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:  

What is capitalism? Is it forceful oppression?
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:
social justice
no racism
no war
people before profits
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.


  1. Seems like the author misses the point entirely. "Property rights" are not mentioned once throughout the entire article, and are the fork in the road at which socialism and capitalism diverge. In fact, the only time he mentions property at all is in the opening paragraph of the article, where he writes:

    "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."

    What he fails to understand, obviously, is that being free to own property is quite different from owning property, and that this is the distinction which he sarcastically dismisses when he says "ignore the man behind the curtain - nothing to see here."

    "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."

    At least he got the explanation of Capitalism correct here, and despite the fact that the author disagrees with it, given the seriousness of the claim, it is quite inappropriate to laugh it off with the closing line of "Ugh, what a downer!"

    Perhaps if the author had spent some time in a developing nation being forced to do slave labor making Nike shoes to ensure he and his family don't starve to death, he wouldn't take such issues so lightly.

    I hope that the author will take some time to look into the large body of literature surrounding Socialism and offer his responses to that, rather than writing a sarcastic rant about Google's search results. Perhaps start with 'What is Property?' by Proudhon, 'Capital' by Marx, or the Anarchist FAQ.

    Note: This comment copied to article linked from r/Libertarian.

    1. I contend that the single mention of "free to own property" is sufficient to get the point across. Yes, there is a difference between being free to own and owning, just like there is a difference between trading and robbing.

      The man behind the curtain that I am clearly referring to is the fact that human interactions is considerably more complex than a two classification system can deal with. There are people clearly between "classes", there is mobility between classes etc.

      I don't see pure capitalism as exploitation of anybody, so I fail to see how it is inappropriate for me to laugh off these foolish notions. I will keep my own council on when sarcasm is appropriate within my own blog.

      Being a slave would probably make me mad about slavery, not trade.

      I have read a considerable amount on the issue of socialism, not the ones mentioned here but enough. I am sufficiently familiar with the subject to state with confidence that is it all crap and based on flawed premises, so it really doesn't matter how vast the literature is on the subject. There is alot out there on homeopathy too, but I don't feel compelled to read it all.

  2. Why not just cite the wikipedia definition as an objective definition? Most socialists will agree with it:

    "Capitalism is the private ownership of means of production"

    For any form of "private ownership", including private ownership of means of production, requires respect for private property rights. Thus, the way to measure the relative degree to which a country is capitalistic is to measure the degree to which private property rights are respected.

    1. This is a fair point, but my objective here is not to redefine capitalism. It is to express what capitalism means to me in a manner similarly romantic to the way the socialists shown here feel about socialism. This post is not intended to be a seminal work in defending or describing capitalism or to turn people over to our side - people who already love capitalism liked the post and those who dislike it hated it. My intent here was to make a call to action. Basically, I think we have a great message, but I noticed one small hole in our "marketing" that could be filled in to reach the very people who are seeking it out. Thanks for your critique; it is appreciated.

  3. Everything you said makes great sense if only thinking about them under the constructs of the society that has already been made up by this unreasonable system in which money dictates everything. I think if you were able to step outside of the mental confines of a world in which the greedy prosper while many are in despair, you would be able to more clearly see all of the many issues that Capitalism creates, and that there has just got to be a better way.
    You should check out my blog too. Favorfreedom.com

    1. Thank you for your thoughts and for providing your blog. I appreciate that you advocate peace and equality and, as far as I can tell, a stateless society. But I am afraid we disagree on what Capitalism is and what its consequences are. I would ask you to take your own advice, because it is quite good, and step outside of your mental construct of what Capitalism is. Now keep in mind that I am referring to pure Capitalism, in which the state has no involvement or does not exist. You say that it is an unreasonable system in which money dictates everything, but would you rather everything be dictated by guns? Whether you choose to accept it or not, that is your choice. Money is what people exchange under peaceful conditions when they value each other's property. If you cannot buy something from your neighbor or he/she will not give it to you, your only recourse is to not have it or to take it by force. You say it is a system in which the greedy prosper while many are in despair, and I can see how you view it that way. But step out of your mental construct and observe that it is a system in which the productive prosper. See that the only way to become wealthy is to provide something others want. See that no one is stopped from helping those in despair, and that no one is forced to either.
      I see Capitalism as nothing more than the emergent property of freedom broadly applied. If you abolished the state, abolished money and destroyed every ounce of gold on the planet, Capitalism (that is peaceful exchange) would reemerge with some other commodity serving as money. Take peace as your premise, and follow it to its logical conclusion. You will find I am right.

  4. HI! Perhaps many people will find it interetsin for reading. Also, I think ther are a lot of people who will share your ideas too. One frind of mine, who works at the sociology research paper topics , recommended me to read your post.


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