Montreal, May 15, 2012 • No 300


Bradley Doucet is a writer living in Montreal. He has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also is QL's English Editor.
Larry Deck is a librarian who lives in Montreal.



Is "Capitalism" Worth Saving?
A Conversation


The Morality of Capitalism (2011)
Tom G. Palmer, ed.


Markets, Not Capitalism (2011)
Gary Chartier & Charles W. Johnson, eds.


by Bradley Doucet & Larry Deck


Bradley Doucet: A Qualified “Yes”


          The recent financial crisis and global recession and the ongoing sovereign debt crisis have spread a lot of misery around the world. In addition to this very tangible pain, though, the fallout from these crises has dealt some intellectual body blows to the brand of capitalism. Whether or not capitalism deserves these attacks, of course, depends in no small part on what, exactly, is meant by “capitalism.” If the term is used to refer to bankers and businessmen buying privileges from bureaucrats and politicians at the expense of everyone else, then the attacks have some real merit. If on the other hand it refers to respect for property rights and the free exchange of goods and services for prices determined on an open market, then nothing could be further from the truth.


          Defenders of this latter type of system often refer to free-market capitalism to distinguish what we are advocating from the collusion of privileged elites and government powerbrokers, which we call crony capitalism (or more colourfully, “crapitalism”). But is this linguistic distinction worth making any more? If the word “capitalism” is ambiguous at best, and downright poisoned in the minds of many, should defenders of free markets jettison it along with its burdensome baggage?

          The word “capitalism,” as Tom Palmer points out in the Introduction to The Morality of Capitalism, was generally used as a term of abuse when it emerged in the 19th century. Karl Marx and other socialists targeted productive entrepreneurs and well-connected parasites alike, and advocated the abolition of capitalism. But as Palmer writes, “Not uncommonly, like many terms of abuse, ‘capitalism’ was taken up by some of those intellectual advocates of free markets against whom the term was wielded.”

          Yet despite its inauspicious beginnings, and despite the fact that it is “fraught with conflicting meanings and ideological overtones,” as Palmer admits, there is still good reason to salvage the contested term. He writes,

Capitalism is not just about people trading butter for eggs in local markets, which has gone on for millennia. It’s about adding value through the mobilization of human energy and ingenuity on a scale never seen before in human history, to create wealth for common people that would have dazzled and astonished the richest and most powerful kings, sultans, and emperors of the past. The difference between the world of today and the world that existed a mere two hundred years ago could hardly be more striking.

          An explosion of wealth creation has lifted vast swaths of humanity out of perpetual poverty. What caused this unprecedented improvement in material wellbeing? Surely not the existence of people who become rich through political connections, which has always existed and therefore cannot be a defining characteristic of the new system that brought so much abundance to so many. No, what changed is the existence of people who become rich by finding new and better ways of serving their fellow man and woman.

          But markets, as Palmer points out, had existed for millennia without producing the wealth that capitalism brought, and similarly, there was almost always some innovation taking place. According to economic historian Deirdre N. McCloskey, who writes a brief chapter in Palmer’s book, “A change in how people honored markets and innovation caused the Industrial Revolution, and then the modern world.” Throughout history, merchants and inventors had never gotten the respect they deserved. Esteem was for warriors and priests, not money-grubbers and tinkerers. It was only following the revolutions and reformations of Europe, writes McCloskey, that people in Holland and then England began to admire entrepreneurs and began to value the creative destruction they brought, and it is this change of attitude that unleashed great waves of innovation for the betterment of all.

          This cultural shift marks a decisive turning point, if not the decisive turning point, in human history. Writes Palmer, “The best available term to distinguish the free-market relations that have made the modern world from those markets that preceded it, in my opinion, is ‘capitalism.’”

Larry Deck: An Even More Qualified “No”

          Gary Chartier, in his fine and fascinating collection Markets Not Capitalism (co-edited with Charles Johnson), makes a provocative but well thought out argument for the proposition that “Advocates of Freed Markets Should Oppose Capitalism.” I say “provocative” because most people who identify as libertarians probably identify as supporters of capitalism, albeit the “unknown ideal” of genuine laissez-faire capitalism as they understand it. Chartier argues that this is a mistake, and that if libertarians understood themselves a little better, they would call their position anticapitalist. So yeah, provocative.

          What about the “well thought out” part? Chartier begins by calling attention to three senses of the word “capitalism” that people use in everyday speech but that need to be distinguished if we are to understand his case. What he calls “capitalism1” is what most libertarians mean when they say “capitalism”: an economic system based on private property rights and voluntary exchange of goods and services. Then there’s “capitalism2,” which is perhaps more what most ordinary people mean by “capitalism”: an economic system based on symbiotic relationships between government and big business such as exists in most of the countries that people have called “capitalist” to distinguish them from more socialistic countries. As Brad writes above, some of us have gotten into the habit of calling that kind of arrangement “crony capitalism” or something similar in the hopes of at least drawing people’s attention to the ways in which it departs from laissez faire.

          Critical to Chartier’s argument is his attempt to distinguish a third sense, “capitalism3,” which he describes as “rule—of workplaces, society, and (if there is one) the state—by capitalists (that is, by a relatively small number of people who control investable wealth and the means of production).” What Chartier wants to say is that even if we give his capitalism2 a label like “crony capitalism” to distinguish it from the real capitalism we endorse, we risk being confused for the sorts of people who would endorse rule by capitalists—his capitalism3—whereas we ought to oppose that just as heartily.

          It's important to note that when Chartier says "rule by capitalists," he's explicitly talking about rule of other things in addition to states ("workplaces, society, and (if there is one) the state" as he puts it). Otherwise it would be hard to distinguish capitalism3 (rule by capitalists) from capitalism2 (crony capitalism) historically speaking, a fact Chartier acknowledges explicitly. This might already put his attempted distinction beyond the pale for some kinds of libertarians who don't think we should talk about the way workplaces are run.

"In order to appeal to the left effectively, we need to be honest and upfront about those aspects of capitalism that have been beneficial and that we want to preserve (and indeed, recapture) and those aspects of capitalism that are really leftover from an earlier age when what little wealth that existed was gotten through some variant of the use of force."

          Unlike most mainstream libertarians, Chartier is eager to make rapprochements with the constantly marginalized but perhaps growing part of the workers’ movement that understands that the state is part of the problem. In this respect, he and other contributors to the collection see themselves as reviving a tradition of American individualist anarchism associated with historical figures like Benjamin Tucker, Lysander Spooner and Voltairine de Cleyre, who supported free markets in large part because they believed—I think correctly—that the goals of what they called “socialism” were best achieved through a fully voluntary society. The collection is at its strongest in several articles by Roderick Long, Charles Johnson and others that show how various typically “left-wing” goals like combating poverty and protecting the environment might be achieved by freeing the market, eliminating barriers to trade and entrepreneurial activity, and defending property rights against the encroachment of the state.

          That part of Chartier’s project is not likely to grab mainstream libertarians, most of whom have a low opinion of all leftists based on too-frequent contact with the statist mainstream of that side of the political spectrum. I think that’s a mistake, and not because I think libertarians should be trying to get friendly with the tiny remnant of left-wing anarchists (who would hardly welcome our overtures). I think it’s a mistake because I think we should be trying to convince everybody of the advantages of free markets, voluntary exchange and property rights, not just the conservatives that mainstream libertarians take to be our natural allies (often with absurd consequences). We should be trying to show everybody that the fair society is the free society. And ultimately that means saying that we’re not just against crony capitalism; we’re against plutocracy and the rule of undeserved privilege as well.

          I think Tom Palmer makes a convincing case that we want to use the word “capitalism” to emphasize what is special and positive about the modern age. If we live in times of sometimes mind-boggling abundance, it is because capitalism caught on and has, thankfully, proven indomitable. But there are also times, as Chartier says, when we want to emphasize that what we favour really and truly is an unknown ideal, which might be called freed markets or market anarchy or something else to distinguish it from the all-too-real shortcomings of really-existing capitalism.

Bradley Doucet: Capitalism Has Already Been Successful

          I wholeheartedly agree with the idea that “we should be trying to convince everybody of the advantages of free markets, voluntary exchange and property rights,” and “trying to show everybody that the fair society is the free society,” as Larry writes above. And showing how a fully voluntary society would be better for the poor is certainly an important piece of the puzzle when appealing to those who self-indentify with the left. It’s tough work, but I don’t see how we can expect to get there from here without putting in this kind of effort.

          That being said, I’m still not convinced that we advocates of a truly free society need to jettison the word “capitalism.” Partly, this is because even really-existing capitalism, warts and all, has been such a boon to mankind. It has been a mixed bag, to be sure, with plenty of crony capitalism and “rule by capitalists” muddying the waters. But despite this, the common man and woman are much better off thanks to capitalism than they were before the capitalist age. They are much better off materially as I argued above and, to directly respond to Chartier’s third category, they are also much less ruled by the elite, in the sense that they have a lot more control over their lives than they did three hundred years ago. The elite still exists, and still exerts control over the masses, but capitalism, imperfect though it has been, has eroded that control.

          Complicating the picture, there was a statist pushback in the twentieth century, and big government has in the last one hundred years curtailed some of the freedoms that capitalism had brought to at least some of the common people. To complicate it even further, things have simultaneously gotten better for others (women, minorities) who had been deprived of the benefits of capitalism. As Ted Levy recently described these opposing tendencies, liberty is like the water in a swimming pool; over time, more and more people have been allowed into the pool (good) but the pool of liberty itself has shrunk (bad).

          So the picture is not straightforward, but hey, the reality is complex. The problem with appealing to the left by saying, in essence, “You hate capitalism? So do we!” is that it fails to do justice to the victories of really-existing capitalism, shortcomings and all. Yes, we want to do better, and we can do better, and we will do better. But as Daniel J. Sanchez recently pointed out in response to self-styled bleeding heart libertarians on this very issue, “most non-libertarians who say they are against capitalism really mean they are against the free market, and not against only corporatism.” (Emphasis in original.) As he goes on to argue, “You may get some head-nods at certain cocktail parties when you say you are against ‘capitalism’ and for ‘social justice’. But once it is clear that you have very unconventional meanings for those terms, it will be clear that there is no true agreement at all.”

          In order to appeal to the left effectively, we need to be honest and upfront about those aspects of capitalism that have been beneficial and that we want to preserve (and indeed, recapture) and those aspects of capitalism that are really leftover from an earlier age when what little wealth that existed was gotten through some variant of the use of force. We need to convince them that they need to embrace the freedom to create wealth, which, as Tom Palmer reminds us, is the only way to eliminate poverty.

Larry Deck: True Capitalism Is Radical

          This is in many ways an argument without disagreement because it comes down to a question of what aspects of the libertarian agenda we ought to emphasize in which contexts. Without getting into the increasingly fraught question of what counts as “bleeding heart libertarianism,” I’ll simply reiterate my point that there are contexts in which we ought to emphasize the genuinely progressive and radical aspects of libertarianism, the parts of our program that have not been realized and that find almost no echo of support in the agendas of conservative political parties. Those who have criticized the bleeding-hearts for wanting to appeal to an audience of left-wing academics have a point: such an effort is probably wasted 99 times out of 100. But it’s not obvious to me that it’s harder to swing a leftist away from statism than it is to swing a rightist away from militarism, nativism or, let’s be honest, theocracy.

          If we can teach a right-wing militarist Bastiat’s “broken window,” we can probably teach a left-wing statist Hayek’s “fatal conceit.” And if meeting the leftist halfway by acknowledging that really-existing capitalism has not lived up to its full promise, both because the state has relentlessly interfered with markets and because capitalists have too often welcomed and colluded with the interference, that should not be too much to ask.

          All that said, it is probably a lot easier to tell people that we’re in favour of true capitalism than it would be to say we’re “anticapitalist” and then explain that we are nevertheless gung-ho supporters of what capitalism has accomplished. But capitalism tout court? Capitalism warts and all? That we must move beyond.