How to Define Capitalism

Capitalism is a socialist word, in that it was invented by and is used predominantly by socialists. Socialism is defined by its opposite, but as you may have noticed, not only can most socialists not define socialism, but they can’t define capitalism either. I was a socialist for over a decade, and I was able to define socialism at age ten: socialism is the collectivisation of the means of production. Socialists have no excuse for not being able to do this.

But Sasha, you just said that socialism is defined by its opposite, and the word “capitalism” is nowhere in your definition!

First of all, it’s not my definition, and second, while the word “capitalism” is not present in that definition, the concept of capitalism is there. However, I cannot simply define capitalism in a single sentence just yet. I will later in this article, but before I present said definition, it is necessary to understand its etymology.

Though the term “capital” has its origins in Latin to refer to wealth or property, Scottish economist Adam Smith (1723-1790) was, as far as I was able to find out, the first to use the term to refer to tangible assets in a strictly commercial context. Production requires both labour and capital, and capital may take the form of something as small as a drop spindle or something as large as a foundry. That’s it. Capital is the means of production. Smith, however, did not coin the term “capitalism,” and instead used the phrase “commercial society.”

The term “capitalism” didn’t appear in the English language until circa 1850, around the time of the initial publication of The Communist Manifesto, which was originally written in German. Karl Marx (1818-1883) used the phrase “kapitalistische Produktionsweise” in his early works to refer to a commercial or industrial society, which is German for “capitalist mode of production,” though it is usually translated simply as “capitalism.” While the exact word “kapitalismus” doesn’t appear in Marx’s work until much later, it is fair to say that the term “capitalism” was Marx’s own invention (or if not his, some other socialist’s), and he identified two main types. “Bourgeois” capitalism is the private ownership of capital, and “state” capitalism is the social ownership of capital. In other words, state capitalism is socialism according to Marx. From this, one could say that Marx defined capitalism as “industrial production,” but then that would mean all production in an industrial society is capitalist, but if everything is capitalist, then nothing is capitalist. Not only that, but such a broad definition is directly refuted by other socialists, including the ostensibly Marxist ones:

Five modes of production are known to history: primitive communal, slave, feudalist, capitalist, and socialist. – Iosif Stalin, On Dialectical and Historical Materialism

But Sasha, Stalin was a fascist dicta-

National Bolshevik, actually. Accuracy, please! Anyway…

Karl Marx did not merely advocate for the government to seize the means of production from the bourgeoisie, in fact, far more important to him was for the proletariat to seize control of the government. Marxists are not the only socialists to advocate for a “workers’ state,” by the way. A lot of what Marx said in the previous paragraph (all of which can be found in The Communist Manifesto, incidentally) was later echoed by Adolf Hitler.

Now then, because Marx was a neo-Hegelian and absolutely, positively LOVED contradictions…

What constitutes dialectical movement is the coexistence of two contradictory sides, their conflict and their fusion into a new category. – Karl Marx, The Poverty of Philosophy

My dialectical method is not only different from the Hegelian, but its direct opposite. To Hegel, the life process of the human brain, i.e. the process of thinking, which, under the name of the “the Idea,” he even transforms into an independent subject, is the demiourgos* of the real world, and the real world is only the external, phenomenal form of “the Idea.” With me, on the contrary, the ideal is nothing else than the material world reflected by the human mind, and translated into forms of thought. – Karl Marx, afterword to the second edition of Das Kapital Volume 1 (1873)

…his working definition of “capital” changed over the course of the nearly two decades between writing The Communist Manifesto and Das Kapital. Before I get to that, however, I need to rant about the translation for a bit. Volume 1 of Das Kapital, for some weird reason, is also known by the title Capital, but that’s inaccurate. “Kapital,” in this context, means either “money” or “capitalist,” the latter of which is obviously a noun. “Das Kapital” therefore means either “The Commodity of Money” or better yet “The Capitalist.” Das Kapital, is, in its entirety, a repudiation of bourgeois culture, not just of the capitalist system that it supposedly created. It is a hit-piece against capitalists, not just against capitalism.

But Sasha! Marx was actually impressed by what capitalism managed to achieve, he simply lamented that the workers weren’t able to fully appreciate its benefits!

Correct, Sammy Strawman! This is why it is so important to point out the changing definitions over time. Das Kapital also makes a lot more sense if you read On the Jewish Question first, which Marx wrote roughly a quarter-century earlier.

Nowhere in anything he wrote does Marx provide a single sentence definition of capitalism, but one can nonetheless be constructed from his endless complaints about it: capitalism is an economic system in which money is used to make more money. The exact phrase “whereby out of money to make more money” appears throughout Marx’s writing, including Das Kapital. By this time, Marx was defining “capital” not simply as “assets,” which could include both the means of production as well as cash, but instead as “the money commodity.” Thus, Marx’s critique of “capitalism” isn’t a critique of the industrial economy nearly as much as it is of the banking system that the entire economy is shackled to, which is, oddly enough, something that a lot of industrialists also criticised.

A business that makes nothing but money is a poor business. – Henry Ford

If capitalism is a system that makes money from money, then any economic activity that makes a profit could be considered a “capitalist” activity. In other words, anyone making a profit in their own life (such as a “wage slave” saving up enough money in order to eventually break free from the system) could be considered a capitalist, which is certainly where Marx’s logic leads, but it is not remotely what he said.

It is not because he is a leader of industry that a man is a capitalist; on the contrary, he is a leader of industry because he is a capitalist. – Karl Marx, Das Kapital Volume 1

In case you didn’t follow that, Marx basically said that a man doesn’t become a capitalist by being an industrialist, quite the opposite, he becomes an industrialist by practising capitalism. This directly contradicts the logic in the saying “what we have is socialism for the rich and dog-eat-dog capitalism for the rest of us,” an Astorism^† which is a bastardised version of a quote commonly attributed to Martin Luther King, Jr, but was more likely coined by Charles Abrams. The actual state of a neoliberal mixed-market, a.k.a. “corporatist,” economy is “privatise the gains, socialise the losses,” (a saying I was unable to determine any possible origin of) which, if anything, is “capitalism for the rich, socialism for the poor” by Marx’s reasoning. What you will notice, if you haven’t by now, is that Marxists have this strange tendency to believe the exact opposite of a lot of what Marx actually wrote, but I cannot fault them too much for not reading Das Krapital, because it’s terrible. Anyway, both Marx and his cult of personality are wrong about how business works.

In most businesses, money is exchanged for labour and materials, which are then exchanged for more money. However, using Marx’s logic, the purest form of capitalism is to eliminate the middle step and simply make money by shuffling money around and not providing anything of value in return. “Pure capitalism” in the Marxian sense, is the trading of commodities… like futures. Buying and selling, making a profit without adding any value, that is pure capitalism. With all that said, why would anyone participate in such an obvious grift? Simple: the Labour Theory of Value, which both Adam Smith and Karl Marx subscribed to, is complete bollocks. Profit isn’t theft, because value is subjective. To be fair to both Smith and Marx, however, the currently prevailing Subjective Theory of Value wasn’t proposed until 1871. Nonetheless, it is now widely accepted that products and services are worth exactly what people are willing to pay for them. As prices rise, either from corporate greed or government meddling in the economy (mostly the latter, let’s be honest), people will, of their own volition, forbear from buying more things and instead live a more modest life or do things for themselves, potentially even bowing out of the state economy and joining an underground “parallel economy,” a phrase coined by anti-Soviet dissident Václav Havel for what the State calls “the black market.” The proletariat has always been adaptable and conservative, rather than revolutionary, as workers typically have a much more amicable relationship with their employer than with the State.

There is another definition of “capitalism,” and that is the one used by self-described capitalists (which I am not): capitalism is a free market, or the voluntary exchange of labour and property. When socialists say “capitalism has failed,” they are obviously not talking about a free market, because that’s not what we have. They seem to think they are (the phrase “unfettered capitalism” gets thrown about a lot), they seem to think that free markets create poverty, but this is demonstrably false. Instead, what is happening is that government interference in the market, rigging it in favour of the multinational corporations (hence the term “corporatism”) reduces competition, creates oligopolies and eventually monopolies, and they create poverty, something that an actual free market with healthy competition doesn’t.

The Socialist Grift Feedback Loop

[Smug look] “But the market is capitalist, right?”

Yes, the market is currently capitalist according to the Marxist definition. This is why, as a free market proponent and someone who despises both corporate welfare (a.k.a. “lemon socialism”) and central banking, I refuse to call myself a capitalist; for now, I’m calling myself an agorist, from “agora,” the Greek word for “market.” The solution to corporate greed is a single word that no socialist ever wants to hear: deregulation. Regulations are known as “monopoly protections” among libertarians of all stripes precisely because they are designed to lock newcomers out of the market. “But only government can break up monopolies!” I hear you say, to which I reply with “who enabled the monopolies to begin with, Sophocles?!” Luckily, I don’t need to explain this to the anti-state lefties:

This is more or less accurate, though I’d argue that lower taxes and smaller government would lead to fewer people needing welfare to begin with. So no, I’m not actually in favour of people starving.

“Too big to fail” businesses need subsidies in order to survive for one very simple reason: they are too bloated and inefficient to be able to maintain sound business practises in an ever-changing market. Therefore, since they can’t earn their revenue, they rely on taxpayer money, and with their revenue guaranteed by the government, these companies have no incentive to improve their business practises. Do I need to repeat the story of the battleship and the speed-boat? The real struggle isn’t between owner and worker, as Marx stated, but is instead between the productive class and the non-productive class. I will let MentisWave elaborate:

Plenty of business owners are in the productive class, while the non-productive class includes – and I can already hear REEEEing in the background – welfare queens (“On the Dole and Proud of it”), career politicians, vulture capitalists like Larry Fink, people who are two of these at once, like Mitt Romney, and of course, useless organisations like the World Economic Forum (inventor of the term “degrowth,” hint hint).

Right, enough of that. Hopefully I can take a break from ranting about economic systems and share something of a loftier nature in next week’s article, especially since it ties into today’s topic in a roundabout way. Nonetheless, if you enjoy economics lessons or basic political theory without the higher philosophy behind it, be sure to let me know, and I’ll come up with something both entertaining and informative. Na shledanou!

* Demiourgos: Greek word meaning “artisan,” from which is derived the term “demiurge,” which adherents of many esoteric religions use as a title for the creator of the real material world, and which Gnostics use in lieu of “devil” as a term for the ultimate evil

† Astorism: one of many words for a saying that has been plagiarised and subsequently adapted so many times that its exact origin is uncertain; this word in particular is used for sayings commonly uttered by the individual after which it is named