What capitalism is
Athought experiment that might help to illuminate the current debate over the merits of (and differences between) capitalism and socialism: Imagine that we have created something called “government” to move us out of an insecure state of nature, where, in Hobbes’ famous description, life was “solitary, poor, nasty, brutish and short.” We have consented to live under laws of our own making, the most important of which prevent us from hurting others or stealing their possessions (the security function, which is always the primary function of government/the state).
Next assume in this thought experiment (which actually coincides in some respects to historical reality, including the logic behind the American founding) that this new thing called government dictates no particular kind of economic system or identifies any preferred (ideal) economic outcomes. People are simply left free to work, buy, sell or save as they wish, according to their own conceptions of economic self-interest.
What invariably results is capitalism, nothing more, nothing less. Its logic is as simple as my decision to trade my old DVD player for your old bicycle because you value my old
DVD player more than your old bicycle and I value your old bicycle more than my old DVD player.
Capitalism is thus a spontaneous natural order that arises out of conditions of human freedom and human nature itself. Life without government might be “red in tooth and claw” due to the inherent aggressiveness of human beings, but once people are prevented by governments and systems of law from getting what they want by murdering and pillaging their neighbors, their energies naturally gravitate toward mutually beneficial forms of trade in free markets for goods and services and labor. To engage in commerce with others is to follow human instinct.
Because of this, it would be misleading to describe capitalism as some kind of alternative or option
chosen from an economic menu because it contains no prescribed ideological or political content other than that which individuals provide it with. It is not the result of any particular person’s ideological vision, but the cumulative consequences of thousands or even millions of daily individual visions.
Government can obviously make capitalism work better by doing some important things—ensuring sanctity of contract, protecting patents, combating monopolies that might result over time, printing currency, building infrastructure to facilitate trade, etc. But it doesn’t bring the capitalist impulse into being; it merely protects it and provides an environment in which it can flourish (at least so long as it doesn’t undermine it, as has so often sadly happened).
This is also why, contrary to popular perceptions, the same capitalism of profits (Marx’s “surplus value”) and greed (defined as other people’s profits) that leftists ritualistically denounce is morally superior to the various permutations of socialism they advocate.
In contrast to the capitalist order and the manner in which it represents the daily extrapolation of human freedom, socialism represents the abridgment of freedom and the nullification of its consequences. In place of capitalism’s spontaneous and mutually beneficial interaction, it seeks to impose from the top down an ambitious ideological vision drawn not from human nature but from abstract political theory. It necessarily replaces our individual conceptions of the “good” with someone else’s “one size fits all” conception based upon an inherently subjective notion of the proper distribution of wealth, and the more extreme (or pure) the conception of socialism, the greater the need for coercion to implement it, and the greater the resulting destruction of individual freedom.
If the central thesis of capitalism is that you are entitled to the fruits of your labor, the central thesis of socialism is that you are entitled to the fruits of the labor of others. All wealth belongs not to those who earned it, but to the state, which will decide how much of it you are allowed to keep or receive according to the ideological blueprint.
This is also why, in the end, the best defense of capitalism is always a moral rather than purely pragmatic one—that it not only works much better than socialism to produce prosperity and innovation but is also part of a broader notion of individual liberty; that economic freedoms are bound in inseparable ways with our other freedoms to make up the wholeness of a free individual.
Anyone willing to look at the world without ideological blinkers quickly notices that there are no affluent liberal democracies that don’t have capitalist/market foundations. And if any of those liberal democracies were to suddenly cease to be capitalist they would also before long cease to be liberal democracies, because capitalism is inseparable from freedom more broadly considered, and its operation brings into being and buttresses liberal democratic institutions and practices.
The great democratizing class of history is the same capitalist bourgeoisie so reviled by leftists, but as Barrington Moore so succinctly put it, “No bourgeoisie, no democracy,” which is just another way of saying no capitalism, no democracy.
At the root of the socialist vision, however otherwise appealing, is a fundamental misconception—that a society in which political considerations dictate who gets what can ever be a free one.