The American Illusion of Capitalism

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"He who desires or attempts to reform the government of a state... must at least retain the semblance of the old forms, so that it may seem to the people that there has been no change in the institutions, even though they are in fact entirely different from the old ones." - Nicolo Machiavelli

Americans love to tout the power of American capitalism whether as a blessing or a malediction. To the Left, capitalism is faulted for all that ails you, hence the New Deal, the War on Poverty, the Great Society and similar such schemes are means of saving the people from the ravages of laissez faire capitalism. To the Right, capitalism is under constant assault from Socialists/Statists. The sad truth is both are wrong and in many ways for the exact same reasons.

The main problem lies in the term itself. For the word “capitalism” like “capitalist” says nothing of ones views on matters of political economy. The assumption common to those blessed only with “conventional wisdom” to borrow a phrase from Lord Keynes, is that “capitalism” is somehow opposed to “socialism”; that it epitomizes the “laissez faire” order. If this is true, “capitalists” would naturally be inclined towards the “free enterprise system”, the “extended order” (Friedrich Hayek), or the “liberal order of the economy” (Gunnar Myrdal).

The evidence suggests that “capitalism” is in no way antithetical to Socialism. In fact, many Socialists throughout history have been entrepreneurs and industrialists and quite successfully at that. These are the men and women who have financed the permeation of Socialism the world over, notwithstanding the fact that they have usually been the first targets of the Socialists once coming to power. Churchill once derided this tendency as “feeding the crocodile in hopes of getting eaten last.” But I digress. The confusion occurs I believe because of a general ignorance of political science which leads many to the erroneous assumption that all Socialism is Communism and therefore all Socialists are opposed to “capitalism.” Fact is, most Socialsits favour some degree of private enterprise. What they object to is the free and unfettered market system. In other words, they oppose Hayek’s “extended order” and Mydral’s “liberal order of the economy.” Consider if you will the vestiges of a market order which existed under Germany’s Zwangswirtschaft Socialism, Italy’s Fascism, Great Britain’s Fabianism or America’s New Deal.

In the US, so-called “capitalists” have been the chief proponents of Socialists or statists policies since at least the 1930’s. Many US corporations and entrepreneurs, always quick to don the banner of “free enterprise” when convenient, have done more to usher the US along the path of planned economy than any Leftist political activist would ever have attempted. Each beseeches the government for protection from competition both domestic and international. Each demands laws which mandate the use of its products or services but always “in the public interest.” Each seeks special privileges under colour of law. Whatever term you use to describe it, this is not “capitalism.” I choose to call it what it really is, “mercantilism.” That damnable system so prevalent in Adam Smith’s day which prompted him to inquire as to the nature and cause of the wealth of nations. And, yes, that same system which John Maynard Keynes, resurrected in the 20th century. It’s an easy mistake of course. Mercantilism has the appearance of capitalism but in reality it is a system of “every man for himself, at the expense of his neighbour.”

Perhaps Americans need accept the fact that they long ago lost any traces of a free enterprise system. America doesn’t have to protect some nebulous conception of “capitalism” she has only to abandon “mercantilism” and make a hasty return to the “free enterprise” system.

Frederic Bastiat said it best, “the fight we face is not with the committed Socialist, rather it is with those who do not realize they are Socialists.”