What is Capitalism?

January 30, 2012

For over a century, leftists have used the word “capitalism” as a type of curse word, the cause of all economic ills. “Oh, well that’s capitalism for you”, they’ll mutter when they read a story that involves anything economically negative. They see “capitalism” as a system where the rich wage war on the poor, or where corporations use the government to trample the rights of minorities and the defenseless.

Of course, they’re dead wrong. And sadly, because they misunderstand what capitalism is, their “solution” to the problem is essentially more of exactly what causes the problems in the first place — theft, the violation of rights, and people waging economic war on each other.

In the end, the only economic system that prevents unjust wars, the nanny state, and promotes liberty at all is the system of capitalism. It’s not just a good system — it’s the only moral system.

When we talk about “capitalism”, we mean something very different than what the socialists try to imply:

Capitalism is an economic and political system that is based on protecting the natural rights of life, liberty, and property. By extension, this means enforcing contracts and banning all fraud.

In such a system, the use of capital almost instantly arises. People will trade out of self-interest, and “money” makes trade infinitely easier. Because of the prevalence of capital, the label “capitalism” was born.

Capitalism does not include any violation of the rights of the rich or the poor. The bailouts weren’t capitalism. Obamacare isn’t capitalism. Agribusiness being paid to not grow crops isn’t capitalism. Oil subsidies aren’t capitalism. Anti-small-business regulations aren’t capitalism.

Those are part of a very different economic system — corporatism. That system — the system of corporatism — is where the government is used to give “special privileges” to corporations and the rich. This is absolutely not capitalism. It’s corruption, a violation of the rights of the people, and should be instantly ceased.

Where Socialists and Capitalists Should Agree:

Capitalism doesn’t allow for theft — whether it’s the rich robbing the poor or the poor robbing the rich. It doesn’t allow for corporations to be bailed out with tax money. It doesn’t allow for so-called “welfare” programs funded out of the pockets of the middle class and rich.

We capitalists hate corporatism just as much as the socialists. We hate theft by anybody — rich or poor. We hate corruption by anybody — rich or poor. We hate it when corporations use the government to manipulate the law to punish small business. We hate it when corporations are at the receiving end of laws that violate liberty, like the insurance companies which benefit from forced insurance under Obamacare.

Because of this, there are plenty of topics where capitalists and socialists and moderates should be on the same page: ending corporate subsidies, ending all bailouts, ending the Federal Reserve, ending fractional-reserve banking, ending legally enforced monopolies, as well as dozens of other topics.

Capitalism: The Unknown Ideal.

Perfect capitalism will obviously never be perfectly achieved. There will always be something wrong — we’re talking about politics after all. But that doesn’t mean that the blame lies with capitalism — that means the blame lies with not having capitalism.

It’s vital that people understand what capitalism is, and understand that the problem with Wall Street isn’t economic liberty — it’s not that theft is banned. It’s that theft is going on — only for the rich and the businesses.

The solution to our economic ills isn’t to change who’s stealing from who. It’s to stop the theft for absolutely everybody. There’s only one way out of the economic insanity we’re in: to move toward the economic protection of life, liberty, and property — for absolutely everyone, rich and poor alike.

As Ayn Rand explained:

“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 mayinitiate 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.”

That’s it. That’s the definition of capitalism. If you agree with us that corporations shouldn’t be allowed to steal anymore than anyone else is allowed to steal, then make sure to sign up for our newsletter and click the “share” button below.

Copyright Capitalism Institute, 2011-present.