Thoughts On “The C Word”

The question I pose here may seem like one of semantics, but I believe it is important.

Should us libertarians/classical liberals use the word “Capitalism” to describe our economic preferences?

I wish to argue that we should not, because it creates unnecessary ideological confusion. This is because the word has multiple definitions.

Generally, we classical liberals have used “Capitalism” as a synonym for free market economics (i.e. an economy wherein which all economic activity takes place within the realms of consent and contract). We use it as a reclaimed word; a former term of abuse which we now proudly wear (in the same way the non-heterosexual communities have adopted the word “queer”).

But is it either accurate or sensible to use “Capitalism” as a synonym for a free market?

Lets take Karl Marx’s use of the term (a use even Marx sympathizers have often misunderstood). In Marxist theory, all economies are boiled down to three basic things;
1) A primary factor of production (the stuff that is used to make other stuff)
2) A dominant social class that owes their dominance to their control of point 1
3) A subordinate social class that owes their oppression to not controlling point 1.

Under Slavery, the primary factor was slave labour with slaveowners as the dominant class and slaves as the subordinate class.

Under Feudalism, the primary factor was land, with land-owning aristocrats the dominant class and land-working peasants the subordinate class.

Under Capitalism, the primary factor is capital, with capital-owners as the dominant class and capital-working proletarians the subordinate class.

Under Marx’s definitions, Fascism is, in fact, a form of Capitalism since the primary factor is capital, capital’s notional private-sector owners are a social class other than the proletarians, and the actual control of capital is exercised by the state (not the proletarians). Additionally, under Marx’s definitions, non-Democratic State Socialism is also a form of Capitalism because control and ownership of capital are vested in a class other than the proletarians.

This is why an intellectually honest orthodox Marxist can accuse Fascism and Stalinism of being “State Capitalist” even if they are not free market.

Marx’s definition of Capitalism has absolutely no relationship to how free market (i.e. based on consent and contract) an economy actually is. Under the Marxian definitions, someone can be both pro-free market and anti-Capitalist (the Mutualists and early Individualist Anarchists, for instance), or someone can be pro-Capitalist and anti-free market (Fascism, Stalinism).

Therefore, for classical liberals to describe their economic adgeda as “Capitalist” is flatly inaccurate and leads to a significant level of misunderstanding.

Of course, some people on the left do use “Capitalism” as a synonym for free-market. They are equally incorrect. However, the people that used “Capitalism” in this manner were mostly the non-Democratic State Socialists, and their numbers were decimated by the collapse of the Soviet Union (most of them went on to Environmentalism or Social Democracy). Also, let me clarify, I do believe an attempt at real life Democratic Socialism will fail (i.e. The Road To Serfdom) and probably collapse into non-Democratic State Socialism, but that does not mean I believe every advocate of Democratic Socialism to be a closet-case Stalinist. Many are sincere (if, in my judgment, incorrect).

Many libertarian theorists have used the word Capitalism to mean Free Market. Ayn Rand is an obvious example, but Hayek, Mises and Friedman all used the term as a synonym for Free Market. So I am not pretending that changing vocabulary will not have a cost; it will require the use of disclaimers/glossaries, and more thorough exposition on the fact that the word “Capitalism” is an antagonym. However, I wish to open the floor to discussion on this matter; is the word “Capitalism” and our association with it doing more harm than good?

36 thoughts on “Thoughts On “The C Word”

  1. At the 2007 APEC meeting in Sydney me and a group of LDP supporters held aloft a banner saying “End world poverty, support capitalism”. I had my reservations and a few of the left leaning marchers on the day did refered to us as fascist. However we wanted controversy so the media would cover our activity. So if you want to avoid controversy and keep peace with the left then perhaps the word should be avoided but if you want to stir up debate and get people thinking the word can be useful. Broadly speaking however I think terms like free market and free enterprise are much closer to what I stand for.

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  3. I agree completely JC. Capitalism is the only moral system consistent with our beliefs, and is only “In your face,” to those who oppose liberty. Who cares what they think.

    Capitalism, free enterprise, liberty, laissez-faire, yeah, talk dirty to me babe.

  4. Capitalism is not synonymous with free enterprise. I’d be happy to toss it under the bus. In fact parts of capitalism are opposed to the idea of liberty.

  5. I once suggested to Humphreys that he should adopt the term ‘Free Anarchist’, as a better (i.e. shorter) substitute for anarcho-capitalism. A Free anarchist is a Free-enterprise-loving Anarchist, as you probably guessed.

  6. Terje,

    I agree with you. “Capitalism” does have a provocative connotation and as such is good for getting attention. After all, Ayn Rand used “selfish” in order to provoke.


    My point is that the word “Capitalism” has alternate meanings to our usage, many of which make our case confusing to people that aren’t fully familiar with it. Shem is right; historically speaking many uses of “Capitalism” have not been as synonyms for free markets. I do like laissez-faire as a term though, everything sounds sexier in French after all, and it specifically refers to a situation without economic intervention.

  7. According to, the word has its origin around 1850? Does this mean Marx actually popularized this word!? That would suck.

    According to Wikipedia: “The initial usage of the term capitalism in its modern sense has been attributed to Louis Blanc in 1850 and Pierre-Joseph Proudhon in 1861.[24] Marx and Engels referred to the capitalistic system (kapitalistisches System)[25][26] and to the capitalist mode of production (kapitalistische Produktionsform) in Das Kapital (1867).”

    Prior to this however the word capitalist simply meant one who owned capital. I would have thought that this was referring to private ownership.

    I like the word capitalism, maybe because it’s confrontational to many.

    Objectivism stresses individual rights (and therefore property rights) as being fundamental to the definition of capitalism.
    So I guess Objectivism has a different focus or emphasis compared to others.

  8. The Oxford English Dictionary, credits William Makepeace Thackeray for the first published use of the word ‘capitalism’ in his novel, The Newcomes (1853-55),

  9. I had to look up the meaning of antagonym. I initially thought it meant a word that antagonised some people, which would make it perfect for capitalism.

    I like antagonising socialists and their fellow travellers, so I’ll use the word capitalism for that purpose when the opportunity arises. Most of them are way too ignorant to understand nuances such as differences from free markets. And when they use the word fascist, they are merely indicating they don’t agree with you. They don’t know what that means either.

  10. Please, Tim, let’s not bring Objectivism into Political philosophy! A love of gold, for instance, is subjective (we don’t need it), but the lure of gold has powered economies for centuries! Australia really got started with the gold rushes! I have never heard an Objectivist explanation of our subjective love of gold and silver.
    If you can do so, here is a great forum- go ahead! You might win us over!

  11. Nuke,

    Objectivism does not contradict the subjective theory of economic value. Moral value and economic value (exchange value) are entirely different questions.

    Also, gold has many uses. We might not “need” it for mere biological survival, but Objectivist morality is survival-and-flourishing, not mere biological survival.


    I would go so far as to argue the Objectivist definition is not just a different emphasis, but a completely different concept. Free market economics, as we understand it, is a totally different concept to the Marxist definition of “capitalism.”


    I love to shock and provoke as well (surprise!) but I don’t like creating unnecessary confusion. And, unfortunately, when a word has several different definitions, all of which tend to ignite arguments and disputes, there are many situations when avoiding this confusion is probably helpful.

  12. Pinochet was a capitalist and a fascist. And there is a historical precedent for “capitalist” nations to embrace cronyism and big-business (over free business). Institutionalising power is what fascism is about, and in many nations capitalism married with state intervention has lead to institutionalised power and artificial monopolies.

    The ownership of capital in large parts of America is not as a result of freedom. What Rand never mentions is that Dagny Taggart likely came into her wealth off the back of slave ownership, limited liability and inheritance laws.

    Capitalism, as it exists in Western nations, leads to the entrenchment of vested interest. Truly free enterprise is what is truly inspiring.

  13. Shem, capitalism does NOT lead to entrenched wealth- monopoly does that. Capitalism means the accumulation of capital, wealth, but you have to work hard to get it, and to keep it- you can’t just rest on your laurels! There’s an old proverb- from shirt-sleeves to shirt-sleeves in three generation. One Generation would work hard to build wealth, the next would grow used to it, and the third generation would fritter it away. Capitalists would like to become entrenched, but that could only happen if they get the government to control competitors, or take over the industry through national boards. The government is the problem, not capitalists.

  14. You don’t need to work hard to get it if you’re born into it. And if you’re born without it then the only capacity you have to take part in capitalism or access resources is by contracting out your labour and contracting yourself to rent or mortgage to have a chance of land ownership.

    It is in the interests of most capitalists to form cartels and to lobby government to prop them up. Not to mention how capitalists have successfully lobbied government on areas like intellectual property and corporation status.

  15. Nuke,

    Shem’s statement that “Capitalism, as it exists in the western nations” should have been a sufficient clue to indicate that Shem is not talking about free market economics (i.e. what we promote).

    He’s talking about the kinds of corporate-statist mixed economies that have been called “Capitalist” in the past.

    What Shem is talking about can be best analyzed in Evolutionary Economic terms. When an entrepreneur first creates a new industry/product, this is by definition a (non-State backed) monopoly. But it is a good, Schumpeterian monopoly. Shem is talking about those kinds of old, institutionalized corporate cultures like IBM and the rest of the managed-economics behemoths that dominated America in the 1950’s; precisely the kinds of corporations that Schumpeter railed against as destroyers of free markets. These institutionalized corporate entities that don’t create novelty become increasingly bureaucratic. Since institutions like to perpetuate themselves (“organizational inertia”), they will eventually demand favors from friends in high office. They will, essentially, become rent-seekers; the bad kind of monopolist and oligopolist.

    I agree with you that this kind of situation only can come about in a mixed economy, and that free markets are the best defense we have against this kind of calcified institutionalized stasis-economy. But none of this changes the fact that there is a sizeable amount of political theory which uses the term “capitalism” to refer not to free market economics but rather to a completely different thing.

    I don’t necessarily agree with everything Shem does. For one I do see a case for intellectual property and I do support the right of individuals to pass on their property to whomever they wish, free of taxes. I also think that even if, yes, the property rights structure we currently have was not a product of genuine free markets, we will probably have to make do with it and simply go for the best set of institutional arrangements we can make. But he is not, from the perspective of semantic history, using “Capitalism” in an unprecedented fashion.

    It is to avoid confusions like the one currently occurring that I am suggesting we libertarians adopt a preference for the use of the term “free market economics” over “capitalism.”

  16. Andrew- I’m not actually sure where I stand on inheritance tax. I was more pointing out a problem rather than a solution. Intellectual property I see as an area of contention and mostly opposed to. It’s generally been a way for companies to subvert the freedom of individuals to share and create knowledge.

    Basically I think it’s important to look at how property rights have been assigned and enforced throughout history. Capitalism relies on property rights and the enforcement of contracts. It is important to realise when and where government and courts have chosen to enforce property rights and enforce contracts.

    Corporations have no responsibility other than to maximise profits (and are legally penalised if they don’t try to in the US). This means they are not interested in free markets or non-violent behaviour, it means they will inevitably form cartels and engage in rent seeking behaviour.

  17. Shem,

    The same could be said about partnerships and trusts.

    What matters is what they are allowed to do. A free market is the best bulwark against cartels etc. OPEC for example is run by Governments, not firms.

  18. I’m not saying government is a better solution.

    But there is scope for lots of different ways to arrange society within a stateless or minimal state society. None of these ways will be forced through violence, but that doesn’t mean we should think of all statelessness as equal.

    Capitalism without government is better than capitalism with government. Just like socialism without government is better than socialism with government. And capitalism with government is better than socialism with government. But capitalism still has historical notions that can result in unfree societies. Free enterprise, or free markets, as a term do not carry the same baggage.

  19. You don’t need to work hard to get it if you’re born into it. And if you’re born without it then the only capacity you have to take part in capitalism or access resources is by contracting out your labour and contracting yourself to rent or mortgage to have a chance of land ownership.

    Sorry Shem, but that’s just rubbish. Many of today’s filthy rich started with *nothing*, and worked for *nobody* on their way to becoming rich.

    Bill Gates founded Microsoft directly after dropping out of university. Richard Branson founded Virgin Records when he was still in school.

    They started with no capital and they got their first finance the standard way, by borrowing money.

  20. Dick Smith started the same way- he worked hard to become rich. Some capitalists do manage to handle inherited wealth, but not all- you have to think that Murdock’s empire is held together by Murdock, and when Rupert becomes a celestial (or infernal) inhabitant, his company will break up.
    I hope that my idea, the mobile button, will make me a wealthy person- and if it does, I will invest my wealth wisely in libertarian causes, so if I have any children, they can be given shares in any companies I manage to own.
    Don’t go bad-mouthing wealth, Shem. If you get rich, you don’t want to feel guilty about it and give it all away, do you?

  21. Borrowing works under a set of fairly achievable circumstances. But a loan still requires assets, income, family or a brilliant plan with great investment returns.

    That style of entrepreneurship is what is to be commended, though. Most brands of capitalism (even the companies of those men) are much less about freedom and innovation once they become incorporated and grow into a hierarchical structure.

  22. And Nuke, I’m not bad mouthing wealth so much as how it is acquired. Libertarians would all be opposed to feudal lords that obtain their wealth by illiberal means, but it’s important to look at unjust acquisition of wealth within capitalism, or to at least question it.

    Big business may be better in a lot of ways than big government, but it’s not a hero and so often the two are in bed with each other, anyway.

  23. Well, as a Christian, I oppose all this bed-hopping anyway. Who knows what socialist diseases you might pick up? and your last sentence backs up my comments about being against monopolies. As an inventor, I hope for a limited-life patent, but I am against monopolies as such, and against cartels, etc.

  24. I find myself increasingly relying on the phrase ‘the private ownership of property’, following Mises.

    ‘Capitalism’ smacks of cheap sloganism to me – it is too often used to embody all the supposed evils of the modern world while reserving the beneficial to some other ‘superior’ form of social organisation.

  25. todd, the right word for your beliefs might be ‘Proprietism’. As a Proprietist, you might be a Capitalist, or you might not. Capitalism seems limited to monetary wealth, and proprietism embraces that concept as a subset, but would not be limited to only money. Both are good terms, but proprietor, and proprietist, are broader.

  26. Nuke, Im not sure that capitalism can be defined in narrow ‘monetary’ terms. The fact that wealth is usually calculated in terms of money amounts doesnt make them the ends. Rather, money on the one hand is a convenient means for economic calculation, and on the other a means of acquiring consumables either immediately or at some point in the future. Few acquire money for money’s sake – it only has any real value in what it can achieve for us.

    That is, of course, assuming that I havent totally mistaken your meaning.

    My own views are more moralistic than functional – get the morality right and the economics can fall where they may. To my mind a dysfunctional but moral system is superior to a function system built on great evil. Private property is moral, and it is a happy circumstance that it is also functional.

  27. In fact, tom, you explained my own views on capital and money quite well! I agree that money, or capital, should be a means to a goal, which will usually be property.
    But I think you are incorrect on one point. A moral virtue is hard work, or industry, and hard work usually results in much money, which is usually considered good. So I think that a correct moral code will gear us to long-term rewards. This is not the code of criminals, who get wealth, but can’t plan on having as long a life as moral non-criminals.

  28. I dont disagree with that at all. Hard work is a moral virtue, and our morality has to have an element of functionalism to it, otherwise we would be likely to piously slide off the planet as a species.

    Where I was coming from were my own views on who owns the individual and who can lay claim to the products of their labour and effort. Unsuprisingly, the conclusion that I have reached is that only the individual can own their life and the proceeds of their life – none may morally claim the life or property of another person. To my mind, this is a more important principle than any functionalist argument.

    The interesting thing about respecting each other’s property is that it creates conditions where cooperation is easier, capital is developed, and the greater well-being of all is achieved. But this is a mere happy coincidence.

    Of course, that is not to say that it is the be all and end all of morality – there are moral functions built into how we use our property and how we interact with others and their property.

  29. Sheldon Richman’s lecture is pretty much interesting in this video titled “Capitalism Vs. free Market”

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