Here’s one of my favorite Deirdre McCloskey remarks, from her Bourgeois Virtues:
I don’t care how one defines capitalism, as long as it’s not defined as evil incarnate.
Unfortunately, that’s exactly how it is often defined. Here’s a recent example from Yahoo.com:
Satellite photos and testimonies of defectors show there are now about 400 mostly outdoor markets, called “jangmadang,” in the North. Recent surveys of refugees suggest most ordinary North Koreans resort to market activities for a living as the country’s public rationing systems have never been fully restored. Four defectors who talked to The Associated Press said they received no rations at all. . . .
There are risks in the business, whether authorities are hunting for contraband, cracking down on foreign currency or simply committing graft. Lee O.P. says she decided to flee after police officers confiscated her whole savings for unauthorized phone calls with her daughter who already defected to South Korea.
Now in South Korea, Lee O.P. said she was amazed at social welfare programs directed at her and other underprivileged people.
“For me, it’s like North Korea is a capitalistic country while South Korea is a socialist country,” she said. “In North Korea, if you don’t have money, you’ll just have to die.”
My image of capitalism is the rich and happy bourgeoisie of Zurich, Switzerland, and my image of socialism is the tens of millions who starved in famines in China, Russia, the Ukraine, Cambodia, North Korea and elsewhere. But that’s not the image of Pope Francis, it’s not the image of Bernie Sanders supporters, and it’s not the image of most intellectuals.
Today there’s a desperate need around the world for more capitalism. One goal I have in blogging is to give capitalism a more positive image.
READER COMMENTS
Thaomas
Nov 27 2016 at 10:41am
But why can’t we have a capitalism even better than Switzerland, including some Sanders-ite ideas like a carbon tax to replace the business income tax and or wage taxes, a higher EITC, and tax-favored consumption subsidized with partial tax credits instead of deductions?
Thomas
Nov 27 2016 at 11:11am
The word “capitalism” conjures an image of a fat cat “capitalist” smoking a cigar and swilling champagne while starving children grovel at his feet.
Free-market economists know that that’s not capitalism. In longhand, it’s something like an economic system based on property rights and free markets that generates prosperity.
If only that could be captured in a single, catchy, accurate word.
Nick Bradley
Nov 27 2016 at 11:17am
“My image of socialism is a rich and happy Scandinavia and my image of capitalism is a Bangladeshi sweat-shop and the 2008 financial crisis.”
mbka
Nov 27 2016 at 11:31am
Scott,
if you find a good image-changing strategy, please write a book. Or do a third blog on it! It is sorely needed. Image has been “capitalism” ‘s perennial problem. The freedom to produce and trade just doesn’t seem like a worthy goal to most people. My guess it’s because it doesn’t offer the comfort of a caring tribe.
Scott Sumner
Nov 27 2016 at 12:17pm
Nick, We need to change that.
mbka, McCloskey’s books have some interesting things to say on that subject.
Most intelligent people are instinctively anti-free market until they study economics.
Daniel Klein
Nov 27 2016 at 12:41pm
The semantic maneuvers 1880-1940 are still killing us and are still worth fighting.
But liberals should not keep on doing what liberals have done for 100 years–that has failed miserably.
As regards capitalism, my advice is to expunge it from your (active) vocabulary. The word was designed by leftists, as a dual to socialism. The latter they defined as the system that serves society, the former as that which serves capitalists.
Don’t keep playing by their semantics!!!!!
Roger
Nov 27 2016 at 1:17pm
I agree with the above comments. The better term is “free enterprise”. This gets to what is at the core of well functioning markets, and has a positive rather than negative connotation and emphasis.
R Richard Schweitzer
Nov 27 2016 at 1:59pm
There is no such thing as capital-ism.
There is capital; usually conceived of as durable, transferable assets, accumulated for deferred consumption or future production.
There are individual and group objectives to acquire capital by various means (feudal, mercantile, commercial, industrial, financial, managerial, etc.).
The efforts to attain those objectives produce resulting conditions, which conditions have been given misleading labels as “-isms,” as if they were systems (such as socialisms), which they are not.
There are other factors which impact both the formation of individual and group objectives as well as the availability and choices of means for their attainment. Many of those factors may have nothing to do with acquisition or use objectives, per se/i> (often ideological). Other factors can impact the circumstances in which the objectives are sought, altering choices and selections of means. There is still a resulting condition.
bill
Nov 27 2016 at 2:16pm
It really is about freedom and being able to do consensual transactions and being free from coercion. Modest tweaks by social democrats do surprisingly little harm and can be a small price to pay for keeping the system intact and generally accepted by the majority. It’s not good when people want to “blow up the system”.
Julien Couvreur
Nov 27 2016 at 2:51pm
I wonder if rigorous methods could be applied to understanding how to best persuade and enlighten people.
For instance, A/B testing (randomize which argument you use with different groups) and big data (we all pool results from our experiments) like in advertising.
Personally, to mitigate this bad perception of “capitalism”, I will often write “capitalism, the system of property rights” and contrast to socialist or democracy, which involve collectivist ownership of property.
It is easy for people to argue against a boogeyman, but it’s harder to argue against commonsense norms which we rely on in everyday life.
James
Nov 27 2016 at 2:52pm
bill,
You say that “Modest tweaks by social democrats do surprisingly little harm.” This may be true but it is not relevant in a world where there are no social democrats who would be satisfied with modest tweaks.
The social democrats of Europe and the political left in the US favor platforms where spending by legislators and bureaucrats is nearly half of GDP, sometimes more. That does not seem like a modest tweak to me.
Pajser
Nov 27 2016 at 3:52pm
My image of communism is more-less Starship Enterprise. The images of people who work for a common good are pretty to me.
My image of capitalism is current USA, but Switzerland is not much prettier. The images of people who “mind their own business” make it ugly.
If we talk about aesthetics. Ethical issues are more complicated.
john hare
Nov 27 2016 at 4:59pm
Pajser,
If minding my own business is a problem for you, it is quite possible that the two of us will never be on the same page. I have a real problem with so many other people minding my business.
Roger
Nov 27 2016 at 6:29pm
I agree with the above comments. The better term is “free enterprise”. This gets to what is at the core of well functioning markets, and has a positive rather than negative connotation and emphasis.
Harold Cockerill
Nov 27 2016 at 6:29pm
Pajser,
Your image of communism exists on a sound stage in California peopled by actors who get fired if they don’t do what the director says. How’s that for cooperation? It’s a definite improvement over how it works in Cuba where the people in charge will kill you if you don’t do what they say.
I’m sure there are problems in Switzerland, just as there are in America, but if you want real ugly try Caracas right now. That’s the reality of what communism produces, not Jean Luc Picard and the bridge of the Enterprise.
Jeff B
Nov 27 2016 at 7:32pm
I’m nearly convinced that (mostly young) society is permanently deranged in regards to what capitalism does and doesn’t actually mean… no idea how to fix it, just take Vice’s preview on Netflix’s upcoming “3%”
At nearly every turn, all of society’s failings get framed as “natural results” of capitalism. It seems impossible for my friends to understand that haves and have nots usually come about due to tight state control, rather than the opposite. The Sanders wave (which almost all of my voting friends supported) inspires no confidence they’ll ever get it, and that is very worrisome.
MikeP
Nov 27 2016 at 9:05pm
My image of communism is more-less Starship Enterprise.
Your image of communism is the ruling class that peoples the tightly controlled military and exploration of the frontier while expressing and imposing government authority where needed?
Yeah. I can see how that might look like communism, given the examples we have seen on earth.
I think of Starship Enterprise as more feudal than communist because even on board they aren’t actually a classless proletariat. They are instead knights who project the sovereign’s power over lower classes of people who don’t get to have such great ships and free adventures.
Philo
Nov 27 2016 at 9:31pm
@ Daniel Klein:
‘Capitalism’ is a word in general use; it is in virtually everybody’s active vocabulary. Never mind its origins–what matters now is its current use. It is defined mostly ostensively–i.e., by pointing to examples, such as Great Britain, Holland, and the United States from some time in the 19th century to the present. Some leftists may claim that these are terrible, failed societies, but that’s not a definition–it is a purported empirical/evaluative statement, one which, it seems to me, we need not fear, since it is so ludicrous.
Michael Byrnes
Nov 27 2016 at 9:45pm
This is a timely post, given that a man who could be the the poster child for the left’s vision of the idle, cheating, non-producing, cronyist rich is about to become President of the United States.
JK Brown
Nov 27 2016 at 10:21pm
Socialism is the opiate of the intelligentsia, or what McCloskey calls, the clerisy.
That may explain why even economics professors don’t seem to have a fixed definition of capitalism. Ranging anywhere from the private ownership of the means of production to the corporation depending on apparently whimsy.
I first saw this in a MRU video by Alex Tabarrok on geography’s influence on institutions. Comparing the plantation to the yeoman farm, he searched for a comparison and identified the plantation as capitalist. Surprising as they both were privately owned means of production, both eventually came to rely on financial markets, etc. But rather than calling the plantation industrial, he wen’t capitalist production process.
Thereby, an economics professor relates capitalism to worker exploitation and, unintentionally, slavery.
This happens all the time when economist appear to on news shows.
This prompted me to try to find a definition of capitalism beyond the 11th grade economics class “means of production privately owned.”
benjamin weenen
Nov 27 2016 at 10:32pm
Socialism isn’t a reaction to Capitalism. Is is the inevitable response to the injustice of an evolved and democratized Feudalism.
With an economy based on the unequal distribution of the value derived from natural resources and intellectual monopoly, is it any wonder those being shafted see State Socialism as their only protection?
99.9% people purporting to be Capitalists and Libertarians are nothing of the kind. The are fakes and hypocrites who in symbiosis with Socialists have managed to convince the majority there isn’t any real alternative to whats currently on offer.
Mactoul
Nov 28 2016 at 1:41am
Capitalism is precisely defined in Catholic social thought and papal encyclicals as the system in which masses of people work as hirelings and relatively few people own the means of production.
It is not the same as a system of free enterprise.
The social character of capitalism is governed by the fact that most people are not owners but work for hire i.e. are wage or salary earning.
Shane L
Nov 28 2016 at 5:33am
I have wondered if the Cold War complicated matters by pitting communist revolutionaries in poor countries against corrupt rent-seeking governments. In much of Latin America or Africa it would seem that the institutions were malignant and extractive. Poor entrepreneurs were crushed by corrupt government officials or gangsters. Pre-communist developing countries were rarely free-market liberal lands with rule of law, elections, freedom of speech, property rights and public goods.
The communists were fighting against horrifying systems. During the Cold War the right ended up propping up some of those nasty systems. Hence the left got a propaganda boost; they could point to corrupt developing countries with monarchs and dictators and say – this is the right.
I’d say economic liberals should distance themselves from brutish extractive regimes that happen not to be communist. If the options are “loot the poor to help the rich” or “loot the rich to help the poor”, the second option will usually sound better. Since the Cold War is over they should be able to attack non-communist extractive regimes too.
Tom West
Nov 28 2016 at 8:32am
I think the bad reputation of capitalism compared to socialism is as simple as the stated goals.
Reduced to epigrams, capitalism is a system that produces a set of fairly good results by harnessing bad “greed”, while socialism tends to produce baddish results while attempting to do good for the people.
As I’ve stated time and time again, for the vast majority of people, what is said or intended is *far* more important than the actual results. That’s just the way humans are wired.
Bill Wilkinson
Nov 28 2016 at 12:10pm
I avoid using the term “capitalism” altogether (unless I’m explaining the very confusion addressed in this post). If I’m referring to the economic system free-market economists have in mind, I call it something like “a system of open competition” or “freely competitive system of production.”
It’s wordier, but it is (1) accurate, and (2) it conveys the idea I have in mind without touching any of the “dog-whistle” terms that will cause young leftists like the man-bun Sandernistas to instantly turn off their minds. When I use one of these phrases, many of my young, leftist colleagues will express agreement on the merits of my pro-economic liberty argument, even though I am expressing exactly the same concept as I would have if I had just substituted the word “capitalism” instead.
John hare
Nov 28 2016 at 2:04pm
How about entrepreneurialism?
MikeP
Nov 28 2016 at 2:11pm
Laissez faire.
Surprising to me, it appears as a noun in the dictionaries I was browsing. Hence “laissez faire capitalism” is redundant.
Andrew_FL
Nov 28 2016 at 2:21pm
And you’re just the Kathedermarktsozialist to fix it, I’m sure.
JK Brown
Nov 29 2016 at 9:58pm
One thing to keep in mind, that in the absence of state interventionism, a populace larger than a family reverts to capitalism. That is individuals produce goods and services required by others for trade in order to acquire the means to get the goods and services they need.
Yes, eventually, some will seek to establish themselves as “boss”, etc. and demand tribute for the nebulous services we associate with government, such as protection. And we then get a feudal set up if all the property is claimed as personal property of the “ruler” or communism, if they establish the fiction of state ownership, even though the “ruler(s)” still exercise control over all state property.
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