What Is Capitalism?

What Is Capitalism? 

We here offer 12 definitions and descriptions of capitalism. Two are from widely used encyclopedias, five are from leading anti-capitalists, and five are from leading pro-capitalists.

Two encyclopedia definitions 

Britannica: “Capitalism, also called free market economy or free enterprise economy, economic system, dominant in the Western world since the breakup of feudalism, in which most means of production are privately owned and production is guided and income distributed largely through the operation of markets.”

Merriam-Webster: “Capitalism is an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.” 

Five anti-capitalists on capitalism and free markets

Noam Chomsky, professor and anti-capitalist public intellectual: Capitalism is “a term that refers, in practice, to a system of public subsidy and private profit, with massive government intervention in the economy to maintain a welfare state for the rich.” (Twitter, December 17, 2020, https://twitter.com/noamchomskyT/status/1339591180086988804)

Karl Marx, communist theorist: Marx never defined capitalism, though he offered many descriptions and claims about its important features. A sample: “capitalist production comprises conditions independent of good or bad will, conditions which permit the working-class to enjoy that relative prosperity only momentarily, and at that always only as the harbinger of a coming crisis.” (Capital, 1893, Vol. 2, Ch. 20, p. 415.) “Capitalist production, therefore, develops technology, and the combining together of various processes into a social whole, only by sapping the original sources of all wealth—the soil and the laborer.” (Capital, 1867, Vol. 1; Penguin 1976 edition, pp. 637-8) As a result: “In bourgeois society, capital is independent and has individuality, while the living person is dependent and has no individuality.” (The Communist Manifesto, 1848, Chapter 2.)

Robert L. Heilbroner (1919−2005), leading socialist intellectual: Capitalism “is the driving need to extract wealth from the productive activities of society in the form of capital.” That capital is in turn reinvested, so “Capital is therefore not a material thing but a process that uses material things as moments in its continuously dynamic existence” ((The Nature and Logic of Capitalism, 1985, pp. 33 and 36-37).

Pope Francis, head of the Catholic Church: Capitalism is “an economy of exclusion” in which “everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape. Human beings are themselves considered consumer goods to be used and then discarded. … In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts …” Instead, capitalism enshrines a “selfish ideal” and develops “a globalization of indifference.” Consequently, “the culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase. In the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.” (Evangelii Gaudium, 2013, sections 53 and 54) 

Adolf Hitler, National Socialist politician, in a 1927 speech: “We are socialists, we are enemies of today’s capitalistic economic system for the exploitation of the economically weak, with its unfair salaries, with its unseemly evaluation of a human being according to wealth and property instead of responsibility and performance, and we are all determined to destroy this system under all conditions.” (May 1, 1927; quoted in Adolf Hitler: The Definitive Biography by John Toland, 1976, p. 306)

Five pro-capitalists on capitalism and free markets: 

Murray Rothbard, economic theorist and historian: “‘Free market’ is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services.” (“Free Market,” Concise Encyclopedia of Economics)

Ayn Rand, philosopher and novelist: “Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

“The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.” (“What Is Capitalism?” Capitalism: The Unknown Ideal, p. 19)

Ludwig von Mises, leading economist, on “the beginnings of modern capitalism” as a break from feudalism:  “There were some persons among those outcasts, among those poor people, who tried to organize others to set up small shops which could produce something. This was an innovation. These innovators did not produce expensive goods suitable only for the upper classes; they produced cheaper products for everyone’s needs. And this was the origin of capitalism as it operates today. It was the beginning of mass production, the fundamental principle of capitalistic industry. Whereas the old processing industries serving the rich people in the cities had existed almost exclusively for the demands of the upper classes, the new capitalist industries began to produce things that could be purchased by the general population. It was mass production to satisfy the needs of the masses.” (1958 lecture later written up as Economic Policy: Thoughts for Today and Tomorrow) 

Friedrich von Hayek, Nobel Laureate of Economic Sciences 1974: “Capitalism is not only a better form of organizing human activity than any deliberate design, any attempt to organize it to satisfy particular preferences, to aim at what people regard as beautiful or pleasant order, but it is also the indispensable condition for just keeping that population alive which exists already in the world. I regard the preservation of what is known as the capitalist system, of the system of free markets and the private ownership of the means of production, as an essential condition of the very survival of mankind.” (Foreword to The Road to Serfdom, 1944)

Milton Friedman, Nobel Laureate of Economic Sciences 1976: “Freedom requires individuals to be free to use their own resources in their own way, and modern society requires cooperation among a large number of people. The question is, how can you have cooperation without coercion? If you have a central direction you inevitably have coercion. The only way that has ever been discovered to have a lot of people cooperate together voluntarily is through the free market. And that's why it’s so essential to preserving individual freedom.” (Interview for Commanding Heights, PBS)

Selected by Stephen Hicks, 2021.