Chafuen: The Sad Decline Of The Word "Capitalism"

The Sad Decline Of The Word "Capitalism"

Published by Alejandro Chafuen in Forbes on May 1, 2013.

Late last week in Orlando, a passionate champion of economic freedom, Rep. Trey Radel (R-Fl.) said, “Capitalism has turned into a dirty word” to a gathering of 500 pro-capitalist think tank operatives during the closing speech of the 36th Resource Bank. The conclave is one of the two largest annual events for U.S. market-oriented think tanks; the other being organized by State Policy Network. 

If “capitalism” is viewed as a dirty word, should think tanks “clean it up” or abandon it? Like other Americans who were not born in the United States, I still mourn the loss of the word “liberal.” In most of the world the word means nearly the opposite of what it means here. I doubt that the word capitalism will be “stolen” but should we mind if it gets lost? During my college years I was more than satisfied with the arguments in favor of capitalism provided in “Capitalism: the Unknown Ideal” by Ayn Rand, and Ludwig von Mises’ The Anti-Capitalist Mentality. In his great treatise, Human Action, Mises recognized that “the system of free enterprise has been dubbed capitalism in order to deprecate and to smear it.” He chose nevertheless to keep the word and redeem it. 

Although Karl Marx did not create the word, it was after his work “Das Kapital” (1867) when the term “capitalism” began to be widely used to describe an economic system based on private property as the means of production. Marx remains the great labeler: “capital,” “the capitalist” and “the capitalist system of production” appear repeatedly in his writings.

 Ludwig von Mises was never shy about engaging in intellectual battles with the other side on their turf and with their choice of words. He wrote that the concept of capitalism “if it means anything, it means the market economy” and that modern capitalism is “essentially mass production for the needs of the masses.” Audiences view terms such as “a system of free enterprise,” the “market economy,” and “mass production for the needs of the masses,” much more favorably than “capitalism.”

 In other regions of the world, the word also has its problems. When Hernando de Soto, founder and leader of the Instituto Libertad y Democracia in Peru, was doing his field work, he asked small businessmen and street vendors if they were capitalists. Their answer was “No! Capitalists are those up there” (“los que están arriba”), which means those who are above or control “the law.” This is similar to today’s term “crony capitalism.”

 Scholars from think tanks and the academy made important contributions to refocus the definition of the word and move it beyond the material aspects of economics. Israel Kirzner finds that discovery, or the unforeseen way to create wealth, is the essence of capitalism. The American Enterprise Institute’s Michael Novak finds that the human mind is the treasure and foundation of capitalism. He makes an effort to use as root the Latin word caput, or head. Discovery, innovation, creativity are the essence of capitalism while the private ownership of the means of production provides its environment but not its ends. “The distinctive, defining difference of the capitalist economy is enterprise: the habit of employing human wit to invent new goods and services, and to discover new and better ways to bring them to the broadest possible public,” says Novak.

 Unfortunately, Kirzner and Novak are in the minority. Until their arguments crowd out the others, more allies of freedom will avoid the term. Going back to the Heritage Resource Bank meeting, only one person from almost 500 represented an organization which uses “capitalism” in its name: “Enlightened Capitalism.” Intellectuals seem obliged to use adjectives: “state capitalism” and “crony capitalism” for the bad; “conscious” or “democratic” for the good. The great investor, Sir John Templeton, decades ago began using the term “people’s capitalism” for a system which allows and encourages wide dissemination of property and wealth. That also has power. His son, Dr. Jack Templeton, correctly points out that capitalism was seldom used during the era of the ascendancy of free enterprise ideas from the Founding Fathers through the beginning of the 20th century.

 Not everyone is giving up. One example is Fred L. Smith, chairman and founder of the Competitive Enterprise Institute, who has launched the Center for Advancing Capitalism. One of his goals is to mobilize businessmen to promote capitalism. For Smith, there’s no need for adjectives – only a capitalism constrained by rule of law and limited government deserves that name. On a similar crusade internationally, the former Czech Republic president, Vaclav Klaus, believes that giving up on the word capitalism is tantamount to surrendering to the enemy. Like Klaus, I am not fond of giving up on battles and although I seldom use the word, I still like the concept of “capitalism” to describe some aspects of the economic system. I sometimes even wear a tie that Steve Forbes gave me with the inscription “capitalist tool.” 

Should we care if we lose the term capitalism? Assessing its popularity, or lack thereof, I recently reviewed the mission of 25 leading market oriented think tanks around the globe. I could not find a single one using the term. “Free enterprise,” “free-markets” “free-economy” and better yet “free society” will continue to crowd out “capitalism,” if not as a system, at least as a word.

 Read full article at Forbes.