The premise behind virtually every government intervention into the economy is that "capitalism" or the free market has failed and government must step in to "fix" the alleged problem. Such a notion has wide ranging political implications. If it is true that capitalism has failed or can not "work" in principle, then isn't the government justified in intervening into every aspect of the economy? After all, what is the justification for the public education system, public roads, publicly regulated utilities, the Federal Reserves printing of public money, public transportation, public housing, public parks and waterways, public mail, public garbage dumps, and our latest government wonders: public automobile companies and soon to be public health care? For some reason we are told, in these particular areas of the economy, the free market just does not "work" and we need the helping hand of the state to "provide" these services which somehow is able to provide them.
The argument that capitalism is to blame for various crises is rampant and seems to appear in every possible context today. I have blogged about it quoting other excellent essays and video's on the topic demonstrating that it is not capitalism but socialism which is to blame for the current crisis and explaining why the modern Right is incapable of defending capitalism. Of course, that capitalism would take the blame for the consequences of governmental policies based on socialism is a monumental injustice. Yet, the argument that capitalism has somehow failed is, as C. August wrote in this post at Titanic Deck Chairs, "seemingly impossible to kill". I do not want to rehash the economic argument for capitalism vs. socialism which has been made countless times by brilliant scholars more lucidly and in more detail than I ever could. Also, my linked post already touched on the ethical argument for capitalism. Instead, I want to focus on another important reason why I think this argument seems "impossible to kill" so that we can work towards killing it.
A primary reason why this argument is difficult to "kill" is that the meaning of capitalism has become completely blurred by modern academics who do not think in principles or essentials. For example, I would say that most intellectuals implicitly define capitalism as "anything America does or has done". So, for example, if the United States had slavery, then that is an example of "capitalism". If the United States authorizes a Federal Reserve Bank to print money endlessly causing credit expansion, malinvestment predicated on the illusion of profits, and a boom-bust economic cycle then that is an example of "capitalism." If the federal government encourages employer sponsored health insurance through its manipulation of the tax code and then offers health care entitlements to a third of the of the population thus exploding health care costs it is an example of "capitalism". Another popular definition of capitalism seems to be "government favors to business". In other words, any time the government offers some preferential treatment to business owners it is regarded as an example of "capitalism".
Consider for example, the most recent Newsweek whose cover is titled "The Capitalist Manifesto" referring to an essay by Fareed Zakaria. To have a clue as to the nature of this piece you only have to know that the sub-title is "Greed is Good (To a Point)". Nowhere in this piece does the author ever define capitalism. It is obvious from context, however, that his definition of capitalism is of the "anything America does" variety. He therefore regards anything America has done in the last 20 years to be examples of capitalism and ends up blaming the "ethics" of businessmen rather than the statist economic polices of the government for the current crisis.
In all of these instances, the concept of capitalism is implicitly being defined in terms of non-essentials. Such definitions blur the essential distinguishing characteristics of capitalism and have the effect of packaging the concept of capitalism together with concepts that represent its antithesis. In these cases, because capitalism is defined improperly, it is literally regarded as its opposite and held accountable for the deleterious effects of its opposite. Therefore, before arguing over capitalism versus socialism one should understand and clarify what exactly capitalism is.
I personally have had the experience of arguing with someone over capitalism when the term is not properly defined. These kinds of opponents of "capitalism" are usually all over the place blaming it for slavery, pollution, Indian genocide, price increases due to monopolies which hurts consumers, price decreases due to competition which hurts labor, etc. Again, it is because they associate capitalism with "anything America has done" or some other non-essential definition that they can not even make a coherent argument and it is virtually impossible to answer them.
The first step is to define capitalism by means of essentials. Ayn Rand defined capitalism as "a social system based on the recognition of individual rights, including property rights, in which all property is privately owned." This is a definition by essentials and rests on a prior definition of individual rights. A proper argument for Individual rights rests on rational principles of morality all of which rest on rational epistemological and metaphysical principles. When capitalism is defined properly and put into the larger context of individual rights, freedom, and an egoistic ethics, it is apparent that to know capitalism, i.e., to define capitalism by essentials, is to love capitalism. It is also apparent that defenders of capitalism are fighting for something that has never existed.
As we can see from the Newsweek piece which is evidently supposed to be an argument for capitalism, it is obvious that we are not fighting the Left - we are fighting the Right. We know what the Left stands for. The problem has been that the alleged defenders of capitalism have not provided a solid intellectual foundation for a proper defense of capitalism. That is why we are losing. We must fight for a proper conception of capitalism and make it clear that we are fighting for something that has never truly existed - a complete separation of economics and state. I think an efficient approach is to constantly argue for more general fundamental principles like individual rights, property rights, and to cast political issues into arguments over these principles. This approach necessitates translating the political issue into a more general context. Arguing over the minutia of various policies can be useful in certain contexts but translating the political into a more philosophical, ethical framework has the power of appealing to people morally at the same time more clearly defining the real issues.
Properly defining capitalism and refuting the "capitalism is to blame" argument should be a high priority for those who value freedom. We can never overestimate the value of refuting this argument (or in the positive sense, making the argument for freedom) no matter how obvious it seems.