Economics 101

Why I Dislike the Word ‘Capitalism’

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Editor’s note: Dr. Anne Bradley was recently featured in an interview with Praxis Circle. Below are a few highlights of that conversation, which you can watch in full here.

What is capitalism?

Capitalism is a word that I don’t like. You might say, “Wow, that’s silly because it’s on the front cover of your book.” In fact, when we were thinking about the book, I said, “I don’t think we should use the word ‘capitalism.’” But the whole point is that people are starting to really question capitalism—again, and have I think forever. Okay we’re going to roll our sleeves up and get dirty and talk about what capitalism means. 

Capitalism is a term that was originated by Karl Marx. It’s a derogatory term. If you know anything about Marx, he was someone who was very worried about excessive wealth accumulation. He believed that work was inherently alienating. So when I get in a commercial relationship with my employer, there’s a probability, a likelihood, that I’m going to be alienated from my work, that I’m going to be a pawn or a cog in this machine. There’s no fulfillment in it. This is very different from the narrative that we talk about when we talk about work. Karl Marx says the dirty capitalists, the holders of capital—that’s where this term comes into being.  

Capitalism as a system. What do we mean? And I want to be very clear about the economic definition of this. The economic definition of capitalism is the private ownership of the means of production. Well, what does that mean? It means that private individuals as firms hold property rights. And they make investment decisions based on their assessment of what people want and need. Meaning the United States government doesn’t own all the farms. The United States government doesn’t own all the manufacturing plants. Apple is a private company and they make stuff. How do they make those decisions? Well they try to figure out what consumers want. Sometimes they’re right, sometimes they’re wrong. Capitalism is about that system of profit and loss. 

What’s profoundly important about capitalism, which Marx didn’t understand, is that it’s driven by consumers, it’s driven by you and I. If none of us go into Apple (the store), it’s not going to exist anymore or they’re going to have to change the way they do things. That’s the power of consumers. It’s very different than what Marx thought a capitalist system looked like. 

So capitalism as a system hasn’t been around that long. It’s very much correlated with the onset of the Industrial Revolution. And I would even say that there’s no system today that we can observe that’s perfectly capitalistic, meaning all individuals privately hold the means of production.

(Watch this part of the interview here.)

Why do you dislike the word “capitalism?”

The reason I do not like the word “capitalism” is because it means a thousand different things to a thousand different people. So if we were to go out on the street and do a man-on-the-spot interview and say, “What does capitalism mean?” you would have every answer under the sun, from the one I just gave (which is the economic answer) to “it’s the rich getting richer at the expense of the poor.” 

That’s why I don’t like the word, because I think when you’re saying, “Let’s talk about capitalism,” immediately in your mind that’s an image, an idea, a definition. So when we talk about capitalism, we’re all starting from a different place and our biases are loaded into that. 

I prefer to talk about a market-based society. Where are markets allowed to operate and where are they constrained and what’s the range over that? That’s less political or less ideological, so I think the problem with the word “capitalism” is it incites all anger and emotion, and then it’s hard to talk about whether it’s good or not.

(Watch this part of the interview here.)

Does democratic capitalism have goals?

I don’t know that there are specific goals to democratic capitalism. I think there are broad goals to democratic capitalism. What do we mean when we say that? We mean, we don’t actually know what’s going to come next. 

Let’s take each word at a time. Democracy means representation, people have agency, I elect my political representative to enforce the rules that I already agreed to. Democracy means political representation, which is a ward against tyranny and oppression. Capitalism means private decentralized people decide how they’re going to make their investments and we have no idea what’s going to come next. 

So living in a world of freedom means there’s a lot of predictability in the rules of the place but it means there’s a lot of unpredictability in terms of knowing where the world is going to go. We don’t know what the next invention is going to be. We don’t know what life is going to look like in twenty years. That’s exciting! It’s exciting to not know. It’s exciting to have people have the right incentives to be coming up with the next big ideas.

Those are the broad goals of democratic capitalism, but the goals are not specific other than protecting the rule of law, protecting people in their relationship against predation by the state, and protecting markets, allowing markets to bloom.

(Watch this part of the interview here.)

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