capitalism, man must realize its application to all sectors of human relationships, not just in the economic sphere. And in order to achieve capitalism, man must be able to justify it:
“By the very fact that a man lives, he can determine that his life is his own ultimate value; that to pursue his own life, he must be free to pursue it; that the ultimate value of every other man is his own life, and that they too must be free to pursue that value; that to interfere with another man’s pursuit of his life is to contradict and deny the conditions necessary to pursue his own; that he can discover all of this through the use of his faculty of reason; that he can use his reason to objectively comprehend the reality in which he lives; that his comprehension of reality allows him to choose those actions that pursue his ultimate value; that the political extension of all these principles is capitalism, and nothing less.”
1. Marx, Karl. The Marx-Engels Reader. Robert C. Tucker, Ed. 2nd ed. New York: W.W. Norton & Company, 1978. 46.
2. Ibid., 44.
3. Ibid., 44.
4. Ibid., 44.
5. Ibid., 44.
6. Ibid., 44-45.
7. Ibid., 45.
8. Ibid., 45.
9. Ibid., 45.
10. Ibid., 45.
11. Ibid., 45.
12. Ibid., 42-43.
13. Ibid., 45.
14. Ibid., 45.
15. Ibid., 46.
16. Ibid., 46.
17. Ibid., 35.
18. Rand, Ayn. The Virtue of Selfishness. “Man’s Rights.” 93.
19. Rand, Ayn. Capitalism: The Unknown Ideal. “What is Capitalism?” 19.