Washington Post owner Jeff Bezos recently announced that the editorial pages of his newspaper will defend “personal liberties and free markets.” It is an admirable commitment. Our only complaint is with his choice of words: Instead of “personal liberties and free markets,” he should have written “capitalism.”
Bezos himself has certainly benefited from personal and economic freedom. So, too, have the rest of us. Indeed, nothing has done more to raise living standards around the world and enable people to flourish. But we are squeamish to use the one word that defines this progress.
The reluctance to embrace the term “capitalism” is the result of a sustained rhetorical attack by freedom’s enemies.
Karl Marx famously denounced the “capitalist mode of production” and “capitalist society,” believing capitalism to be a system of exploitation. Modern critics similarly invoke the word as a pejorative. Harvard’s Program on the Study of Capitalism and the New School’s Robert L. Heilbroner Center for Capitalism Studies are not homes to capitalism’s greatest defenders. On the contrary, these centers amplify scholars erroneously blaming capitalism for the usual litany of bad things: colonialism, slavery, inequality, pollution, and so on.
Even proponents of capitalism have soured on the word. Count us among the guilty. One of us is a research fellow at Texas Tech’s Free Market Institute. The other is a fellow with the Phil Smith Center for Free Enterprise and the president of the Association of Private Enterprise Education. With few exceptions, proponents prefer euphemisms to the real McCoy. Is it any wonder, then, that capitalism is considered a dirty word today?
Despite what our genteel affiliations might suggest, we have come to believe the word capitalism best describes the economic system we love.
The great University of California, Los Angeles, economist Armen Alchian recognized this long before us. “Under private property rights of people to goods and resources,” he said in 1978, “the anticipated future effects of one’s current actions are capitalized now into his wealth and hence his current and future exchange opportunities.” That is a powerful motivator.
As Alchian explained, capitalism “induces the private property rights owner to be responsive to the foreseeable distant effects” of his or her actions. It rewards those creating value with profits and punishes those destroying value with losses. This capitalization feedback mechanism is the driving force of capitalism. That is why we, like Alchian, prefer the term capitalism to denote a private property rights regime.
Whereas the word capitalism draws attention to the capitalization feedback mechanism, alternative terms invite ambiguity.
The “free” in “free enterprise” is intended to indicate the absence of restrictions on private property rights but can be mistaken for the misguided concept of “zero cost.” It does not imply, for example, that there are no costly barriers to entry, such as acquiring skills or equipment to produce goods or services, only that there are no legal barriers. The “private” in “private property” is sometimes misinterpreted to mean secretive or deceptive — a rhetorical boon to capitalism’s critics. “Market economy” includes too much. The Soviet Union had markets, but it did not have capitalism. These ambiguities create confusion, which is easily avoided by using the correct term.
Recapturing the word capitalism would also hinder anticapitalists. Whigs, Yankees, Quakers, and Suffragettes unironically embraced the derogatory labels of their opponents, thereby neutralizing linguistic attacks. It is rhetorical jujitsu. By carefully and consistently explaining why capitalism works and works so well, we can eliminate the negative connotation. Without a word that everyone thinks is bad, anticapitalists will find it much more difficult to dismiss our views out of hand.
MORE CAPITALISM IS THE ONLY ANSWER TO POVERTY AND ENVIRONMENTAL PROBLEMS
Words convey and create meaning. In the battle of ideas, those who control the medium of thought hold the high ground. For far too long, capitalism’s proponents have tried to sneak into polite society. That strategy has failed. Euphemisms for capitalism downplay the very features that make capitalism so great and give anticapitalists a rhetorical advantage. No more!
The enemies of capitalism intend it as an epithet. We will wear it as a badge of honor.
William J. Luther is an associate professor of economics at Florida Atlantic University and director of the Sound Money Project at the American Institute for Economic Research. Alexander William Salter is an associate professor of business economics at Texas Tech University and a Sound Money Project senior fellow at the American Institute for Economic Research.