Capitalism is not a System

This short essay was published originally on Facebook shortly after the Occupy Wall Street Protests.

In recent months we have seen many Occupy Protests that have been primarily against “the capitalist system.” Signs that read “Death to Capitalism” and other slogans that decry the unfairness and unequal distribution of wealth (1% versus 99%) all seem to have some basic misconceptions when it comes to laws, human nature and how we survive as both individuals and collectively. 

Let us start with the idea of a system. A system is a designed order to achieve a certain outcome. A car is a system designed to move people and things. A camera is a system designed to capture images. In America, the “capitalist system” was not designed and therefore not a system. In fact, the term capitalism came into being after the Declaration of Independence and the Constitution. The term capitalism was first coined in 1854 by William Thackery and popularized by Karl Marx in a disparaging manner. 

By contrast, socialism, communism, fascism and other forms of centrally planned societies are designed systems. They are systems of government that seek a certain outcome for society (or for the ones who happen to be in power.) The goal of a workers’ paradise, economic justice, the greatest good for the greatest number of people and fair distribution of wealth are all potential goals of government systems that have been tried in the past and currently today. 

Rather than being a designed system, “capitalism” is the outcome of free people following their separate goals and desires. Of course, in order to live, survive and act, we must first have sovereignty over our bodies and have control over property. Freedom, self-ownership, and property rights are all laws. These laws are not created by governments, a vote of the tribe, or decreed by kings. These laws are all a priori to government. Some call them “natural laws” or “self-evident” laws. 

In America, the Constitution essentially limits the government on what it can do to its citizens and their property. These Constitutional rights protecting life, liberty and property are fundamental precepts. Understand that capitalism per se is not the goal of the Constitution. Rather the Constitution simply ensures the sanctity of those previously mentioned laws. In other words, the Constitution defines how we interact with each other (the means,) and does not seek a specific outcome (the ends.) 

Stability of these fundamental laws is necessary when it comes to a free society. Imagine playing any board game or card game; the rules do not favor any person, nor do the rules change while the game is being played. Imagine what would happen if the fundamental rules of a game were changed by a vote of the participants. Let’s say you’re playing poker and two of the eight players are doing better than the rest by either skill, luck or a combination of both. A vote is taken and six say that if any player accumulates more than 40% of the chips, all chips must be thrown into the middle and then divided equally.

This example is simplistic, but very similar to the goals of designed systems and those in the Occupy Wall Street Protests. 

Designing or re-designing how a society works necessarily must violate those previously cited fundamental laws. If the goal is that everyone have exactly the same house, car, food and disposable income, then you are not free to achieve and create more. Not to mention the impossibility of achieving such a utopian goal. Government must treat inherently different people differently. Who can determine such a thing? Let alone, be able to measure and enforce such a goal.  

Although that example may be extreme and impossible, half-measures that create a ”social safety net” are often proposed and adopted because without these government programs, people would be starving in streets, rampant homelessness, and people dying due to lack of affordable health care. How did we manage without all of these social programs previously? Also, why do we assume that such services wouldn’t be provided via charity and other forms via freedom? 

My argument is not that capitalism produces the most wealth, the most stocked store shelves, and the most human creativity. Nor is it that a centrally planned economy, with or without noble goals, is better despite creating dis-incentives, a dependent and permanent welfare class, and dislocations in the market. My point is that capitalism is the result of acknowledging and enforcing the a priori fundamental laws of self-ownership, freedom and property rights.  

Capitalism is a spontaneous order that is the product of human action, but not human design. It is consistent with the physics of our existence.