It is often presumed that the American form of government creates economic conditions that are "capitalist" in nature, but is this really the case? Even without looking to history, does the logic of this claim even make sense on its face?
Let's find out.
Capitalism
First of all, what is capitalism? I'd personally prefer to obtain a definition from the works of Ludwig von Mises or Murray Rothbard, but let's defer to the definition in Webster's dictionary for the purposes of this article, if only because it will be less controversial for the statists in the audience. According to Webster's, capitalism is "a way of organizing an economy so that the things that are used to make and transport products (such as land, oil, factories, ships, etc.) are owned by individual people and companies rather than by the government."
Note that you won't find anything about taxation or regulation in this definition.
But what is an economy? What are companies? What is government?
Economy
Let's flesh this out a little bit, starting with "economy". For the sake of consistency, let's continue to use Webster's. According to Webster's, an economy is "the process or system by which goods and services are produced, sold, and bought in a country or region."
"Economy" is therefore a term used to describe the purposeful actions called "production" and "exchange" among individual people in aggregate.
Company
Okay. So what is a company? According to Webster's, a company is "a business organization that makes, buys, or sells goods or provides services in exchange for money". I think we're safe in assuming that any such "organization" is likewise made up of individual people (as opposed to dolphins or space aliens).
Government
Great, so we have definitions for "capitalism", "economy", and "company". Beautiful. So... what about "government"? Again, from Webster's: "Government is the group of people who control and make decisions for a country, state, etc."
This definition seems a bit circular (especially since Webster's gives almost identical definitions for "government", "state" and "country"), but it looks as though "government", like "economy", is also a way of describing the purposeful actions of each individual in a group in aggregate. Given the phrasing of the definition, we can infer that their control and "decision making" is said to apply to everyone and everything within an entire geographical region as opposed to just their own bodies and property, as the circular definition might seem to imply at first.
So what does "control" mean in this context? It seems necessary to dig a little bit deeper.
Control
Webster's says control is "to direct the behavior of (a person or animal) : to cause (a person or animal) to do what you want", which begs the question: how many different ways are there to get people to do what you want? Correct me if I'm wrong, but there are exactly two: persuasion and coercion.
Which method do the individuals calling themselves "government" use to control people?
Rule by Compulsion
If you refuse to pay a tax, do IRS agents meet you at a diner for coffee and debate? If you get caught driving without a license or registration, do you get a casual phone call from a police officer about how you really ought to consider getting a license and registration? If you fail to comply with a regulation, do you get a Christmas card from a code enforcement officer? The answer here is clearly a resounding "no fucking way".
You get threatened with the ever-escalating use of force until you submit or are dead.
In other words, "government" is a group of people in a geographical area who use violence and aggression to force people to do what they want. Got it.
Bringing Everything Together
Now that we've covered our bases, let's put it all together:
- Capitalism: when things are owned, produced and exchanged by individuals and companies/business organizations (which are made up of individuals); not government.
- Government: when a group of individuals coordinate the use violence and aggression to control other individuals and property within a geographic area.
Interesting... Doesn't that mean "government" and "capitalism" are mutually exclusive systems of organization? Wouldn't that make both "capitalist government" and "state capitalism" a contradiction in terms?
We unfortunately still have more questions than we started with.
A Closer Look
Let's take a closer look at the individuals calling themselves government to see whether their other actions line up with the previously given definition of capitalism. Would it be controversial to suggest that communism is the antithesis of capitalism? I would suggest that it isn't. According to Webster's, communism is "a way of organizing a society in which the government owns the things that are used to make and transport products (such as land, oil, factories, ships, etc.) and there is no privately owned property."
Okay, so that's pretty straightforward. If the actions of these individuals can be best classified as "communist", that would suggest that they aren't proponents or enablers of capitalism whatsoever. To flesh this out a little bit, let's enlist the help of a well-known communist thought leader, Karl Marx. Since he's dead, we'll be referring specifically to his work, "the Communist Manifesto".
American Government and the Communist Manifesto
Let's take it plank by plank.
1. Abolition of private property in land and application of all rents of land to public purpose.
You mean like property tax? You mean like the monopoly on keeping record of land title?
2. A heavy progressive or graduated income tax.
You mean forcing people to pay a penalty for being productive? Speaks for itself.
3. Abolition of all rights of inheritance.
Well, there are huge penalties and taxes on inheritances, and some liberals have called for outright abolition of inheritance through a 100% inheritance tax.
And technically, if someone is only allowed to keep a certain percentage of an inheritance, it means the individuals calling themselves "government" already consider themselves entitled to the entire thing.
Perhaps they think you should be glad and thankful that they let you keep any of it.
4. Confiscation of the property of all emigrants and rebels.
Isn't that what happens when you refuse to submit to the income tax mentioned in plank two?
5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.
This describes the Federal Reserve pretty accurately.
6. Centralization of the means of communication and transportation in the hands of the state.
Like roads? Like subways? Like TSA at airports? Like the NSA? Like the FCC?
7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.
Like the production capital used to maintain roads and bridges? Like "shovel ready" projects? Like the EPA?
8. Equal obligation of all to work. Establishment of Industrial armies, especially for agriculture.
They might get a pass on this one, but I could be wrong.
9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country by a more equable distribution of the population over the country.
Like Monsanto, which enjoys a plethora of government protected monopolies? Like tax-subsidized industrial farming?
10. Free education for all children in government schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc. etc.
"Free" is an interesting word but this plank certainly speaks for itself.
Results
Okay, so wait... Not only are "government" and "capitalism" mutually exclusive, but the people calling themselves "government" ALSO hit at least 9 out of 10 planks on the communist manifesto?
Given that the demonstrated preference of these individuals is for communism, the antithesis of capitalism, how could any of the actions in which they choose to engage have possibly created economic conditions which are "capitalist" in nature? Wouldn't attempting to create economic conditions that are capitalist in nature through the imposition of communism be a performative contradiction?
As Ned Flanders would say: Indeedily doodily.
After further investigation, it looks like our initial findings were correct. "State capitalism" and "capitalist government" are each a contradiction in terms, making the assertion that capitalism stems from government, or aggression and violence, logically incoherent.
The short answer? Yes. The long answer? Also, yes.
Excellent Post @jaredhowe , I also follow Austrian economics, instead of this Keynesian disaster that central banks are following. Enjoyed the read.
As always, you've managed to succinctly unpack that which eludes most of (all of?) those who are blinded by their devotion to a centralized ruling class. Bravo!
I agree on the description of capitalism but it doesn't exist in the current government. The people own the state is just but a definition to make them believe that the government is willing to take care of its constituents.
It's good to think that it is but people are not blind, they are not deaf either. It doesn't mean we don't to be in the government, we just wanted treatment should be fair for all.
"State capitalism" = Crapitalism and the crap runs downhill....
Thanks for the prestige
Demonstrating preference? Rothbard correctly diagnosed that the fundamental problem with government is that taxpayers don't demonstrate their preferences for public goods like they demonstrate their preferences for private goods. Rothbard's fundamental error was assuming that taxpayers can't demonstrate their preferences for public goods like they demonstrate their preferences for private goods. Voila! Here you are!
In order to fix the government... you simply need to convince Netflix subscribers that they would greatly benefit from the opportunity to use their monthly fees to demonstrate their preferences for the shows and movies that match their preferences.
great article -- i have the 10 planks of the communist manifesto in a frame and on a wall so that I am reminded just how close we are -- keep on struggling against the closed minds who believe themselves to be open!