"This ain't Capitalism"

Enjoy Capitalism
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It’s a recurring theme lately that whenever one will point out sufferring and generally bad stuff happening because of Capitalism, right-wing libertarian apologists will pop-up from the woodwork to point out that “This ain’t Capitalism”. They will claim that the government played too big a role and this we can’t really consider it a fault of the system per se, but must lay all the blame on the government intervention1.

This is starting to get quite annoying so I think it’s time to explain why I consider this a no-true Scotsman fallacy.

First of all, ‘Capitalism’ as a word is quite recent, only coming into the mainstream vocabulary at the start of the 20th century by Werner Sombart, a Marxian who used it in his critique of the system. Before that, the use of the word had been sporadic and in variants of the root, with the most important being by Karl Marx himself who wrote mainly about the Capitalist mode of Production.

This concept has been expanded in the last century to mean a complete economic system who’s core characteristic is the same Capitalist mode of production that Marx was accurately criticizing. Peripheral to that is the sociopolitical situation within which this mode of production exists. This can range from authoritarian imperialism (Fascism), to libertarian minarchism (The American ‘Libertarianism’).

All of these, are still Capitalism. The means of production (factories, land, labour) are still privately owned and the only thing that changes is the degree of political freedom and interference of the state. But the degree to which these two fluxuate has nothing to do with wether the system is Capitalistic or not.

The Austrian school of Economics is of course the most rabid denouncers of this idea. For them, as long as Capitalism is not absolutely free any government, it cannot be called as such (Merchantilism is apparently the correct word) something of course which is complete nonsense. Even under the most welfare-oriented system, the mode of production still remains in the hands of private owners and as such the core characteristic is fulfilled. To argue otherwise is similar to claiming that someone is not a Scotsman because he puts sugar in his porridge.

Apologists of Capitalism from every school of thought, wether that is that there is too much restriction on Capital or that there is not enough restriction on Capital, will eagerly lay the blame for all the human suffering under the actions (or inactions) of Capitalist regimes on anything else than the economic system itself. It’s too much state intervention. Or too much credit expansion. Or not enough checks and balances. Or too much Greed. Or too much Corruption. Or too much environmental destruction. Whatever. It’s anything and the kitchen sink to blame but Capitalism.

And yet we see the same suffering and destruction occuring to any Capitalist system sooner or later. Wether that is the Free Market Wonder of Chile, the Soaring Growth of India or the State Capitalism of the USSR. No matter how much or how little government intervention there is in the market, the same crises happen, povertry and starvation remain, and people suffer. And the only thing that stays constant, the only common denominator, is the Capitalist mode of production.

This is Capitalism.

Also see: Capitalism: A good word for a bad thing.

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  1. The hypocrisy that takes the cake of course is when the same people will blame all the suffering of USSR, Korea and China squarely on Communism without being willing to recognise any other factor other than how those nations defined themselves []

30 thoughts on “"This ain't Capitalism"

    1. Oh that's a simple problem. If you're confronted with one or many Misesians, just shout "LOOK, A SYNTHETIC A PRIORI!" and run away from the ensuing stampede.

  1. Hah, I have no idea why this would be (linkage for context?) but it sounds fun ๐Ÿ™‚

    As for the name, I prefer Miseoids myself ๐Ÿ™‚

  2. It's a Kantian term that Misesians use to designate their axioms. You know, the whole analytic/synthetic thing. Personally I give no stock to it.

  3. Its a pointless debate… Just define what you mean by capitalism and get on with it… (or avoid the term entirely). Some people will never get over it…
    The same can be said for communism, and socialism (just try pursuading people that market socialism can exist… people from both the left and the right will deny it).

    Personally I'm fine with using the term capitalist for the free market to engage with people where appropriate – but take it beyond their assumptions and show that the free market would never have generated the system we have today, or the system of the 19th Century.

    Mises himself was often an apologist for capitalism, as are many of his followers. The insights of the Austrian school can be incredibly useful however and they can be used as a major part of free market, anti-capitalist arguments.

    1. You're generally right. These days I try to avoid using the term entirely, opting for "The Capitalist mode of production" to be more accurate. At least now, if someone makes the argument that "It ain't Capitalism" I can point them here.

  4. Avoiding terms like "capitalist" and "communist" and referring to specifics might be better. Whenever I hear someone praising or condemning "capitalism" and "communism", I always get the very strong feeling that they're doing so just for the sake of doing so. Or in other words, I can't glean what exactly they're praising or condemning from what they're saying.

    1. Yeah I don't often talk about either of these for the same reason. However it still annoys me to high heaven when people associate crimes on "Communism" at the drop of a hat but Capitalism comes out spot clean

        1. Hm, I wouldn't agree. While one can lay the blame on Marxism from an ideological perspective (although that is not much different on laying the blame on democracy because some Dictator called his regime "Democratic), the problems of Capitalism come from its practice. There's no Capitalist ideology afaik.

          1. What do you mean, there is no capitalist ideology? There has been plenty written in a systemic defense of capitalism. Do you mean that the capitalist ideology came as an after-thought or rationalization of the existing system?

          2. That too but mostly that there's isn't an ideology behind the economic system that is capitalism. Sure there are apologists (as are necessary for anything that produces so much suffering) but they don't defend it from an ideological perspective but usually from comparison with the "alternatives" and/or outright fabrications. The only ones who use ideology to defend Capitalism are usually Objectivists and similar who do not defend Capitalism per-se but rather some of its basic building blocks (Pirvate Property, Man qua man etc)

    1. Here's an intro for you:
      http://www.capitalism.net/

      Aimed at both the intelligent layman and the professional economist, and written in language that both can understand, this book is the most comprehensive and intellectually powerful explanation of the nature and value of laissez-faire capitalism that has ever been written. It represents a twofold major integration of truths previously discovered by other writers, combined with numerous original contributions made by the author himself. Within economic theory, it integrates leading ideas of the Austrian school with needlessly abandoned doctrines of the British classical school. It further integrates such reconstituted economic theory with essential elements of Ayn Rand's philosophy of Objectivism.

      A leading part of its trenchant economic analysis is a consistent demonstration of the natural harmony of the rational self-interests of all men under capitalism—of businessmen and wage earners, of consumers and producers, of men of all races and nationalities, including immigrants and the native born, and of competitors of all levels of ability—consonances most will find astonishing, given the prevailing misunderstandings of capitalism in the late twentieth century.

      The book's importance and appeal to a general audience are evident in its description of prevailing attitudes toward capitalism and its challenge to learn why they are all completely wrong and the cause of self-destructive political behavior on a massive scale. For those with the intellectual courage to accept a challenge of having many of their firmest and most cherished beliefs reduced by unanswerable logic to the status of Dark-Age superstitions, here are some of the beliefs that Reisman's book demolishes: The profit motive is the cause of starvation wages, exhausting hours, sweatshops, and child labor; of monopolies, inflation, depressions, wars, imperialism, and racism. Saving is hoarding. Competition is the law of the jungle. Economic inequality is unjust and the legitimate basis for class warfare. Economic progress is a ravaging of the planet and, in the form of improvements in efficiency, a cause of unemployment and depressions. War and destruction or additional peacetime government spending are necessary to prevent unemployment under capitalism. Economic activity other than manual labor is parasitical. Businessmen and capitalists are recipients of "unearned income" and are "exploiters." The stock and commodity markets are "gambling casinos"; retailers and wholesalers are "middlemen," having no function but that of adding "markups" to the prices charged by farmers and manufacturers; advertisers are inherently guilty of fraud—the fraud of attempting to induce people to desire the goods that capitalism showers on them, but that they allegedly have no natural or legitimate basis for desiring. (These are all common accusations that are bandied about again and again ad nauseam, in the media, in novels and plays, in classrooms and lecture halls.)

      1. Hmm, from that short intro it doesn't look much different from what I said above, in that the author seems to be defending the individual building blocks of Capitalism and by extension the system itself since it's the only thing combining them all together.

        I may be wrong of course

  5. Hello Db0! You're wise not to use that much the term Capitalism (especially "free market" Capitalism). It's at best a strawman term which Mass Media (known for their trademark "Accuracy")uses in order to conceal the fact that plutocrats, bureucrats, and militarists are a unified front (plutocracy vs. bureaucracy is the silliest division in political science). Despite being a mutualist, I prefer Kropotkin to "Maggie n' Ronnie" anyday.

    Another problem is the "Communism as statism" strawman which needs to be deflated the quickest possible. "Marxist-Leninist" Parties need to be fingerpointed for the fraud they are.

  6. Well the problem is tactical. Internet has helped some to escape from the corporarist Mass Media propaganda (I would still be a centrist, if it weren't the internet). The problem is to speed up the process and help as much people as possible to escape the Platonic Cave of the slavemasters (Mass Media "Democracy"). Do you have any insights on how to do that?

  7. My advice would be first not to try and bite more than you can chew to avoid getting disappointed. Don't expect to make by yourself a visible difference but nevertheless keep raising awareness.

    The way I do it is through blogging and discussions. If I know that my thoughts have converted even 2 people I would be happy. If I know that I've convinced these 2 people to try and convince at least 2 more people each, I would be content.

    Help however you can. Point the flaws of Capitalism and the current system and try to make your audience break away from the illusion. Interesting times are a-coming and we need to be pushing in the right direction.

  8. Just for clarification, when you define the capitalist mode of production as one in which land, capital, and labor are privately owned, do you mean they are ALL privately owned? For example, would you consider a mode of production in which only capital and labor or only labor were privately owned capitalist?

    1. Well for practical purposes, both land and static capital (factories, machines etc) are in the same group. In the same way that a Capitalist is considered to "own" the factory even though it's the workers that use it, a Landowner "owns" the land even though it's other people who live and work in it. They are also impossible to separate as their end effect (taking part of the wealth that productive member of the society produce through rent of profits) it the same.

      Se we can talk about having private ownership of static capital (Capitalism) or not (Socialism). Labour is impossible not to have as private.

      1. That makes sense. However, capital does differ from land in that capital is the product of someone's labor and land is not. Just as the producer of non-capital goods has the right to own, individually or collectively, the product of his/her labor, shouldn't the producer of capital goods have the same right?

        I consider myself a socialist, so I'm really just playing devil's advocate here.

        1. Just as the producer of non-capital goods has the right to own, individually or collectively, the product of his/her labor, shouldn't the producer of capital goods have the same right?

          Depends. This mostly stumbles into the question of primitive accumulation in the sense that you can't decide which capital was created by the labour of one person and which was created by exploitation.

          But let's take a theoretical situation of someone building a factory by himself, from scratch. The fair thing to do would be either to sell the factory outright to people who want to work in it, or to rent it until the cost to produce it has been repaid. The wrong thing to do would be to make other people work in the factory while one gets the profit indefinitely, even after the original investment has been repaid.

          I consider myself a socialist, so I'm really just playing devil's advocate here.

          No prob, you may actually help clarify my position or strengthen yours ๐Ÿ™‚

  9. Alright. I've been pondering this point for awhile, and I think your approach makes the most sense. It allows the producer to keep the value of his labor and doesn't lead to exploitation of others or excessive accumulation. Thanks. ๐Ÿ™‚

  10. For them, as long as Capitalism is not absolutely free any government, it cannot be called as such

    Yes, well, if you maintain such an ill-informed belief, it's no wonder that you reach the conclusions that you do.
    Capitalism from a Austrain/Libertarian point of view does require government. The governement's role is to ensure that the law is upheld. It is not to turn a blind eye to any fraud and permit special treatment for a select few.
    That has never happened.
    That's why we have never experienced the Austrian definition of Capitalism (although the US came the closest pre 1910) but that doesn't make their definition invalid or make them 'apologists' for your incorrect definition.

    1. The governement's role is to ensure that the law is upheld. It is not to turn a blind eye to any fraud and permit special treatment for a select few.

      It seems that it's you who is the ill-informed. You should do well to speak with your fellow Austrians, especially those who call themselves "Anarcho"-Capitalists and ask them if they think a state is required.

    2. That's why we have never experienced the Austrian definition of Capitalism (although the US came the closest pre 1910) but that doesn't make their definition invalid or make them 'apologists' for your incorrect definition.

      They actually didn't come close pre-1910 but in any case, yeah, they are apologists of capitalism in general since they are eager to oppose all working class struggles such as unions and takeovers while many of them being supportive of corporations and the capitalists earning the lion's share of the wealth a company produces. They are unwitting apologists of the plutocracy.

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