Ask someone in the science of accounting or finances to define “capitalism” and the most common answer will be “private ownership of the means of production (a.k.a. capital).”
The typical recipients of media indoctrination will hear or read that explanation and images of elite moguls wearing top hats and smoking cigars pop into their minds. “Fat cats.” Monopolists. Robber barons.
The mental associations spawned by media and academic spin are not the province of this post. Rather, it is my purpose to explain that there is a philosophical aspect of the concept of capitalism that is far too often missed, even by advocates for the ideology.
What does one call a system of exchange in which all the participants are free from coercion? If Alex has an extra pig and needs cotton, and Betty has extra cotton and could use a pig, what do you call the system that allows these two to exchange their surplus without anyone being allowed to use any form of force, including just a threat of force?
If the farms producing the excess pig and cotton are owned by the state, that is socialism. The pig-producer does not own his farm or any excess pigs he makes, and neither does the cotton farmer own her lands or machinery, or the extra cotton she grew because of harder work or smarter techniques. If either of these producers refuses to produce, or to turn over their production to the state for distribution, they are coerced with fines, imprisonment, even execution in extreme cases. There is little free choice in this system, and what choice there may be is trivial.
If Alex and Betty “own” their farms, but must turn over all production to the state for distribution … they suffer the liability of investing in and maintaining their businesses, but have no control over the results of their labor … that is fascism. (And you thought fascism was just about wearing black uniforms and committing ethnic cleansing. Thank your school and television for sustaining that association for you.) The distinction between socialism and fascism is that socialist systems require that the state maintain the means of production, where fascism allows and requires the individual business to do so. Otherwise the coercive elements are essentially the same.
What do you call a system where the means of production are all owned by a monarch, a church, or monarch/church-approved nobility? That’s feudalism. In feudalism the state is the monarch and/or church, and the delegated princes of the monarch and/or church. Again, the coercion is essentially the same. Persons failing or refusing to produce or to surrender their production face punishment up to death.
Now, imagine a science fiction realm where no one is forced to buy any specific thing from any specific person or business. Imagine that no one is forbidden from producing left-handed purple thong extractors if they desire to do so. The state wants more guns manufactured, but no one is required to make the weapons, and no one is forbidden from making the weapons if they choose to do so. What is this system called?
Under coercive systems, if Alex has surplus pigs he needs to get rid of, Betty may be required by the state to hand over her extra cotton … even if she already has more pigs than she needs … even if she has no surplus cotton … even if she is a vegan with no use for pigs. Also, if Alex makes more pigs than he needs, the coercive authority may take his pigs and assign them to others without any compensation to Alex at all.
STATE: You had a pig you didn’t need. Don’t be greedy. Clark has no pigs at all and needed that pig more than you did. What … are you selfish or something?
ALEX: But I need cotton!
STATE: Fine. We’ll give you Betty’s this time. But you really need to make more pigs. One extra pig is sort of puny, don’t you think?
BETTY: Hey! I was all set to trade my cotton with Denise for some apples…!
STATE: More greed and self-centeredness. You should both be ashamed.
Alex and Betty then choose to stop over-producing because there is no reason to make more than they can use. If they have a need they may simply petition the state for someone else to meet it and not have to work extra in order to compensate anyone else. However, under socialism where Alex and Betty do not “own” their means of production at all, the state decides how much is to be produced. Quotas are established and if the state sets the levels too low, not enough pigs or cotton are produced to go around … or of the levels are set too high pigs are substituted for apples (which are insufficient this season), or destroyed as waste, or pig producers are unable to meet the ridiculous number and are punished (coercion).
What is it called when Alex didn’t make enough pigs to even meet his own needs, but Betty shares her excess cotton with him anyway, with an understanding that when Alex recovers he’ll reward her with pigs? Well, without the idea of a later reward, that’s charity, and note that it is voluntary. If Alex threatens Betty for her extra cotton, that’s theft. (If the state does it, it’s socialism or fascism.)
Capitalism, as a philosophical issue, is the recognition that a free individual has the right to do business if and as he or she pleases without force. Alex may not threaten or injure Betty in order to make her buy his pig, or surrender her cotton. If she doesn’t want his pig, he cannot have her cotton. If she very much wants his pig but cannot meet his price for it in cotton, she cannot have his pig. Neither party is forced to make the exchange … nor is either party prohibited from making an exchange. If Alex had a bumper crop of pigs and needs very much to unload them, he may offer Betty two pigs for her cotton, especially if she doesn’t have much extra and can’t part with it for just one pig. Alex and Betty are free to choose their rate of exchange, as well as whether or not to swap at all.
Philosophically speaking, capitalism is the system of voluntary exchange of value. It is, so far, the only such system. All other systems so far devised require coercion. (I am hedging because I’m not sure how much effort has been made to come up with a non-capitalist system that is also fully voluntary … and I cannot think of one myself, but that is not conclusive at all.)
People who lament the “evils” of capitalism are deeply unaware of what it truly is, and without intending to, they are advocating a restraint of choice and the systemic application of force. Most of these people will also self-identify as “pro choice” on social issues, ironically.