Let’s say that we believe that there are only two possible systems of organizing the economic forces of society: capitalism and socialism. It would seem from experience and logic that there is no contest. The experience with socialism has been one long and grueling disaster for every country that has tried it, while capitalism has created prosperity consistent with human rights.
And yet I suspect that this is not what people mean when they refer to capitalism with derision. What they mean is a system of social organization that is driven by an engine dominated by large capital currying favor with an insatiable consuming public. Such a system is seen—and rightly so if that’s all there is to it—as crude, unenlightened, and contrary to all high ideals.
I can concede that what I just described is a bad system. In fact, I’ll go further and agree that such a social system is undesirable and contrary to high ideals. My problem here is the identity of such a system with the term capitalism, which might be used more broadly to refer to the economic component of the voluntary society.
Capitalism is really a misnomer. Under a voluntary economic system, capitalists have no power of compulsion. The primary influence over what is produced, how, and in what quantity are consumers. It is they who reward or discourage the production decisions of capitalists. If you know anyone in business, you know that consumers must always be the first concern. The second concern is the workers who make production possible. A capitalist who serves himself the first fruits just isn’t going to last very long in the market. Capitalist actions that are successful in the long run are always other-directed.
Perhaps the real problem is the term itself. We can gain great conceptual clarity by just letting it go and setting on some other term, such as the market economy or the business economy. But even these phrases are seriously limited because they do not account for the fullness of economic activity in society. They only cover what has been called (from the nineteenth-century) “catallatics“ or the science of monetary exchange.
But monetary exchange covers only a part of overall economic activity. Providing for and managing a household is economic and yet the internal matters of a household do not usually involve monetary exchange. The massive charitable sector in the United States is funded by people giving contributions and receiving no direct good or service in exchange. This is how American houses of worship are funded, for example. For that matter, large business firms are places where the primary means of cooperation is not monetary exchange. We cooperate based on need and desire.
Should non-catallactic action be included in our definition of what constitutes economic behavior? Most certainly! A major part of the work of the Acton Institute consists in the effort to expand our understanding of what economic is. It is not only stock markets, corporate buyouts, and large chain stores. It is also houses of worship, families, extended communities, civic associations, soup kitchens, homeless shelters, and volunteer efforts of all kinds.
I have no problem in saying that these are part of the capitalist order, rightly understood. But the more important point is that they are part of the social order that respects private property, human rights, and the freedom of association. We must not think too narrowly on these questions. Economics, rightly understood, encompasses the whole range of human behavior. This is why it is such a mistake to speak with such disdain for what is merely a reflection of mutually beneficial exchanges and voluntary behaviors.
If we want to give up the term capitalism to appease its critics, so be it. But let us replace it with something even more poignant and descriptive of the reality of which we speak: freedom.