Cancel Capitalism!

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It has long been a truism that he who poses the question controls the answer. Texas Senator Ted Cruz’s mastery of the technique was on display last November 17 when he grilled Department of Homeland Security Secretary Alejandro Mayorkas. Secretary Mayorkas was well aware of the forensic technique and did his best to deflect it, only to be left looking the fool.

Sen. Cruz: How many children have been in the Biden cages?
Sec. Mayorkas: Respectfully, I’m not familiar with the term cages and to what you’re referring.

Something similar occurred when Karl Marx, in his 1867 opus Das Kapital — along with selected subsequent translations from the original Germanset the tone of the discourse by popularizing the word capitalism. In the original, Marx adopted a sneering tone toward the word. He incorrectly conflated free markets with the amassing of capital, a one-to-one correlation that not only continues today but has actually increased. The accumulation of capital is not an intrinsic characteristic of free markets, but rather a secondary, emergent trait, one without a direct cause and effect relationship.

Adam Smith recognized that the market is a mechanism of morality and social support because it is an arena where individuals and entities engage in voluntary exchanges beneficial to both parties.


Today we generally recognize Adam Smith as the father of capitalism and communism as the child of Karl Marx. Smith never used the term “capitalism.” Instead, he used “commercial society,” and “the system of natural liberty.” He was referring to free markets, a term Milton Friedman rightly emphasized whenever the term capitalism came up in discussion. Friedman saw capitalism-free markets as a system that promotes freedom and democracy. Smith recognized as much — that the market is a mechanism of morality and social support because it is an arena where individuals and entities engage in voluntary exchanges beneficial to both parties.

Imagine if Karl Marx had titled his book Der Freier Markt. It’s tough to criticize the voluntary exchange of goods and labor. So he didn’t. He blithely skipped over the popular attraction of free markets and went right to capital accumulation.

Let me clarify the hierarchy.

First, private property is a requisite of free markets. Without it, free markets cannot exist. Imagine again if, instead of The Communist Manifesto, Marx had published The No Private Property Manifesto (the abolition of private property is advocated within but accompanied by turgid prose and even more convoluted ideas). Hard to sell the concept that you can’t own your own home, land, tools, pottery shop, talent, labor, or livestock . . . as was the policy in socialist Cuba for many years. Killing “your chicken” or “breaking your shovel” were considered crimes against the state. Finally, determined success in free market exchanges might lead to riches: the amassing of capital. But not necessarily. Capital and free markets are not interchangeable concepts.

* * *

The Wealth of Nations is not a treatise on amassing capital; it is an advocacy for free trade, not just among nations but, by extension, among individuals. It was a counter to the existing mercantilist economic regimen, which in modern terms can be a form of fascism. There is a symmetry between a free-market system and a mercantilist system, a similarity that allows direct comparison, just as there is between a free-market system and a socialist system. Such symmetry does not exist between socialism and capital accumulation. The latter is not a system at all. There is a fundamental category error in directly equating free markets with amassing wealth. It is certainly possible to get rich under a free market economic system, but it is by no means a given. On the other hand, it is impossible to become rich under a socialist system.

* * *

That Marx renamed Smith’s “system of natural liberty” — which in 19th century France became “laissez-faire” (literally, “let do”; basically, free markets) — capitalism was a stroke of sophistic genius. It was a back door — really a straw man — approach to attacking free markets, private property, and individual liberty. Marx added that the amassing of capital under capitalism was at the expense of others, a damning flourish that has stuck. Today the critiques of capitalism are that it is inherently exploitative, alienating, unstable, and unsustainable; that it creates massive economic inequality, commodifies people, is anti-democratic, and leads to an erosion of human rights while incentivizing imperialist expansion and war — all attacks that would wither if aimed at the free exchange of goods, private property, or individual liberty.

And the critiques are not all from left-wing academics. A July 11, 2017 article by Jason Hickel and Martin Kirk in Fast Company, a left-leaning business magazine, cites a Harvard University study indicating that 51% of Americans between the ages of 18 and 29 no longer support the system of capitalism. Separately it states that 64% of Britons believe that capitalism is unfair and makes inequality worse, and that in the US 55% of the population believes capitalism is unfair, while in Germany, 77% are skeptical about it. Why? Here’s the article’s assessment:

It’s because they realize — either consciously or at some gut level — that there’s something fundamentally flawed about a system that has a prime directive to churn nature and humans into capital, and do it more and more each year, regardless of the costs to human well-being and to the environment we depend on.

It’s even a category error (which Marx exploited) to call free markets, private property, and individual liberty “a system,” in the sense of something manmade or designed, like a railway system or the Federal Reserve. Free markets exist and evolve naturally and organically. Imagine calling natural selection or gravity a system, as if some imaginary entity designed and imposed it. On the other hand, socialism is a system, one designed not only by Marx, but also by other thinkers.

Thomas Sowell, in The Vision of the Anointed, recognizes the same distinction by referring to systems that arise intentionally, i.e., by design, and those that arise systemically: incrementally through the input of countless feedbacks. Sowell credits Friedrich Hayek for having “sharply distinguished an emergent ‘order’ from a contrived ‘design.’”

There is only one solution: classical liberals must abjure the use of Karl Marx’s term “capitalism.”


And it’s not just hoi polloi who opine thus. Bruno Le Maire, France’s finance minister, said, “We need a new capitalism for the 21st century, which would be more sustainable, and which would allow us to reduce inequalities among nations and within nations.” Yanis Varoufakis, former finance minister of Greece, said that capitalism as we know it is morphing into an “awful kind of techno feudalism” that only deserves to die.

Even God’s representative on earth weighed in. Speaking to the Guardians for Inclusive Capitalism, Pope Francis said, “An economic system that is fair, trustworthy, and capable of addressing the most profound challenges facing humanity and our planet is urgently needed. You have taken up the challenge by seeking ways to make capitalism become a more inclusive instrument for integral human wellbeing.”

Evidently, the word “capitalism” is a trigger that releases an artillery barrage against Marx’s unfair accumulation of capital but ends up hitting free markets and private property, since all are conflated under the same term. Lefties and classical liberals are speaking at cross purposes from each other, assigning different definitions of capitalism in their discourse. There is only one solution: classical liberals must abjure the use of the word capitalism, Karl Marx’s term. It is an inadequate characterization of liberty, private property, and free markets.

One Comment

  1. Chris

    Brilliant. Thank you.

    I frequently have the discussion with people who rail about the immense wealth held and controlled by various individuals, among them Elon Musk and Jeff Bezos. I’ve tried to explain that they’re not human equivalents to ‘Scrooge McDuck’, with vaults filled with precious metals, currency and gems. Their wealth consists in maintaining majority ownership of fabulously productive businesses, where people spend money willingly and quickly and often. This essay helps to make the argument in new ways.

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