The word “capitalism” was coined by the socialists, often used as a pejorative, and has historically described a system of state-granted privilege and plutocracy. This is the definition to which most people subscribe, and which I would argue prevails today. A contrary definition is one that is synonymous, or nearly synonymous with “free markets”. My best guess is that this “definition” is a the result of a revisionist attempt to hijack the term “free markets”.
Bill Wurst, the author of this post highlights these two competing definitions of “free market capitalism” and argues that the term is not an oxymoron (although strictly speaking it may not be an oxymoron, I believe that it is certainly a null program). The first definition is prevalent in particular among American libertarians:
- In one sense, “free market capitalism” may be viewed as a system in which individuals make voluntary arrangements involving the exchange of capital.
Although Wurst does go further with this definition (every imaginable transaction) it’s silly and sloppy to put emphasis on “capital” when (and I think he’d agree here) a truly free market is a “system in which individuals make voluntary arrangements involving the exchange of goods and services (i.e., not limited to “capital” but also to include non-capital goods, labor, land, etc.). Unfortunately, this definition of the term has never been widely accepted, and to this day 99 out of 100 people would probably not even come close to approximating this elegant definition.
The second definition of the term free market capitalism, he goes on to say:
- In another sense, “free market capitalism” may be viewed … as a phrase combining words interpreted via historical realities and implications. In other words, “free market” implies voluntary arrangements, whereas “capitalism” has become (rightly so) known as a system in which business and coercive state forces collude to serve whatever arbitrary interests may be lobbied for by the businesses or championed for reasons of power by the politicians.
Words have meanings! And in order to have any meaningful, relevant definition, words must be “interpreted via historical realities and implications” regardless of whether we like them. Whereas the former definition sloppily suggests that the properties of “free markets” dominate the term and carelessly ignores the historical and popularly understood definitions of “capitalism”, the latter definition is much more precise in defining both terms separately. Additionally, Wurst admits that this definition is the one that is popularly held, and as the language belongs to the people and their common use, I see no reason to pretend that it means something else.
So why bother trying to apologize for “capitalism” when “free markets” are what you (and I) really wish to obtain? That is, if you really do believe in “free markets”, then you should probably distance yourself from the word “capitalism”.
If it’s a free market, it’s not capitalism. And if it’s capitalism, it’s not a free market.
Those of us who believe in free markets need to stop trying to save the word “capitalism”. If anything, we need to save “free markets” from “capitalism”, because the two should never have been joined.