Speaking personally, I’d rather discuss many things during this joyful season of Advent than “capitalism.” And yet Matthew Summers’ recent essay “In Defense of Capitalism” for The Imaginative Conservative has prompted me to comment on the topic, albeit briefly.
Let’s begin with Mr. Summers’ definition of capitalism. He writes that “the term capitalism refers to an economic organization in which the means of production are privately owned, and production is guided by profit.” If this definition is accepted, I am happy to call myself a “capitalist.” There are, however, other broader definitions of the word which cloud the issue, causing confusion, as Mr. Summers’ confesses to be the case:
[I]t is deceiving to discuss capitalism broadly without recognizing the spectrum of economies to which it refers. The term simultaneously describes free-market or laissez-faire capitalism—in which the government plays zero role in the economy—and economies replete with central banking, artificial interest rates, price controls, minimum wages, labor politics, corporate welfare, bailouts, social safety net programs, public works programs, stimulus packages, et cetera. Rarely do critics distinguish between true free-market capitalism and the crony, corporatist, Keynesian, protectionist, welfare states that operate under the same name.
In this passage, Mr. Summers begins to display a modicum of confusion. Capitalism, according to his own admission, is not simply “an economic organization in which the means of production are privately owned, and production is guided by profit” but is much more complex and complicated than this simple definition would suggest. Capitalism refers to a “spectrum of economies,” at one end of which is a mythical economy “in which the government plays zero role in the economy” and at the other end is the sort of “capitalism” which resembles the socialism of the control economy. In between, we have the real messy world of capitalism as it really is, regardless of what we think it should be: “economies replete with central banking, artificial interest rates, price controls, minimum wages, labor politics, corporate welfare, bailouts, social safety net programs, public works programs, stimulus packages, et cetera.”
It seems, in fact, that Mr. Summers is not really interested in making a defence of capitalism, irrespective of the title of his essay, but only of a certain type of capitalism which has never existed except as an unrealizable ideal. He is as vehemently opposed to “the crony, corporatist, Keynesian, protectionist, welfare states” that operate under the name of capitalism as any run-of-the-mill anti-capitalist might be. What he actually wishes to defend is not capitalism per se, not the real messy thing which all of us experience in our daily lives, but an idealized and romanticized view of a perfect capitalism that never was and never will be. He only wishes to defend this non-existent capitalism, what he calls “free-market or laissez-faire capitalism—in which the government plays zero role in the economy.” It is this laissez-faire capitalism that he wishes would exist and not the de facto capitalism which really exists that he wishes to defend.
In the real world, as opposed to the imaginary worlds of utopian dreams or academic theories, the free market has never existed and can never exist, for the simple reason that those with power exert their influence upon it, manipulating it for their own purposes. Such influence might be exerted by government, which Mr. Summers thinks is illicit, or it might be exerted by powerful sectional interests, such as corporations or financial institutions, which Mr. Summers evidently believes is not only good but a sacrosanct right. The problem is, of course, that the powerful will manipulate the market in ways that keep them powerful or make them more powerful, including ways in which they can keep the not-so-powerful from having fair access to the market. It is for this reason that the world is now effectively run by global corporations and international financial institutions who are answerable to no government. The further irony is that Big Business, which continues to get bigger, is in a very comfortable ménage with Big Government, doing what it can to make Big Government even bigger. Thus the biggest corporations and the most powerful global financial institutions favour corrupt mega-states, such as the European Union, over puny national governments which seek to preserve their national sovereignty.
Mr. Summers berates “protectionism” as a manifestation of government interference in the “freedom” of the market but doesn’t address that other form of “protectionism” which is the desire of governments to have some control over immigration, thereby impeding the free movement of labour in accordance with market forces. Does Mr. Summers believe in the eradication of border controls, or indeed the eradication of borders, so that the market can be “free” from such Government protectionism. Isn’t this the logical correlative of his desire for a world “in which the government plays zero role in the economy”?
Leaving aside these utopian fantasies and the nonsense that they engender, let’s return to Mr. Summers’ original definition of capitalism as “an economic organization in which the means of production are privately owned, and production is guided by profit.” If this was really all that capitalism was, most of us would be happy to defend it. There are, however, other definitions which seem to dovetail more with the messy reality in which we find ourselves. G. K. Chesterton, for instance, defined capitalism as the economic system whereby the vast majority are constrained to work for a small minority for a wage. The problem is that capitalism is not the simple thing that Mr. Summers thinks it is. It’s not merely something as benign as “an economic system in which the means of production are privately owned, and production is guided by profit”; it is something which leads to the means of production being corporately owned by a small minority of owners in such a way that it precludes the possibility of the vast majority ever becoming owners. There are means of rectifying this situation, such as the encouragement of employment stock ownership plans (ESOPs), which encourage employees to become business owners. This is the sort of realistic proactive engagement with the economy which is really worth defending and advocating. One wonders if Mr. Summers agrees. If so, would he see efforts to encourage ESOPs as a good thing or would it constitute a violation of his laissez-faire principles? Should he choose to answer such questions we could begin a discussion which would really be worth having.
Written by Joseph Pearce for The Imaginative Conservative ~ December 16, 2018