Sunday, April 24, 2011

Not Capitalism, but capitalisms

One pet peeve of mine is that when people are critical of the economic structure of the US, the free-market capitalists say "but that's not capitalism." As if the macroecnomic situation in this country were merely a case of semantics. Call it by another name and everything is fine, just don't call it capitalism.

Well obviously what we have in this country is capitalism. Vietnam has capitalism as well. So does England. Heck even China is approaching what could be called capitalism. There is no Capitalism with a capital C. There are merely various capitalisms.

At the heart of this argument is the difference between ideal types and reality. Some hold the Smith view of capitalism as the only ideal type for capitalism. Anything else demands another name. This is simply semantic hairsplitting. There will never be a real life incarnation of Smith's capitalism -- so making it the benchmark to judge whether an economy is "capitalist" or not is moot. What exist in the world are real-life versions of capitalism. And there are many of them. They are certainly not the same, but they are all capitalism.

(As an aside, I would offer the theory that economies and finance are socially constructed realities. Since all societies differ, their forms of economy will differ. This also means that what works well for one society may not work well for another. Hence the failure of exporting American capitalism to the developing world.)

I'm currently finishing Joseph Stiglitz's Making Globalization Work (I got it used for $2.25 on eBay and little did I know was signed by the author :O) and then moving onto James Childs's Greed (connecting the economic and Christian ethics dots) before hitting thesis reading full time. In his preface, Stiglitz says much more eloquently what I've been trying to say:

There is also a growing recognition that there is not just one form of capitalism, not just one "right" way of running the economy. There are, for instance, other forms of market economies . . . that have led to quite different societies, marked with better health care and education and less inequality. . .. And when there are alternatives and choices, democratic political processes should be at the center of the decision making -- not technocrats. 


  1. How about a definition of capitalism? If definitions differ, then it'll be hard to agree on any policies.

  2. It's like porn -- you know it when you see it. ;)

    Like all socially constructed realities, it's difficult to define as each society has their own version, but I think there are two traits that need to be present in order for it to be capitalism: (1) a market economy and (2) privately owned businesses.

  3. Just as I thought, we have radically different conceptions of capitalism. As for me, I see capitalism on one end of a continuum (the other end is socialism). In between is a mixed economy, with some capitalist elements and some socialist elements, where virtually every country sits (including the U.S.). If we can call both the U.S. and Vietnam capitalist, then by the same token we can call both socialist. In which case, the words lose most of the use in everyday language.

    So is your pet peeve that people disagree with your definition. ;)

  4. Your definition is simply incorrect though. You want to make "capitalism" mean "laissez-faire ideal typical Smith capitalism" which is . . . well it's not a good definition.

  5. I disagree, but...well I guess you already knew that.

  6. Just for the record, the majority of economists disagree with your definition as well. :)

    I do, however, agree with your viewing it as a spectrum.