Editorial
A Précis on Libertarianism and Capitalism
Libertarianism is the political system wherein the highest political good is the protection of the individual citizen's right to life, liberty and property. Capitalism is the economic system of libertarianism since in libertarian societies the institution of the right to private property, that is, to own anything of value (not, of course, other human beings, who are themselves owners), is fully respected and protected.
Libertarian law rests on the idea that the individual is the most important member of society, with all groups to be formed by the consent of individual members, including the military, corporations, universities, clubs, and the government itself. What is primarily prohibited in a libertarian society is involuntary servitude. What is primarily promoted via the political administration is the liberty of all persons to advance their own objectives provided they do not in this process violate anyone's equal rights.
There is dispute about the label "capitalism" as the proper way to call the economic order under libertarianism, mostly because its definition is often a precondition of having either a favorable or unfavorable view of the system. Some have insisted on the use of "laissez-faire," in memory of the French entrepreneurs who responded to the king's question as to what the government can do to help the economy by exclaiming: "Laissez-faire, laissez passé," or "allow us to do, allow us to act." Some use F. A. Hayek's term "the spontaneous order" to stress such a system's support of uncoerced behavior. There is also the more popular term "free enterprise." Yet capitalism is most widely used, by both critics and supporters of an economic order in which individuals have the right to own property and to use of it on their own terms.
By itself capitalism is an economic arrangement of an organized human community or polity. Often, however, entire societies are called capitalist, mainly to stress their thriving commerce and industry. More rigorously understood, however, capitalism presupposes a libertarian legal order governed by the rule of law in which the principle of private property rights plays a central role. Such a system of laws was historically grounded on various classical liberal ideals in political thinking. These ideals can be defended by means of positivism, utilitarianism, natural rights theory and/or individualism, as well as notions about the merits of laissez-faire (no government interference in commerce), the "invisible hand" (as a principle of spontaneous social organization), prudence and industriousness (as significant virtues), the price system as distinct from central planning (for registering supply and demand), etc.
Put a bit differently, "capitalism" or "libertarianism" is the term used to mean that feature of a human community whereby citizens are understood to have the basic right to make their own (more or less wise or prudent) decisions concerning what they will do with their labor and property, whether they will engage in trade with one another involving nearly anything they may value. Thus capitalism includes freedom of trade and contract, the free movement of labor, protection of property rights against both criminal and official intrusiveness.
The concept "freedom" plays a central role in the understanding of both libertarianism and capitalism. There are two prominent ways of understanding the nature of freedom as it pertains to human relationships. The one that fits with capitalism is negative freedom: the condition of everyone in society not being ruled by others with respect to the use and disposal of themselves and what belongs to them. Citizens are free, in this sense, when no other adult person has authority over them that they have not granted of their own volition. In short, in capitalism one enjoys negative freedom, which amounts to being free from others' intrusiveness. The other meaning of freedom is that citizens have their goals and purposes supported by others or the government so as to prosper. Under this conception of freedom one is free to progress, advance, develop, or flourish only when one is enabled to do so by the efforts of capable others.
In international political discussions the concept "capitalist" is used very loosely, so that such very diverse types of societies as Italy, New Zealand, the United States of America, Sweden and France are all considered capitalist. Clearly, no country today is completely capitalist. None enjoys a condition of economic laissez-faire in which governments stay out of people's commercial transactions except when conflicting claims over various valued items are advanced and the dispute needs to be resolved in line with due process of law. But many Western type societies protect a good deal of free trade, even if they also regulate most of it as well. Still, just as those countries are called "democratic" if there is substantial suffrage – even though many citizens may be prevented from voting – so if there exists substantial free trade and private ownership of the major means of production (labor, capital, intellectual creations, etc.), the country is usually designated as capitalist.
The most common reason among political economists for supporting capitalism is this system's support of wealth creation. This is not to say that such theorists do not also credit capitalism with other worthwhile traits, such as encouragement of progress, political liberty, innovation, etc.
Those who defend the system for its utilitarian virtues – its propensity to encourage the production of wealth – are distinct from others who champion the system – or the broader framework within which it exists – because they consider it morally just.
The first group of supporters argues that a free-market or capitalist economic system is of great public benefit, even though this depends on private or even social vice, such as greed, ambition, exploitation. As Bernard Mandeville, the author of The Fable of the Bees, put it, this system produces "private vice, public benefit." Many moral theorists see nothing virtuous in efforts to improve one's own life. They believe, however, that enhancing the overall wealth of a human community is a worthwhile goal.
Those who stress the moral or normative merits of capitalism, mostly libertarians, say the system rewards prudence, hard work, ingenuity, industry, entrepreneurship, and personal or individual responsibility in all spheres of human life, and this is all to the good. This alone makes the system morally preferable to alternatives. Yet another other reason given why libertarianism or capitalism is not only useful but morally preferable is that it makes possible the exercise of genuine moral choice and agency, something that would be obliterated in non-capitalist, collectivist systems or economic organization.
Capitalist theorists note that most critics of capitalism demean wealth. Indeed, they virtually attack the pursuit of human individual well being itself and, especially, luxury, anytime there are needy people left anywhere on Earth, as well as, more recently, if any portion of nature is overrun by human beings (as if they were not natural creatures). But, the champions of capitalism argue, this stems from utopian thinking and has the consequence of begrudging anyone a measure of welfare, since some people will always be poor some of the time and nature will continue to be transformed by people.
Yet the capitalist advocate need not be seen as reckless toward the environment. Indeed, arguably the strict and consistent institution of the principle of private property rights – through, for example, privatization and prohibition of dumping waste into other private as well as public realms – may solve the environmental problems we face better than any central planning champions of the environment tend to propose. Libertarians and capitalists think that the environment suffers worst when the "tragedy of the commons" is permitted, whereby commonly owned values are overused since everyone is deemed to have a right to such use while no one in particular is left with the responsibility to care for it.
Capitalism rests in large part on the belief that human beings are essentially individuals and a society's laws must value individuals above all else. Most historians of ideas admit that whether the importance of human individuality should have been recognized in earlier times, it certainly was not much heeded until the modern age. Even in our time it is more often that groups – ethnic, religious, racial, sexual, national, cultural etc. – are taken to have greater significance than individuals. The latter are constantly asked to make sacrifices for the former. In capitalism, however, the individual – e.g., as the sovereign citizen or the consumer – is king. Undoubtedly, a capitalist system does not give prime place to economic equality among people, something that group thinking seems to favor since in groups all are deemed to be entitled to a fair share.
(Excerpt from Philosophy With Meaning [Addleton Publ., 2013])
Tibor R. Machan holds the R.C. Hoiles Chair in Business Ethics and Free Enterprise at the Argyros School of Chapman University.
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Posted by 1776 on 03/21/13 07:18 PM
House conservatives to offer their own four-year balanced budget proposal By Russell Berman - 03/15/13
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Posted by FreeManTx on 03/21/13 12:03 PM
Libertarianism, or more properly, "Capitalism" is a usurping, holistic ideology, rife with intellectual thievery and historical finagling, glorifying an amoral set of contradictory and self destructive beliefs in service to a vacuous egotism.
The only redeeming persons that have ever come out of that misbegotten ideology are Michael Badnarik and Ron Paul. At least they appear to have embraced the principles founded in our Constitution.
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Posted by IndyLyn on 03/21/13 11:43 AM
This is the "Professor" Machan at his finest. Thank YOU, Dr. Machan.
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Posted by Libertarian Jerry on 03/21/13 11:27 AM
Good article. Using the word "Capitalism" may be a misnomer as it was a word invented by Marx to describe and to denegrade the free enterprise system of the time. Perhaps a better description of a libertarian economic system would be Free Market. With that said,behind the main thrust of Socialism(collectivism or a planned economy)is always the notion that property rights should be extremely limited and that everything belongs to everybody. This is why in explaining their ideas socialists will always refer to the word "we" in regards to what must be done or accomplished in their economic world. Statements such as: "in a democratic society "we" must plan and fund a single payer health care system." The question to ask is,who are the we? Of course the "we" in the socialists eyes are the "representatives" of the "people" which are the individuals running the state. And of course the socialists want to control the state making them,the socialists,the real owners of the wealth of the nation. In the socialist's eyes individual choice and wealth shouldn't be allowed to exist. The society must be planned and run by what Thomas Sowell called "the vision of the anointed." The "vision" being the world views of the socialists. In reality its all about power. And,in the end,the results are a world of gulags and stacks of millions of corpses.
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Posted by 1776 on 03/21/13 11:20 AM
"Rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add 'within the limits of the law' because law is often but the tyrant's will, and always so when it violates the rights of the individual." Thomas Jefferson
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Posted by speedygonzales on 03/21/13 10:55 AM
We are constantly told that we live in a 'Capitalist' society. But what does 'Capitalism' mean? The word comes from the Latin 'capitalis', meaning 'of the head', and the relation of this concept to the later financial connotation of the word 'capital' is unclear. Its first use in that sense was actually the word 'capitale', meaning 'stock or property.' The basic building unit of capitalism is the corporation, and these first started in the 1600s.
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Corporations comes with lawyer's knot creation: Coprorate personhood. It is not living person but has rights of living persons. But worse, it has privileges over real persons: they do not have to pay debt and they create dual standard of law.
The Keynesians and neo-classicals wish to see it driven through the Demand side, with higher wages rising to meet the demands of profit in an inflationary expansion. Both believe that market forces alone can achieve this equilibrium. Across both groups runs a sub-category of statism vs. individualism.
Unfortunately both groups are wrong.
Both approaches require an ideal, almost frictionless, objectively rational, and honest economy in order to succeed. The Keynesians have a bit of an edge in this, because it is easier to control inflation than deflation in a fiat regime, and the natural growth of inflation tends to satiate the impulse to greed. They don't care if they can buy more as long as they can say they HAVE more. People tend to be irrational, and there is a percentage of the population that is irrationally greedy and obsessively rapacious. People are not naturally 'good.'
The greatest flaw in the many studies that come from each of the schools to prove their point is the brutal way in which they flatten the reality of the markets and make assumptions to allow their equations and analysis to 'work.' They spend most of their energy showing while the 'other school' is a group of ignorant fools, doomed to ignominious failure, in an atmosphere reminiscent of a university departmental meeting.
This has quietly scandalized those from other scientific disciplines who review the work of many of the leading economists. Benoit Mandelbrot was poking enormous holes in the work of the leading economists long before Nassim Taleb made it more widely known. The ugly truth is that economics is a science in the way that medicine was a profession while it still used leeches to balance a person's vapours. Yes, some are always better than others, and certainly more entertaining, but they all tended to kill their patients.
The most intractable part of the current financial crisis, and the ongoing problem of the US economy is the huge tax which is levied on the American public by its corporations, primarily in the financial and health care sectors, and a political system based on lobbyists and their campaign contributions.
There are hidden taxes and impediments to 'free trade' at every turn. The ugly truth is that capitalism-in-practice hates free markets, always seeking to overturn the rules and impose oligopoly if not outright monopoly through barriers to entry, manipulation of the political process, distortion of regulation, predatory pricing, brute force, and the usual slate of anti-trust practices.
Some of these 'hidden taxes' are the bonuses on Wall Street which require an increasing percentage of the financial 'action.' The credit cards fees and penalties levied by banks to support profits in a contracting economy. The Sales General & Administrative portion of the Income Statements of the pharmaceutical industry which only American consumers seem willing to pay. A health care system which is a monument to overspending, outrageous pricing, and greed.
The notion that 'if only government would not regulate markets at all everything would be fine' is a variation of Rousseau's romantic notion of the noble savage which no one believes except those who wish to continue to act like savages, and those who get no closer to the real work of an economy than their textbooks. Economic Darwinism works primarily to the advantage of the sharks. Anyone who believes that 'no regulations' works well has never driven on a modern highway at peak periods. Click to view link
Laissez-faire was developed to make alliby and excuses for brutality of The British East India Company which is responsible for more deaths than Hitler and Stalin altogether. Gimme names of shareholders. They shipped wheat out of India and China while tens of milions starved to death. The same laisses-faire applied in Ireland during potato famine. BEIC also developed concentration death camps where they left starved to death 150,000 women and kidz durring Boer wars. Why they talking about Stalin and Hitler? See book: Late Victorian Holocaust.
I do not take this crappy fairy tales that capitalism is economical system while political is Click to view linkpitalsim contradicts democracy. A democracy is a system of government in which not only the voice of the people is heard but the interests and wellbeing of all citizens are paramount. The existence of classes poses a serious problem for democracy, since classes presuppose contradictory interests in different parts (the different classes) of the society. But capitalist society is premised on class-diametrically opposed interests for owners and workers, the exploitation of labor for investors'/employers' profit. Hence, as a former student has said, "The agenda of capitalism is to … downgrade skilled workers…, [create a] willingness to work for lower wages…," deny sustenance to single parents, and so forth. That is a remarkably anti-democratic agenda!
Capitalism is based on a power hierarchy in which investors/employers control the lives of those who work to create profits (capital).(Parenti:Democracy For the Few, Chapter 2.) But democracy proposes that each person shall be an autonomous individual engaged in a common endeavor to create the greatest possible advancement and self-expression of all persons. Capitalism is individualistic. Democracy is communitarian, i.e., it seeks to strike a balance among individual interests. Capitalism seeks benefits for a few based on the exploitation of the many. Democracy requires that people come together to decide what is in the best interests of the community as a whole, regardless of class-based or individual interests.
A fully functioning political democracy could not tolerate a capitalist economy. The power elite knows this, which is why the U.S. government has tried to subvert democracy in every country in which U.S. capitalists have tried to exploit resources and labor (see Parenti, chapter 10). A country in which the people as a whole actually make decisions about their common destiny would, of course, not permit such exploitation. "Democracy subverts capitalism": it works on diametrically opposed principles of the value of human life and the worth of collective decision-making. The power elite does not have to take the same extreme steps in the U.S. because, as Domhoff explains throughout his book (and Parenti concurs in chapter 18 and the chapters on bureaucracy, the media and elections), it has already taken control of the "democratic" forms of the political system and has reduced political culture to mere "consumption" of the ideology of individualism and consumerism.
Real democracy, as in Scandinavia or Swiss is called "social democracy" this allow capitalists to call their system "democracy" as well. But they are not social. Socialism,communism and democracy are on one side while feudalism,fascism and capitalism on other side of spectrum. What academix do they try to find explanations for the masses so they eat bite with hook, rod and fisherman itself.
