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Re: “Libertarians Are Confused About Capitalism”

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To Mr. Charles Davis,

I read your article in Salon about libertarianism and capitalism. I would like to, respectfully, disprove the definition of capitalism you provide as the base of your criticism of free-market capitalism.

This is what you wrote in your article:

“If one defines capitalism as a system designed by and for the interests of those who hold capital (what it is), capitalism is what the United States has today.”

That is, with all due a respect, a terrible definition of capitalism. A system designed for those that hold capital can be applicable to socialist and corporatist regimes as well. Defining capitalism in this day and age should be very simple, the consensus is: private ownership over the means of production.

Market socialism, a popular alternative and rival to market capitalism, is a system where the government or the collective (whoever that may be) takes ownership of the means of production. Those that control capital, in other words, are those in the state. Under that system, it is perfectly possible for socialist governments to manipulate the economic system to favor their interests, the same can be done for the current U.S. economy. In fact, it is rare to see incidences in history where governments or those that control capital do not manipulate markets. It is more the norm than the exceptional. A good example of this is progressive rise of the U.S. steel industry; how the government previously used trade barriers to protect their industry at the expense of other industries. In essence, other industries had to pay a tax to keep the steel mills alive, something that should not happen if a business has, more or less, stability and a sound operation. There are other examples of this too, highlighted in Economics In One Lesson by Henry Hazlitt (despite the author’s bias, the examples he provides are facts, not opinion.)

The form of capitalism you criticize, free-market capitalism, is similar to secularism; it is the more or less separation of government and the economy. To put this into context however, there is no such system in the world that has a pure free-market capitalist economy. None has ever existed in the common era and none will ever likely exist. Although there may be some anarcho-capitalists and other groups out there who support a pure market economy, but that is the minority among those that support capitalism. Milton Friedman himself, arguably the face of free enterprise economics, has not argued in favor of a pure market economy, in fact he was a monetarist; Ron Paul, who you criticize in your article, along with the a good majority of Austrian economists do not support monetarism but prefer other means like the gold standard.

What exists in the United States right now, and in practically ever country in the world with an economy, is a mixed-market system. Government intervenes in the form of taxes, some regulations on safety (including health and the environment), trade barriers, etc., and these exist and will continue to exist to some degree whether or not one agrees with them. (Unless the state is abolished but that’s a whole other argument.)
The U.S. economy is less “free-market” (see note) in some ways than Canada and some European and Scandinavian countries. While this is not necessarily a bad thing, the way in which government has intervened in the economy is more often to favor the largest corporations with considerably high interest groups and lobbyists in Congress; companies receive these benefits in the forms of bailouts for failed policies, subsidies (agriculture, tax credits, etc.), protectionism that ultimately benefits select industries, and many other forms of big business welfare. This is a problem that very few people in legislative power seem keen on tackling.
But back to the main point of the article, you do, in all fairness, explain some problems with capitalism that exist, that’s legitimate and I take no issue with disagreement, in fact I welcome it. Criticism of systems is never a bad thing, the mistake made with this article is poor research skills on part of distinguishing capitalism from every other system. It may not seem like a big deal, but this premise is the undoing to the entire argument the article makes. The points are null and void.

I would like to add that the intention of letter is not to offend, but to respectfully acknowledge a flaw with the premise of your article’s main argument. 

Thank you for taking the time to read this,

Nazzy S.

Note: By less free I mean lower regulation and ease of doing business, not necessarily high taxes, though the two are not mutually exclusive. The index study was conducted by the Heritage Foundation, a right-wing think-tank, however their methods for uncovering and interpreting data is quite transparent and matches with a similar study done by the Fraser Institute.

[This post was originally published in The Midnight Zone.]