The capitalist manifesto: capitalism, by any other name, could smell sweeter

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Capitalism has created more prosperity and progress for more people than any other system in human history. On the 30th anniversary of the official end of the Soviet Union, join the National Post and the Financial Post in a series saluting the old-fashioned but awesome power of the free market system.

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The people at Gallup reported last month that 60% of Americans have a favorable impression of “capitalism,” a part that has changed little over the past 10 years despite all the horrible things that capitalism is supposed to have done recently. Socialism, on the other hand, is 38% the same as the US government – and also roughly where Joe Biden is now, other polls show. One change that could explain Biden’s predicament is that since 2018 more Democrats, 65%, have a favorable view of socialism than of capitalism (52%). With such a pro-socialist party behind him, it’s no surprise that the president of a country where 60% of the people genuinely love capitalism is going through a rough patch.

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I doubt capitalism scores that high in Canada, or in most other rich countries except the old Soviet satellites. Among the Canadian intelligentsia, the word is rarely uttered without aerial quotes or even without a sneer. Moreover, it is the rare businessman who declares himself a proud capitalist or a defender of the capitalist system. Business people seem almost embarrassed to be a part of capitalism. Our big awakened banks are clearly awakened. One of the main reasons for this – in an exquisite irony first emphasized by Joseph Schumpeter in 1942 in Capitalism, Socialism and Democracy – is that the unprecedented and unprecedented wealth generated by capitalism allows the existence of a “clerical Anti-capitalist, as economist Deirdre McCloskey calls it, who dominates the media and academia and now largely rules elite opinion.

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Among the Canadian intelligentsia, the word is rarely uttered without aerial quotes

Considered objectively (as Marx himself would have made us do), the word “capitalism” presents obvious problems. Although Marx did not invent the word – the French utopian socialists did – his main work was of course Das Kapital, or simply Capital, a word which has at least two meanings in economics: either money and other financial assets. , or “real capital”, that is to say, machines, buildings, roads, bridges and so on (not to say that financial capital is not so real: but you cannot not bang your toe on it to prove it’s there).

In basic economic theory, capital works with labor – the other main “factor of production” – to produce production. Except for misanthropists, an ism based on capital is necessarily less simpatico than one based on its fetish human partner: work.

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But besides being inherently unsympathetic, “capitalism” lacks the essence of the system that bears this name. The Romans and the ancient Egyptians had capital, the Chinese dynasties also had a lot, some still functional: you can walk on the Great Wall. But they didn’t have capitalism. They had, as McCloskey writes, “illiberal” economies “run by landowners, guildmen, swordsmen and clergy” (which modern interventionists would restore, in part restored, by handing over power to ” new governmental hierarchies of experts and Party cadres. ”as she puts it).

No one had capitalism until three centuries ago, when it first erupted in Holland, then Britain and the Anglosphere, thanks to the gradual implementation of policies recommended by Adam. Smith in The Wealth of Nations (1776): “Peace, easy taxes and a tolerable administration of justice. By “easy” taxes, of course, he meant low taxes – which meant really low taxes since when he wrote down the tax-to-GDP ratio, as we would call it, did not exceed five percent.

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What we mistakenly call “capitalism” is, if not exactly a system of economic anarchy (assuming anarchy is a system), then a system that is very out of control. There are government imposed rules against denigrating or stealing their property, and if you want to believe that government is the key to all the good things that come with it, go ahead and believe it. But the point is that beyond these two functions, the government cannot have a plan for the economy, does not necessarily recognize that it is “An economy”, rather than a myriad of voluntary interactions of buyers and sellers, and, most importantly, does not allow existing elites to co-opt laws and regulations to restrict these spontaneous and decentralized interactions. In this way, capitalism is fiercely and relentlessly democratic and equalizer. The owner of a new Indian restaurant that I first visited a few weeks ago spoke about how other Indian restaurants in the area had objected to him getting a license. The capitalist point of view is that he shouldn’t need a license and that they should be the last to have a say in whether he gets one or not.

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McCloskey, one of the most skilled rhetoricians among economists and the only one to have written a book on rhetoric, has over the years suggested several replacements for “capitalism,” a word which, she writes, “must be withdrawn. of history and economics. thinking.”

One is “innovism” or “liberal innovism”, which focuses on the storm of innovation that the Smithian system has unleashed: a factor of 30 – a factor of 30! – increase in the well-being of the average individual after 10,000 years of more or less subsistence farming. Capitalism is particularly good at innovation, not because of capital, but because free societies (you listen, President Xi?) Are great at generating ideas and letting people follow them. Free people, free markets, to state the Smithian Creed most succinctly. A lot of people don’t like Elon Musk, Time’s Person of the Year, but are there better examples of someone driven by ideas that change the world?

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Are there better examples of someone driven by ideas that change the world?

Another of the replacement terms suggested by McCloskey is “commercially tested improvement” or “commercially tested improvement,” phrases that don’t sing but capture how the essence of capitalism is that if you have an idea you can “try it out”. That is, try it out and see if it works. If so, you could become incredibly rich, but only by improving the lives of others. This is the bourgeois accord, to use the title of McCloskey’s most recent work: “Leave me alone and I will make you rich.”

Another substitute for “capitalism” is “flourishing”, which happens to societies when they take the capitalist approach to development. Edmund Phelps, Nobel Prize-winning economist, published a book in 2013 entitled: “Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change”. Blossoming is also not generally limited to business, but extends to the arts, letters and other pursuits, as happened in the West when societies became more open, less restricted and more rich.

Unfortunately, these various proposed replacements for “capitalism” have themselves been tested in the market and have so far proved insufficient. None took. Perhaps the easiest thing to do is to keep the old tarnished usage, but tweak it so that we understand something different from what we traditionally have.

Or, recognizing that capitalism has been the source of most material progress for the past 250 years, perhaps we should just call it “progressivism.”

Financial post