Authored by Jeffrey Tucker via The Brownstone Institute,
The word capitalism has no stable definition and should probably be permanently retired. That won’t happen, however, because too many people are invested in its use and abuse.
I’m long over trying to push my definition over someone else’s understanding, generally viewing disputes about vocabulary and dictionary definitions as a distraction against the real debate over concepts and ideals.
The point of what follows is not to define precisely what capitalism is (my friend CJ Hopkins is hardly alone in describing it as once emancipatory but now rapacious) but rather to highlight the many ways in which economic systems of the industrialized world have made a hard turn against the whole ethos of voluntarism in the commercial sector.
Still, let’s pretend we can agree on a stable description of a capitalist economy. Let’s call it the system of voluntary and contractual exchange of otherwise contestable and privately owned property titles that permits capital accumulation, eschews top-down planning, and defers to social processes over state planning.
It is, ideally, the economic system of a society of consent.
This is obviously an ideal type. So described, it is inseparable from freedom as such and forbids state planning, expropriation, and legal privileges for some over others. How does the status quo match up against that? In uncountable ways, our economic systems utterly fail the test, with all the results that one would expect.
What follows is a short list of all the ways in which the US system does not comport with some ideal type of capitalistic marketplace.
1. Governments have become a main customer of tech and media platforms, instilling an ethos of political deference and cooperation, resulting in surveillance, propaganda, and censorship. This happened gradually enough so that many observers simply did not notice the turn. They held onto their reputation as go-getting capitalist companies even as one platform after another fell to become minions of state power. It began with Microsoft, extended to Google, came to Amazon with its web service in particular, and made its way to Facebook and Twitter, even as taxes, regulations, and intense enforcement of intellectual property consolidated the entire digital-tech industry.
In the course of the change, these companies somehow still held onto their reputations as disruptors with a libertarian ethos, even as they were ever more deployed in service of regime priorities. When Trump took office in 2016, and Brazil’s Jair Bolsonaro and UK’s Boris Johnson seemed to be forming a populist resistance force, the crackdown began. With Covid lockdowns, all these platforms swung into action to feed public panic, silence dissent, and propagandize for untested and unnecessary shots of an experimental technology. The deed was done: all these institutions became faithful servants of an emergent corporatist empire.
Now they are full cooperators with the censorship-industrial complex, while the few outliers like Elon Musk’s X and Rumble are facing enormous pressure to conform and get on board. The CEO of Telegram has been arrested simply for not providing a backdoor to Five-Eyes governments, while NATO nations are investigating and arresting for the act of posting disrespectful memes. Digital tech is the most notable and thrilling innovation of our times and yet it has been browbeaten and distorted into a main tool of state power.
2. The US has a medical cartel that works with regulatory agencies and official institutions to impose poisons on the public, charge outrageous prices, cooperate with business cartels to block alternatives, and promote addiction and ill health. The interventions in the sector are legion, from licensing to employer mandates to mandated benefits packages to government funding to financial support from patent-protected and indemnified pharmaceutical companies that fund and control the very agencies that are supposed to regulate them.
The signs and symbols of market economics still exist but in a highly distorted way that makes independent medical practice nearly impossible. It’s not socialism and it’s not capitalism but something else, like a privately-owned medical cartel that works hand in glove with coercive power at public expense. And the coercion is not about promoting health but promoting subscription-based dependency on pharmaceuticals, which have evaded normal liabilities that would otherwise pertain in a genuine marketplace.
3. The US has an educational system that is mostly government-funded, blocks competition, forces participation, wastes students’ time, and pushes a political agenda of compliance and indoctrination. Public schooling in the US has late-19th century origins but the compulsory features came many decades later, alongside bans on teen work, and this later mutated into state-funded universities that enlisted ever larger shares of the population into the system, eventually saddling several generations into vast debt that cannot be paid. The families seeking alternatives end up paying many times over: through taxes, tuition, and lost income. State intervention into educational services is massive and comprehensive, blotting out all normal capitalistic forces and leaving comprehensive state planning.
The whole system is so bad that when the Covid lockdowns took place, teachers, administrators, and many students too welcomed the chance to give it all a rest. Many teachers have not come back and the system as a whole is now worse than ever, with private alternatives popping up everywhere and homeschooling now more common than ever. But even so, regulations and mandates prevent the full flowering of a market-based system, even though no sector is more obviously governed by markets as they were in most of human history.
4. Agricultural subsidies that build vast industries that crush smaller farming and capture the regulatory apparatus and foist bad food on the public. Anyone in farming knows this. The system has gone the way of these other sectors like tech and medicine to become heavily cartelized and working hand-in-glove with government regulators. Daily small farms are being driven out of business with compliance costs and investigations, to the point that even sellers of raw milk fear the knock at the door. In the name of disease mitigation, millions of chickens are being slaughtered and ranchers fear so much as one positive test of some infectious disease. This of course has further consolidated the industry which is ever more dependent on patented pharmaceuticals, insecticides, and fertilizers, the producers of which also get rich at public expense. When Robert F. Kennedy, Jr, and so many others, speak about a public health crisis in the US, the food system from production to distribution plays a large role, which in turns feeds the medical cartel mentioned above.
5. A wildly complicated and confiscatory system of taxation that punishes wealth accumulation and blocks social mobility in all directions. The federal government alone has seven to ten major forms of federal taxation in main categories like income tax, payroll tax, corporate tax, excise taxes, estate and gift taxes, customs duties, and various fees. Depending on how you count them, there are 20 or more. This is remarkable given that only 115 years ago, there was only one source of federal financing: the tariff. Once the government got its fingers into incomes with the 16th Amendment – before that, you kept every penny you earned – the rest followed. And that doesn’t count state and local financing. They are deployed as methods of planning and control, with no industry immune from the need to bow and scrape before their taxing masters to grant abatements or breaks of any sort. The net result is a form of commercial and industrial servitude.
6. Fiat paper money floating exchange rates (born 1971) give the government unlimited funds, create inflation and currencies that never rise in value, and provide foreign central banks investment capital to make sure international accounts never settle. This new system has blown up government power, which expands without limit, and disrupted the normal functioning of international trade. Treasury debt floated by governments with central banks evades all normal market forces and risk premiums, simply because they are guaranteed by the power to inflate a public expense. This gives the politicians, warmongers, and totalitarians among us a blank check to do their dirty work.
It is precisely this regime change, together with the manipulation of interest rates, that has given rise to what is called financialization, such that big finance has eaten so much of what was once a healthy industrial sector in the US in which people actual made things for sale in the consumer marketplace. In the old days, the price-specie flow mechanism (described by every free trader from David Hume to Gottfried Haberler) balanced out accounts to ensure that trade would result in mutual benefit. But under the dollar-dominated fiat money system, US debt has come to serve as an infinite source of financing for international industrial buildup that has wrecked countless US industries that once thrived.
This is not free trade but paper imperialism and it ends in producing a backlash like we see in the US. The solution being offered is, of course, tariffs, which turn into another form of taxation. The real solution is a fully balanced budget and a shutdown of the Federal Reserve’s money spigot but that is not even part of the public conversation.
7. The court system invites extortionist litigation and can only be fought with deep pockets. Litigation these days is merely about playing the long game in a wicked match that can be over absolutely anything, real or imagined, that any would-be plaintiff can assemble into a court case. Business people, especially small ones, live in daily fear of this constant threat. And this has become the means by which DEI hiring standards have become normalized; they are instituted by risk-averse managers in fear of bankruptcy by litigation. The irony is that the real wrongdoers, such as pharmaceutical makers, are indemnified against legal action, leaving the courts as playthings for the rapacious.
8. A patent system that grants private industry production cartels and stops competition for everything from pharmaceuticals to software to industrial processes. This is a subject too big for this essay but know that there is a long history of free market thinkers who regarded the patent power as nothing but a tool of industrial cartelization, wholly unjustified by any standard of commercial freedom. “Intellectual property” is not property as such but the creation of fake scarcity by regulation.
One needs only read Fritz Machlup’s 1958 study to understand the fullness of the fakery here, or read what Thomas Jefferson said about the commodification of ideas: “That ideas should freely spread from one to another over the globe for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation.”
The corruptions that have resulted from the legislative manufacture of property in ideas cannot be overstated. In industry after industry, they have restricted competition, conferred privilege on would-be monopolists, hindered innovation, and truncated learning and innovation. This is obviously a hard subject but one impossible to avoid. In this connection, I highly recommend the sleeper of a monumental treatise by N. Stephan Kinsella: Legal Foundations of a Free Society. The capture of pro-capitalist thinkers by patent theory represents a serious breach in history and in the current day.
9. As for authentic property rights, they are weaker than ever and can be overridden or even abolished with the stroke of a pen, such that not even landlords can evict tenants or small business can be open for business. Such was common in poorer countries with despotic governments but such a system is now common in the industrialized West such that no business owner can be certain of his rights to his own enterprise. This is the devastating consequence of Covid lockdowns. It is so serious that the various indexes of economic freedom have yet even to adapt their metrics to the new reality. Obviously there is no capitalism as such if millions of businesses can be shut on the whim of public-health authorities.
10. A bloated federal budget supports 420+ agencies that lord it over the whole of commercial society, ballooning up compliance costs for entrepreneurs and creating vast uncertainty about the rules of the game. Slight attempts at “deregulation” cannot begin to fix the core problem. There is no product or service made in the US that is not subject to some form of regulatory diktat. If one happens to come along, such as cryptocurrency, it is beaten to pieces until only the most compliant firms survive the market competition. This has been going on in the crypto space since 2013 at least, and the result has been to convert a disruptive and stateless tool into a compliance-obsessed industry that serves mainly the incumbent financial industry.
Please consider all these factors the next time someone denounces the US system as the best example of the depredations of capitalism. It might just be marketing that is on the hot seat. Marketing to the consumer was a revolution in the use of resources but it too has been corrupted to serve the interests of power. Just because something is available in the consumer marketplace does not necessarily mean that it is a product of the voluntary matrix of exchange that would otherwise profit in a genuinely free market.
Again, I’m not here to argue about the meaning of a word but rather to draw attention to what everyone can surely agree is a hegemonic imposition on commercial freedom by state power, sometimes and even often with the willing cooperation of the dominant players in every industry.
I’m not sure that such a system has a precise name in the 21st century unless we want to go back to the interwar period and label it corporatism or just plain-old fascism. But not even those terms fully fit with this new mode of surveillance-based and digitized despotism that has descended on the US and the world, one that provides healthy rewards for private enterprise that links up with state power and brutal punishments for those enterprises which do not.