TGIF: Which Way — Capitalism, Socialism, or Something Else?

by | Mar 3, 2023

TGIF: Which Way — Capitalism, Socialism, or Something Else?

by | Mar 3, 2023


Big questions are being thrashed out these days. One of the biggest is this: do we want capitalism or socialism? Unfortunately, the online discussions I’ve witnessed have been, to put it as politely as I can, terrible. (For an example, see this one between Reason senior editor Robby Soave and political commentator Briahna Joy Gray, cohosts of The Hill‘s online show “Rising.”)

Let’s start with the words themselves. We’re in a linguistic mess. It’s only a slight exaggeration to say that nearly everyone has his own definition of capitalism and socialism. So when people get together to hash things out, they ought to begin by saying what they — the discussants, not the words — mean. That doesn’t seem to be an unreasonable demand.

It’s pointless to debate what words “really mean.” There are no platonic definitions. Language is usage, which is what dictionaries have traditionally reported on. and word usage changes. So we should dispense with that conversation or else time will be wasted.

As I say, we’re in a linguistic mess. Bernie Sanders is the country’s best-known “democratic socialist.” Asked during one of his campaigns what democratic socialism is, Sanders said something like, “It’s an economy that works for everyone.” Real informative, Bern. Thank you very much.

The fact is that most younger Americans today seem to think that socialism is just a bigger welfare state. For example, they would probably say socialism would include Medicare for all, a program in which the government would pay everyone’s medical bills through taxation. But that’s not what socialist ideologues have traditionally had in mind. For Marx and his socialist predecessors, socialism meant the abolition of private property, money, and hence the market: the state would own the factories, hospitals, and other means of production. I don’t think most people who call themselves socialists today favor that.

How about capitalism? As I wrote some years ago, as the word is used, capitalism

designates a system in which the means of production are de jure privately owned. Left open is the question of government intervention. Thus the phrases “free-market capitalism” and “laissez-faire capitalism” are typically not seen as redundant and the phrases “state capitalism” or “crony capitalism” are not seen as contradictions. If without controversy “capitalism” can take the qualifiers “free-market” and “state,” that tells us something. [I discuss the many problems with the word capitalism here.]

It tells us that the word itself is a muddle. The word capitalism has been called an “anti-concept,” a term I associate with Ayn Rand, who wrote:

An anti-concept is an unnecessary and rationally unusable term designed to replace and obliterate some legitimate concept. The use of anti-concepts gives the listeners a sense of approximate understanding. But in the realm of cognition, nothing is as bad as the approximate….

But the word capitalism is worse than an anti-concept because it’s not merely approximate; it contains contradictory elements. As philosopher Roderick Long writes:

Now I think the word “capitalism,” if used with the meaning most people give it, is a package-deal term. By “capitalism” most people mean neither the free market simpliciter nor the prevailing neomercantilist system simpliciter. Rather, what most people mean by “capitalism” is this free-market system that currently prevails in the western world. In short, the term “capitalism” as generally used conceals an assumption that the prevailing system is a free market. And since the prevailing system is in fact one of government favoritism toward business, the ordinary use of the term carries with it the assumption that the free market is government favoritism toward business.

And similar considerations apply to the term “socialism.”…

Ironically Rand, like Ludwig von Mises but unlike F. A. Hayek, favored the name capitalism for her “unknown ideal.” But Rand, again like Mises, left no doubt about what she meant. The other day I caught a YouTube short of Rand talking about capitalism in which she said she meant “real, free, uncontrolled, unregulated, laissez-faire capitalism, not the mongrel mixed economy we have today.” (I prefer self-controlling and self-regulating to uncontrolled and unregulated, but let that go. See my “Regulation Red Herring.”)

If people define their terms before plunging into the debate, the time will likely be more fruitfully spent. If I were in such a discussion, I would insist that the issue is not whether we really have capitalism, but whether we, individually, are fully free, politically and legally, to produce, consume, invest, and exchange in unmolested self-regulating markets.

And I would ask the self-described socialist if he favors the abolition of property, money, and markets. If he says no but favors Medicare for all, housing subsidies, and regulatory agencies, I would say he sounds like an advocate of a mixed economy in which markets exist but are routinely manipulated by state personnel aiming to effect outcomes they believe that voluntary exchange will not achieve.

As for the actual socialist, I’d start by saying what H. L. Mencken said:

The chief difference between free capitalism and State socialism seems to be this: that under the former a man pursues his own advantage openly, frankly and honestly, whereas under the latter he does so hypocritically and under false pretenses.

People with an overwrought sense of romance love the phrase, which Marx did not originate, “From each according to his ability, to each according to  his need.” But how does that not describe a nightmare world? Under socialism, would each individual freely decide what he thinks his abilities and needs are? (What is a need?) If so, central planning is out of the question. So some presumptuous person or bureaucracy with dictatorial powers would make those decisions. Oh happy days! The promised withering away of the state is about as likely as an honest politician.

I can’t see that socialism has anything at all to be said in its favor. Even Benjamin Tucker, the prominent American free-market anarchist, who was seduced by the valueless labor theory of value, said, “[State] Capitalism is at least tolerable, which cannot be said of Socialism or Communism.”

What the free-market advocate must not do is let his interlocutor get away with claiming that “our capitalist system” is the free market. When, for example, Briahna Joy Gray says, as she did in the discussion I linked to above, that homelessness or (undefined) inequality is capitalism, she must be called to account with a question: “But are people free in the market?” Considering how thoroughly government bureaucracies at every level encumber necessarily win-win voluntary exchange, it can’t be the free-market order that’s causing homelessness. Coercive corporate power, which Gray and her ilk see as the prime culprit in so many ills, derives from coercive political power and cannot exist without it — thus, it’s what I call the most dangerous derivative.

Influencing the language is like herding cats. Nevertheless, I’d love to come up with a single word ending in ism for what free-market champions favor. We could simply say, “the free market,” “laissez-faire capitalism,” or Adam Smith’s marvelous term “the system of natural liberty,” but they seem clunky in some sentences. “Individualism” has its virtues, but it’s not quite on point in this context because markets are founded on social cooperation and the division of labor. “Enterpriseism” is contrived, although it makes the point. I’ll keep working on it.

For Further Study

Sheldon Richman, “Capitalism versus the Free Market” (video), Future of Freedom Foundation, 2010.

Sheldon Richman, “Capitalism and the Free Market, Part 1 and Part 2, Future of Freedom Foundation, 2010.

Sheldon Richman, “Is Capitalism Something Good?” Foundation for Economic Education, 2010.

Sheldon Richman, “Wall Street Couldn’t Have Done It Alone,” Counterpunch, 2011.

Roderick T. Long, “Corporations Versus the Free Market, Or Whip Conflation Now,” Cato Institute.

Roderick T. Long, “Rothbard’s ‘Left and Right’: Forty Years Later,” 2006.

About Sheldon Richman

Sheldon Richman is the executive editor of The Libertarian Institute and a contributing editor at He is the former senior editor at the Cato Institute and Institute for Humane Studies; former editor of The Freeman, published by the Foundation for Economic Education; and former vice president at the Future of Freedom Foundation. His latest books are Coming to Palestine and What Social Animals Owe to Each Other.

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