People constantly debate about economics and politics. Sometimes they even fight about it. But these discussions are often confusing, unclear, and ambiguous. Why?
One simple vocabulary word can be misleading: “capitalism.”
Before deciding whether capitalism is good or bad, one must first discover what capitalism is. To complicate matters, it soon becomes clear that there are different types of capitalism — so different from each other that they are nearly opposites.
So when Ben Shapiro makes a radical statement like “Capitalism is morally preferable to socialism,” the meaning of his statement can vary, depending on which definition of ‘capitalism’ the reader has in mind.
The word ‘capital’ is used to denote, in the simplest sense, money. More specifically, it refers, in economic contexts, to money used to form “the means of production,” i.e., money invested to create jobs, factories, businesses, etc.
It is not possible to have an economy without capital: without value used to create production. Even socialist and communist economies have capital. So, in that sense, communism is a type of capitalism! That might seem like a confusing statement, but only because, in everyday conversation, the words ‘communism’ and ‘capitalism’ are used vaguely.
Friedrich Engels, who worked closely with Karl Marx, wrote, “State ownership of the productive forces is not the solution of the conflict, but it contains within itself the formal means, the key to the solution.” Many communists, therefore, desire “state capitalism” — i.e., the government ownership of the means of production, which is the government ownership of factories and businesses.
Wilhelm Liebknecht, an early follower of Marx and Engels, wrote that “State Socialism is really State capitalism.”
To clarify matters, an adjective can precede the noun ‘capitalism,’ as in “state capitalism,” or “crony capitalism,” or “free market capitalism.”
“State capitalism,” as used in the above quotes from Engels and Liebknecht, is a type of communism or socialism, in which the government owns and controls much or all of the means of production.
“Crony capitalism” is a system in which government leaders cooperate and collaborate with those who own large amounts of capital. In “crony capitalism,” governments make regulations which favor large and influential businesses, and which do not create a fair or neutral marketplace for economic competition. “Crony capitalism” is a corruption of the system, and the role of the government fails to be impartial and unbiased. In “crony capitalism,” people cannot rely upon the government to be an objective referee or adjudicator between competing businesses. Instead of being neutral, the government in a “crony capitalist” system works to help some businesses and hinder others.
On the one hand, “state capitalism” leads to shortages in the marketplace and leads to a loss of freedom and prosperity. On the other hand, “crony capitalism” leads to a lack of opportunity for ordinary people: they can’t have a fair chance of competing with those who have a special relationship with the government. Crony capitalism also leads to higher prices and lower quality in production.
“Free market capitalism” corresponds to the everyday notion of a “level playing field” or a “fair game.” In free market capitalism, individuals have freedom, and have the opportunity to make offers: to bargain about prices. Individuals have the freedom to choose which type of work they want to try, and for which employer they might work. They also have the freedom to start their own business. Fair competition between businesses leads to lower prices and higher quality. Individuals have opportunities to seek higher wages, and thereby raise their standards of living. When the rules are fair, and fairly enforced, everyone has a chance.
Because the word ‘capitalism’ gets used in these different ways, debates become garbled. Those who say that they are in favor of capitalism are really in favor of free market capitalism; those who say that they are against capitalism are actually against crony capitalism. Those who say that they are in favor of socialism or communism do not realize that they are actually in favor of a type of capitalism.
It “free market capitalism” that Ben Shapiro has in mind when he writes:
Capitalism is the greatest single force for the empowerment of human beings in the history of mankind. Free markets defeated the global scourge of communism, which was responsible for the impoverishment of half of mankind and the murder of a hundred million people; free markets raised nearly the entire globe out of abject poverty.
In a historical perspective, capitalism is often linked to the Industrial Revolution. This link is real, but also indirect. On the one hand are the advances in technology and inventions which radically changed work and life; on the other hand is the financial system which enabled this creativity and inventiveness.
Although the Industrial Revolution is sometimes linked with images of urban poverty and hardship, in many places it led in fact to a rising standard of living for the lower and middle classes. In the Soviet Socialist system, however, it led to shortages and lower standards of living. The former was a free market system, the latter was a form of state capitalism.
One of the principles that distinguishes “free market capitalism” from the other types of capitalism is that freedom is related to prosperity. Where there is freedom for people to make their own economic choices, standards of living rise. In general, human beings desire both freedom and prosperity; it turns out that those two are almost the same thing.
Capitalism is about the notion that you are not a slave. You own your own time, and you own your own labor, and you may do with it precisely what you wish. The miracle of capitalism is that such freedom doesn’t result in billions of artists finger-painting — it results in billions of people investing their time and effort into creating products for one another. Capitalism results in a sort of reality-forced altruism: I may not want to help you, I may dislike you, but if I don’t give you a product or service you want, I will starve. Voluntary exchange is more moral than forced redistribution.
To take away people’s freedom is to lower their standard of living. To control people is to impoverish people. To willingly inflict both control and poverty on people is morally questionable.
