What Capitalism?

It has long been a grievance of mine that people who ought to know better use the term “capitalism” inexactly, or at least are guilty of a failure to define their terms. Am I just being petty? I don’t think so. There is a modern method of smearing your ideological enemies by labelling their values in a negative context using imprecise terminology.

The original values of US political economy were labelled as “capitalism”. Ostensibly this meant laissez-faire policy with a social system characterized by individual rights to life, liberty and property. The associated political economy was considered free market oriented. The US political economy never was capitalism defined fully within these parameters. It has always been contaminated to some degree by the old feudal and mercantilist systems which rotted away at nations in the 16th through 18th centuries.

America was different to a significant degree however. In the 19th century the free market ideas really had a revolutionary wealth creating impact on the world with the US at the vanguard and a model to be admired or envied. The rot within, represented by vestiges of old collectivist doctrines and fueled anew by German and French socialists, began to have its cancerous effect. Every economic or political crisis since the so-called Progressive Era has resulted in explosive expansion of government growth and power which never fully abated following the end of crisis periods. (See the outstanding, scholarly examination of this aspect in Crisis and Leviathan by Robert Higgs.)

So now the smearing begins by the collectivists. Starting with the erroneous assignment of blame for the Great Depression to a failure of “capitalism” through today’s blaming of the US and worldwide financial crisis on free market ideas, the great majority of people believe capitalism has failed. Yet, ask anyone what is meant by “capitalism” and not very many will have a clue. In the intervening periods, the only common element of change over the decades has been the growth of the size and scope of the state. Only the vestiges of open markets have allowed wealth creation. How can you reasonably then blame that characteristic for economic recessions? The correlation between growth of the state and frequency and intensity of recessions cannot be ignored. I’ve written previously on “Uncapitalism”.

Copyright 2009 Edward Podritske

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