Capitalism has nothing to do with the “free market.” Capitalism says nothing about freedom, or individual liberty, or property rights. Capitalism is simply the science of investing. Capital is savings that are invested. Savings become “capital” when they are put to work. The investment yields a return through profit or interest. That return is only possible if the investment is profitable — if there is enough to repay with interest.
Capitalism yields all sorts of subsidiary disciplines. The science of interest rates, for example, including the “time value of money,” which says you’re missing out on gains if you aren’t investing your savings. Capitalism generates cost/benefit analysis, double entry bookkeeping, and loan amortization tables. Almost everything capitalism does is mathematical, requiring no value judgments.
It is this universal, mathematical nature of capitalism that allows it to be used by any style of government to generate wealth. The Chinese Communist Party uses capitalism to rapidly grow currency-generating jobs for the masses. The Federation of Russia uses a very close style of capitalism, where opportunities for investment and returns are limited to a small group of insiders. The E.U. has a scrum of countries nudging each other into a capitalism tethered to some collective standards of decency. In the United States, capitalism without value judgments has resulted in corporate capture of the state, recurring financial crises, and tremendous environmental degradation — without apparent oversight or enforcement.
There’s No Such Thing As a Free Market
Pure capitalism is completely free of value judgements. If you want to buy a hammer to beat your landlord to death, and I want to use the money from selling the hammer to buy fentanyl on a street corner, capitalism considers that a win/win situation! Both parties in the transaction get what they want. There is a gain in satisfaction on both sides. That gain is called “growth.”
Capitalism would consider the death of the landlord to be an economic loss, a loss that could be calculated with some degree of accuracy, a cost that is assigned by courts routinely: How much was the deceased’s life worth? The death from a drug overdose is likewise an economic loss that can be calculated. There is a market for human life but it is not a “free market.” More like a market of difficult choices.
If it were a free market, economic transactions would not have to be recorded. No one would have to give receipts, no one would have to know a deal was made, it’s nobody’s business. In a truly free market, murder would be a service you could legally sell and deliver; the market sees nothing wrong with assassination. In a truly free market, no person would have a say in what any other person does or doesn’t do. No one wants to live in a free market and no one ever has.
The minute you add one commandment, you’re no longer talking about capitalism, you are talking about theocracy. If the one rule is “Thou Shalt Not Kill,” that’s public policy laid on top of capitalism. It’s a restraint. It means that the scope of your freedom is limited. By whom? The structure of restraint is complex. It can be anything from a mob to a monarch. It always involves the use of force against the will of the restrained.
Capitalism as practiced in the United States has no resemblance to a free market whatsoever and never has. Very little of the territory of the United States was ever purchased legitimately from its historically-recognized owners. Most was stolen at the point of a gun. Large swaths of territory were then traded between countries and given to families connected to the crown, as if that somehow made title to these stolen properties legitimate.
The United States was conceived in larceny and built through slavery and indentured servitude. And then came the corporation. Oh, the beautiful corporation, marvel at its infinite life and limited liability! The corporation is a creature of the state, designed by the state, for the benefit of the state. That’s what it means to incorporate: to get a corporate charter. A charter from whom? From the state. Every corporation starts with a set of rules designed by the state to limit corporate freedom to practice business any way they want. There’s no such thing as a free market.
Capitalism in America
Even the patron saint of capitalism, Adam Smith, saw that the market has problems and must be restrained. Capitalism puts all corporations in a bind from the moment they begin: how to make something more than what we started with. With the time value of money bearing down, the entrepreneur is compelled to come up with something quickly that is better than what s/he started with. The easiest solution is fraud.
You don’t return the money. You pay them back with something that turns out to be worthless. You take a deposit from the next sucker and use it to pay off the last sucker. You harvest more timber than you’re allowed. You dump your toxic waste on public property. You buy a bigger company on margin and fail larger. There are as many ways for people and corporations to harm others as there are stars in the sky. Every society has rules against this kind of behavior. None of them are free markets. They all exercise a degree of state control, whether North Korea or Switzerland, and none of them are “capitalist” economies.
Corporations have essentially captured the state in most of the world where they now write rules that allow them to loot, pillage, and burn with impunity. The United States would have and could have shifted to electric vehicles in the 1980s. They did not because the oil companies and the car companies had a hammer lock on the state. There was no way they were going to allow the will of the people to interfere with their investments in motor vehicle factories and petroleum reserves. Any well-functioning society would have seen the arc of global warming and acted much sooner. Only corporate capture kept carbon pricing from making polluters pay for their mess.
Corporations generate enormous externalities, which is a way of saying they eat in one market and shit in another. Corporations are always looking to increase profitability by growing revenue and reducing costs. Cost reduction often means getting someone else to pay your bills. The book Kochland describes how Koch Industries specializes in buying companies that are functioning poorly “due to government regulation.” They then use their expertise, which is bullying the state, to loosen restrictions so the bling starts flowing. They draft model legislation, they donate to candidates who agree to support their legislation, and then they sue anyone who gives them a hard time or tries to exercise one smidge more oversight than strictly required by law. None of their wealth comes from hard work or being good corporate citizens. It is all predatory. You are their chicken.
You Are The Chicken
To say the American worker faces a free market is to say that chickens are free to become McNuggets. All the homes in America have been paid for many times over and still we pay mortgages, rent, and dues the rest of our lives. All the housing should be free! All the schools, the streets, the bridges, all the sewers, towers and wires, should be free! “Sunk costs” the economists call them. Money already spent. Our endowment.
All the land is everybody’s and all the food it produces should be free as well. The oil beneath the land should be as free as the air above. Cars should be free. Computers should be free. Everything we need should be absolutely free. We already paid for it. It’s our history, our heritage, our legacy.
What you do should be a choice. If you do it well, you should be paid well. There is more than enough wealth for everyone in the world to live like this as long as there are limits on corporations and the super wealthy. It’s not like “the people” can’t figure out how to make rice or electricity or anything else we need by forming a collective and hiring managers. This is essentially what China has done, although “forming a collective” is a sad euphemism for the brutal autocracy and exclusivity of the CCP.
China is not as corporate-captured as Russia, Europe or the U.S. Chief executives still get executed in China for massive failure. In the U.S., they get a seat in the cabinet. Which is why it is sort of silly for me to suggest an alternative scenario that is full of hope and optimism and suggestions for bending the monolith of the state to the will of the people. When you run out of optimism you end up with Kaczynski Anarchism.
Ted Kaczynski explained how capitalism works better than Milton Friedman. He was more accurate in creating a theoretical model of the past, present, and future than the Father of Free To Choose. Kaczynski’s Industrial Society and Its Future (a.k.a. The Unabomber Manifesto), published in 1995, combined with his jail cell bildungsroman, Anti-Tech Revolution, 2020, explain that nation states unleash corporations to grow rapidly but find themselves unable to tether corporations due to that same stunningly brutal corporate efficiency. It’s a matter of time until corporations choose the leaders, make the laws, and run the courts all over the world.
Kaczynski understood this mechanism of leverage that compelled nation states to let the dogs of capitalism out or die. China let the dogs out. Russia let the dogs out. Europe let the dogs out. Australia is the dogs out. Africa is opening the kennels. Canada is asking the dogs to please sit. Meanwhile, the amount of carbon burned each year is going up at a faster rate! It’s amazing! We can’t even slow it down! We let the corporations take over and they burned down the house and now it’s too late.
You want optimism? The birth rate has dropped so fast we could maybe shrink the population in time to get the planet back in balance. That could be a very small population and a very long period of time. When that day comes, the new people should know that we made a big fucking mistake letting the dogs out. You should never let a corporation tell you what to do: they have financial incentives to lie.
Yes, you should love the market! A regulated market, not a free market. A market regulated by the people who keep the corporations on a leash through their representatives: the legislatures, the leaders, the courts. All of them should be chosen democratically by all the people as much as possible. Then, if we are stupid together, we will perish together. If we do not make these changes, we will surely perish at the hands of a stupid few.