What is Capitalism?

The Common Definition of Capitalism:

An economic system that is based on private ownership of the means of production and the creation of goods or services for profit.

My Definition of Capitalism:

Capitalism is the consistent application of peace to every aspect of life. The result of this ideology is the material success that we see around us - the extended order that arises spontaneously when people are free to own property. This "economy" is the emergent property of the action of free people.

How the Average Layman Defines Capitalism:  

I was quite dismayed to find that the first Google result for "What is capitalism?" was from the website of the World Socialist Movement.  I actually tried Bing as well and got the same result.  This would be like asking the Nazi Party, "Who are the Jews?" - they will likely be capable of pointing them out but poor at honestly understanding them or treating them fairly.  Interestingly, the same site ranks second behind Wikipedia in response to "What is Socialism", and there are no pro-capitalist antipodes on the first page of Google results.  Perhaps this is because there is no World Capitalist Movement, at least as far as I can find.  I doubt that this is the result of any major conspiracy, outside the search engine optimization team at the World Socialist Movement, and is more likely attributable to the fact that socialism just seems like such a warm, fuzzy ideal when placed up against the cold, calculated exploitation  that is commonly associated with capitalism. This sentiment is no doubt the inspiration for the picture included above - capitalism represents the exploitation of the working class by the capitalist class and results from the private ownership of the means of production.  Ugh, what a downer!



Now check out this short video of enthusiastic young Australians describing their Utopian (not pejorative, quoted) ideal of socialism.


How grand!  Socialism sounds awesome.  Here is a list of some of the wonderful descriptors of socialism from the video:

freedom
social justice
liberty
no racism
sustainability
justice
no war
solidarity
emancipation
equality
people before profits
harmony
democracy
fulfillment of human potential
balance between humanity and nature
relating to each other as people not commodities

So we've established what seems so groovy about socialism, now what specifically is wrong with Capitalism?  The article referenced above uses as its primary source the authoritative Communist Manifesto, so let's begin with it.  

The basis of Capitalism according to the article is class division where the working class (those dependent on wages or salary for survival) is exploited by the capitalist class (those who own the "means of production" such as "land, factories, technology, transport system etc").  The author is careful to state that it may be difficult to determine which class some "relatively wealthy"  individuals are in and that there are some other frequently mentioned class distinctions, such as "middle class", but the reader is assured that assuming only these two classes exist statically and exclusively is the key to unlocking the mysteries of Capitalism.  Ignore the man behind the curtain - nothing to see here.

The second pillar of Capitalism, saith the gospel, is the profit motive:

In capitalism, the motive for producing goods and services is to sell them for a profit, not to satisfy people's needs. The products of capitalist production have to find a buyer, of course, but this is only incidental to the main aim of making a profit, of ending up with more money than was originally invested. This is not a theory that we have thought up but a fact you can easily confirm for yourself by reading the financial press. Production is started not by what consumers are prepared to pay for to satisfy their needs but by what the capitalists calculate can be sold at a profit. Those goods may satisfy human needs but those needs will not be met if people do not have sufficient money.

To whom does one sell products if not to consumers?  What better to sell than what they want?  How does one arrive at a sales price if it is not related to what the consumer is willing to pay for to satisfy his or her needs?  It's not clear, but somehow greedy capitalists, driven by competition, arrive at prices and products that are profitable but not in line with the desires of the huddling masses.  The Labor Theory of Value, the theory underlying the price mechanism in this system of "thought", is complete rubbish and has been thoroughly debunked by Austrian Economists and satirized by your's truly.

Skipping on past a section on how China, Cuba and the U.S.S.R. didn't quite get it right because they were foolish enough to allow "commodity production, buying, selling and exchange", the article continues:

It is also possible (at least in theory) to have a free market economy that is not capitalist. Such a 'market economy' would involve farmers, artisans and shopkeepers each producing a particular product that they would exchange via the medium of money. There would be no profit-making and no class division—just independent producers exchanging goods for their mutual benefit. But it is doubtful whether such an economy has ever existed. ... Such a system would almost inevitability lead to capital accumulation and profit making—the definitive features of capitalism.

It is a tragedy that it is not harder to find wishful, Utopian, childlike thinking of the sort on display here.  There is one sentiment I can certainly agree with though; it is absolutely doubtful if any such economy ever existed with merely the casual notion of magical money, farmers, artisans and shopkeepers keeping everyone clothed and fed without the possibility of accidentally making a profit that might hold them through the next drought or cold spell.

You think I'm cherry picking the articles?  The second article is a brief, matter-of-fact post from About.com which is neutral on the subject.  Wikipedia comes third, followed by a longer neutral article from wisegeek.org.  The fifth article is a real gem from "The End of Capitalism" blog and starts off with:

Capitalism is the name of the power structure that currently dominates all human society, and which has done so for the last 500 years. It is a system based on ecological and social exploitation for the profit of the wealthy few. I sometimes refer to it as a “global system of abuse” because our relationship with capitalism is based on violence and submission, even though the system would like us to believe that it has our best interests at heart.

I could go on, but I expect my point is clear.  The first five articles an individual in the United States will encounter if struggling to understand the meaning of Capitalism consist of two absolutely banal pieces from the socialist left and three rather boring, dry, neutral descriptions of Capitalism.  Fortunately, if one is patient enough to scroll to the bottom of the page, he or she will find two items extolling the virtues of Capitalism.  The first is a fantastic piece from the Capitalism Institute.  The second is this video from the venerable Tom Woods:


It is an indelible mark of my character to shift between delusions of grandeur and total lack of self confidence.  I have at times struggled to keep this blog going and justified my apathy by the observation that so much has been written about Capitalism, libertarianism and the ideas of liberty in general that I could not possibly contribute to the body of knowledge.  What could I possibly add to the movement with just my spare time and without any formal expertise?  Since discovering, in my first, brief foray into keyword research, that we have failed so miserably in bringing our message of peace and prosperity to those who may be seeking it, I have been invigorated in my quest to do so.  Remember that Google search rankings are temporary.  I would love few things more than coming back in a year's time and finding that this post is in need of a drastic edit because the cogent work that has already been done to expound the virtues of Capitalism has been optimized to be found by those seeking it.