I've been thinking on this issue ever since I read Fernand Braudel's extraordinary "Civilization and Capitalism" trilogy. Braudel, a doctrinaire Marxist in aradigm and vocabulary if not quite in practice, distinguishes effortlessly between "free markets" and "capitalism" -- indeed, to him they are opposites. While I had tended to look at subsidies, tarriffs, regulations, and the like as flaws in a capitalist order, I realize increasingly that these are simply epiphenomena of capitalism, and distinguish capitalism from actual free-market liberty.
I think that Marx got it right. Capitalism is the dedication of the political means to the projects of holders of capital. This is a system quite different from free markets, and is in fact doomed for largely the same reasons that Marx identified. Because at any particular moment the current capitalist classes must oppose innovations that would devalue their existing capital, they can deploy the political means to stifle such innovation. Innovation is the revolutionary class struggle; the political class opposes it with the political means. In the absence of productive innovation, efficient markets rapidly degenerate into zero-sum games. An analogous argument about diversity worsens the situation even more.
I believe that advocates of liberty and of free markets must separate themselves from this system of social organization, and I believe that it has for better or for worse taken the name "capitalism." The efforts of revisionists like Rand notwithstanding, liberty has lost the war to define capitalism. The more that we speak of capitalism as an ideal, the more we make asses of ourselves.
I favor liberty and free markets, and their child prosperity. I oppose capitalism and socialism, and their bizarre hybrid, fascism.
by Grant Gould on February 4, 2005 at 1:47 PM