I am well aware that many of the people who read my posts have had difficulty with my position on Capitalism. I am also aware that these difficulties are compounded by the limitations of this medium and my style of writing. I know that many read arrogance and condescension into my words where they are not intended. I wish I knew how to make a video so you could hear the tone of my voice and see my facial expressions. Then you would know I am pleading with you to understand what I am saying, not lecturing. But alas, I am barely competent enough to manage this blog, let alone make a video for You Tube. Sadly, all I am really good at is philosophy, and that is not going to help because I am going to be making a very philosophical argument in this post. I only hope that, for those who actually want to understand, you will excuse the length of the post (made necessary by the need to make myself as clear as possible), accept that I am sincere in my assertion that I am pleading and not lecturing, and then find the time to stay with me to the end — please. With that said, let me explain why I say that Capitalism does not necessarily equate to a free market.
The first thing we have to do is call attention to definitions. When I was studying logic in philosophy school, I was taught how to make strong arguments, and that one of the strongest arguments we can make is an argument that rests on definitions. At the same time, we must understand what a definition is. It is not the word we use that defines a thing, but the form and function of that thing (I write on this topic here). But this has become a problem in our society as we do not have the attention span necessary to study definitions, and even if we did, we live in a society that has embraced the belief that a definition means whatever the individual claims it to be. This is bad reasoning and the chances of finding any truth or even agreement with a person who has embraced such an attitude are very slim as they have rejected the use of reason. All they know is what they ‘feel.’ However, for the purposes of this post, we will be using the accepted definitions for the terms discussed, and where more than one possible definition exists, we will make it clear which meaning we intend to be understood. Let’s then start with the definition of ‘Capitalism:’
Full Definition of CAPITALISM
Now, before you start thinking that the mention of the free market in connection with the definition of Capitalism defeats my argument, let’s look at the definition of the ‘Free Market:’
Full Definition of FREE MARKET
Now, let’s apply a little logic to these definitions. I am going to intentionally use extreme examples here so that I can paint the most apparent illustration of the point I want to communicate.
Under Adolf Hitler, corporations remained in the hands of private citizens. Hitler also issued open competitions for military and government contracts for which these privately owned companies were freely allowed to compete. So, by the definitions given above, NAZI Germany had a Capitalist economy based on a free market. The problem with this conclusion is that it is false. Hitler openly stated that he had ‘Nationalized’ the entire German people, which then means — by definition — that the people belonged to the State. Hence, any appearance of Capitalism and the Free Market were just illusions. Yet, by the definitions were have today, Capitalism and the Free Market still existed in NAZI Germany. This leaves us with a contradiction that must be resolved, and I suggest the resolution of this contradiction is the purpose of this paper: understanding how and why the modern definition of Capitalism and the Free Market are flawed.
Let’s start by going back even further in our understanding of the terms we are discussing. At the heart of Capitalism is the notion of ‘private‘ ownership. But what does ‘private’ mean in terms of Natural Law? Why do I now point to Natural Law? Because, without it, we can define ‘private’ to mean anything we want — as we just discovered with the example of NAZI Germany calling people ‘private’ citizens when — in reality — they ‘belonged’ to the State. Without Natural Law, there is no fixed foundation for anything of moral value, and that is what we are really discussing here: moral value (I write more about this issue here). So, what does ‘private’ mean under Natural Law?
Well, in its simplest form, under Natural Law, ‘private’ would refer to those things that are strictly between an individual and his/her creator. I often use the illustration of being alone on an Island. If it concerns something you can make a moral claim to on a deserted island, then that would be ‘private’ under Natural Law. However, the moment another person is introduced to the island, the relationships change. When there are two or more people on the island, anything and everything they can make a just claim to then becomes ‘public.’ The key here is in understanding that, under Natural Law, ‘public’ implies duties and responsibilities. Now, let’s try to make more sense of this by applying this understanding to a hypothetical business under the terms of Natural Law.
I have written about a character I call Stick. Suppose Stick is on an island by himself. He has no Natural Right in the island as it has nothing to do with his free will, life or labor. However, he can claim a Natural Right to the things he makes and grows. This right is acquired by using his labor to sustain his life and, thus, his free will. According to Natural Law, it is self-evident that all these things granted to Stick by his Creator. Now, let’s assume a load of castaways arrives on the island. How does this change things?
Now that we have many people on the island, Stick decides to start a business selling pineapples to the new arrivals. While he has a Natural Right to the tools he made to farm, and the produce from his efforts. These are all private property. They belong to Stick because he made them by applying his labor. At the same time, Stick does not have any Natural Right to the land he has cultivated. He did not make the land. He can only claim use of that land, and then, only so long as he continually occupies and uses it to sustain his life. If he abandons the land, others can claim the use of that same land. Because no one has a Natural Right to land, it is a ‘public’ property. And, at first, Stick is happy to live under this system. Everyone finds a piece of land they can use to make or grow something they can trade with the rest of the people on the island. The castaways freely enter into trade agreements with Stick and each other (i.e. contracts). Everyone freely exchange their labor and the goods they make or produce they produce they grow for the services, goods and produce of others. In short, Stick and the castaways create a free market and — for a time — all goes well.
But then, Stick notices that some of the castaways have been taking over soe of the fields he had cleared and set up for use growing crops that only take part of the year to produce. If he is going to keep growing these crops, he needs to be able to claim the use of that land even when it is not actively being used to grow the crop in question. That means Stick needs to have an exclusive right to use the fields he has cleared for these crops. But how can he do this? Under Natural Law, the castaways have a right to use his fields if he is not actively using them, himself. This is because the only way a person can claim a ‘right’ to the exclusive use of a piece of land is by entering into a contract with all other members of the island community. But the rest of the castaways can’t be expected to willingly enter into such an agreement without getting something in return that they deem as equally valuable. That is the essence of the Social Contract, but it has limitations and comes with inherent duties and responsibilities to the other members of society (please read the link).
OK, so let’s assume that Stick and the rest of the castaways agree to grant each other exclusive claim to the use of specific pieces of property. The next problem that will arise is how to enforce the terms of this contract. This is generally how and why governments are formed: to protect individual rights. But here is the key to the problem at hand: there are Natural Rights, which are granted by God and are inalienable to the individual. These can truly be said to be private in that they only involve the individual and his/her creator. Then there are rights (note: small ‘r’) that are created by agreement among the members of a community or society. These rights are made by people through the Social Contract, but because they are something that all have a hand in making, they cannot be said to be ‘private.’ They can only and must be understood to be ‘public’ because, just as society made them, society can also change or abolish them. And if society (i.e. people) can change or abolish a right, then that right is neither a Natural Right, nor a private right. It is — by definition — public. At the same time, ‘public’ does not necessarily mean ‘government.’ This is another area where we misunderstand the meaning of the words we use, which leads to even more problems.
At this point, we need to understand what ‘necessary’ means in logical terms. If someone is speaking logically, when they say ‘necessary,’ they mean that something must follow. It does not mean that it ‘can’ follow, but that it must. For example: water can be wet, but it is not necessary that it be wet. If the water in question is in gaseous or solid form, then it will not be wet. However, it is necessary that liquid water be wet. This is an important concept to understand at this point of our discussion as Capitalism does not necessarily mean ‘free market’ anymore than ‘public’ necessarily means ‘government.’ This is why I used the example of NAZI Germany earlier. Now, let’s continue.
Coming back to Stick and the castaways, we now have a society that has created a public right to the exclusive use of specific pieces of land. Our island society has granted individuals the authority to use that land as though it were a private right, but only so long as they use it within the confines of Natural Law. If they use it to threaten the society or to harm another individual, the society retains the Natural Right to revoke the individual’s claim to the land. This is Society’s Natural right to self-defense and is inherent in the Social Contract. Later on, our society also extends the right (note: small ‘r’) to claim ideas as ‘private’ property.
We now have a very rudimentary form of Capitalism on our imaginary island, but note: under Natural Law, there is no Natural Right to ‘private’ property in either the land or ideas. Both of those rights (small ‘r’) were created by the island society through the Social Contract. Here is where we need to understand the connection between this community action and the meaning of ‘collective‘ (small ‘c’). A ‘collective’ action merely means an action that involves the participation of a number of persons. In this case, since the island community entered into a contract with each other to create a right (small r) to use land and ideas as private property, their action was a ‘collective’ act. It does not necessarily follow that a collective act has anything to do with The Collective (note: capital ‘C’).
The danger here is in mixing our understanding of how we use the term ‘collective’ (an adjective) and the term Collective (a noun). In the first case, as an adjective, it is possible — in both theory and practice — to have a collective action that remains within the confines of Natural Law. However, as a noun, it is possible to have a Collective that remains within the confines of Natural Law only in theory. In application, history provides no example of a true Collective remaining within the confines of Natural Law. This is because human nature is in conflict with Natural Law.
Now, let’s apply this to our understanding of Capitalism. First, we have already shown that Capitalism cannot be as defined and remain under Natural Law as there is no Natural Right to ownership of land or ideas. Any way we wish to conceive of a Capitalist economy, it will require the ability to use land and ideas as ‘private’ property, as well as the use of what will clearly be public property (i.e. roads, waterways, etc). This means that Capitalism cannot equate to ‘The Free Market.’ This is a matter of definition, pure and simple. But this doe snot mean society cannot agree to operate a Capitalist system as though individuals can claim private ownership to land and ideas. In fact, society has the Natural Right to create such a system, so long as the use of the land and ideas remains within the confines of Natural Law.
The next point to consider is the creation of the corporation. In this case, not only has society created a right for individuals to claim land and ideas as private property, now society is creating an artificial entity (the corporation) and giving individuals the right to claim that entity as private property. In this light, we must understand that the corporation is twice removed from Natural Law. The issues is further compounded when we consider the special ‘rights’ (again, small ‘r’) given to stockholders. In both cases of a ‘public’ and ‘private’ corporation, the corporation is still a public creation and remains under public control even though the public has given the owners the ‘right’ to treat the corporation as private property. Then we have the problem of granting a corporation personhood; or the legal status of a person with associated rights. a society gives. At this point — when a society starts creating artificial people — the confines of Natural Law are irreparably breached. Not only is society trying to declare its creations equal to itself, and thus, society to the Creator, it is destroying individual responsibility/accountability, another key aspect of Natural Law.
This is what man has been trying to do since time began: claim equality with God. Every time we do this, we violate Natural Law. This is because the creation is never greater than the creator. Most every problem in our world today can be traced directly to someone or some group trying to enforce a violation of Natural Law. When people ignore the Natural Laws governing economics, economic chaos results. When men try to change the meaning of words, or moral laws, chaos results. When men refuse to obey their own laws, chaos results. So why should we expect it to be any other way with God’s laws? And why should we expect God’s laws to ignore the things we create when, after all, we are His creation? Would we be ‘OK’ with a computer system we created suddenly trying to destroy all mankind (I believe there are several movies about this)? The same applies to any system that claims the private right to God’s earth, or any idea, etc. These things can only be allowed to be claimed as private property,, and even then, only so long as individuals use them within the confines of God’s Laws. The moment a person or persons starts to abuse their claim of private property, society not only has the authority to rescind that claim it has a duty to do so under Natural Law. This is why I said ‘public’ implies duty earlier in this post. Society is public, and we have a duty under Natural Law to protect and preserve other individuals as well as ideas and land (i.e. the public).
At this point, though I’ve quoted them many times before, I have to ask you if these words are starting to make any more sense? And do they show you that the founders understood everything I have just tried to explain? And that they understood it so well, and expected that others did too, that they saw no need to go into the depth of explanation I just went through:
“A right of property in moveable things is admitted before the establishment of government. A separate property in lands, not till after that establishment. The right to moveables is acknowledged by all the hordes of Indians surrounding us. Yet by no one of them has a separate property in lands been yielded to individuals. He who plants a field keeps possession till he has gathered the produce, after which one has as good a right as another to occupy it. Government must be established and laws provided, before lands can be separately appropriated, and their owner protected in his possession. Till then, the property is in the body of the nation, and they, or their chief as trustee, must grant them to individuals, and determine the conditions of the grant.”
–Thomas Jefferson: Batture at New Orleans, 1812. ME 18:45
“All the property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it.”
–Benjamin Franklin, letter to Robert Morris, 25 December 1783, Ref: Franklin Collected Works, Lemay, ed., 1
There’s so much more to this discussion that I could write a book about this. subject. You may think I already have. I just hope I’ve done enough to help you see why I stress that we should not think that Capitalism is the same as the free market. It isn’t. At best, we can create circumstances where Capitalism is allowed to operate the same way as a free market, but there is so much more to the free market that are not possible under Capitalism as we practice it today. This is mostly due to the corporation. But, if you do not see why I say that Capitalism is not the same thing as the free market by now, I don’t think I will ever be able to explain it. For that, I apologize for wasting your time…and for failing you.