A word can have multiple, conflicting connotations, and misunderstandings can arise when we don't agree on meanings. Capitalism is one of those loaded terms because it has been used to describe different things. To be clear, by capitalism I mean the institutions of a society which enable free, voluntary, competitive commerce and the private accumulation of assets from production and trade. Those institutions protect the life, liberty and property of the people. That accumulation of assets is called capital, another term for wealth, and individuals and societies accumulate wealth by producing more than they consume. Those which don't produce more decline or remain poor.
All institutions and business organizations in a primarily capitalist society don't necessarily support the ideas of competition, free trade, or the protection of private property. Many powerful corporations, unions, and non-profit organizations are set up as anti-competitive or monopolistic predators with the blessing and support of state or national governments. Those organizations are not capitalist in any useful sense, since, while they do accumulate assets, or capital, their success relies on political connections rather than market relations. They are, instead, the modern versions of mercantilists of old, members of the privileged class who use government coercion to solve their problems of competition.
A capitalist is not necessarily a billionaire industrialist or banker. Most people in America or any advanced society can be viewed as capitalists. They accumulate property for the production of some future advantage. Most families put a significant amount of time and accumulated wealth into homes for long term benefit and into education and labor-saving devices to enhance personal productivity. Millions of Americans have retirement plans which are invested for profit. People accumulate savings for automobiles, vacations, or other future advantages. In essence, any person who has accumulated assets can be considered a capitalist. This view of capitalism may be different than most people are accustomed to, but it advances a more coherent understanding of reality. Some people are uncomfortable with the capitalist label because the fundamental morality and undeniable benefits of capitalism have been pasted over with negative pictures by a malignant socialist, anti-capitalist mentality which denigrates property rights and loathes economic freedom.
The morality of capitalism is based not only on the assumption that all people have a right to accumulate property and to use their productivity as they choose, but also on the observable reality that the poor in wealthy, capitalist societies are generally much better off than the average person in poor countries. Good results trump good intentions. Countries are poor primarily because their governments are corrupt, their economic institutions are not open to the underclass, and the fundamental rights to life, liberty, and property are disregarded. What all of those poor nations lack is capitalism, the freedom to trade labor and goods and to accumulate assets with minimal interference.
Entrepreneurship is the lifeblood of an advancing society and those problem solvers and innovators contribute to a better life for everyone. The most wonderful thing about capitalism and entrepreneurship is that the more people you help and the greater the value of your services, the higher the potential reward. While there are some despicable people who get rich defrauding, stealing or coercing, the vast majority of successful people in America get that way because they work hard, develop their skills or their products, and provide significant value for lots of people.
Capitalism is not an ideal system where everybody is equally prosperous and nobody is poor. It is, however, the best way for the average person to raise himself or herself up to a higher level of prosperity and a better life. It is dishonest to compare only its perceived weaknesses to the idealized dreams of socialist Utopias. Many of the present problems in American society are the results of interference in the economy by politicians and monetary authorities. High unemployment results from restrictions in the labor markets, protectionism, and by over-regulation and taxation which send jobs to other countries. Inflation results from increases in the money supply by monetary authorities. The boom-bust cycle results from a too-flexible money supply and inflationary credit. None of these things are inherent to capitalism but are, rather, impairments of the system and abuses of the rights of the people by politicians and unelected bureaucrats. Capitalism and the advantages that accrue from it depend on freedom in the marketplace and in the lives of the people. It is a benefit for all societies which embrace it and doesn't need an apology.
Dan McLaughlin is a columnist for The Post-Journal. Contact him at danmcl999@roadrunner.com.