Brief Summary of Capitalism

It is possible to say that capitalism is greatly misunderstood by the common person, because of the economic agendas of corrupted governments and special interest groups. There is a great confusion between what capitalism and mercantilism actually is. It is true that there is and has been a real exploitation of poor people that capitalism has been blamed for, but that is just not reality. Through political and corrupt corporate rhetoric “in the late 19th and the early 20th centuries,” the true definition of capitalism has been greatly distorted and “condemned.”[1] It is commonplace for purported experts in economics and politicians to cry out that “capitalism has failed; we need more government controls over the entire financial market.”[2] Capitalism has not failed; it just has not been given a fair chance.

Capitalism can be defined as “a system of the free exchange of goods and services between individuals on a voluntary basis under the rule of law and in a system of private property rights.”[3] This means that business is conducted without government regulation or interference and “all parties” in the exchange of goods “are better off.”[4] In other words, this is free trade.

Mercantilism is the opposite of capitalism and is not meant to benefit the consumer, but is meant to secure power for a select few. Not all governments and businesses want to support free trade, because it creates competition that can affect their profits and control. The two are always attempting to work together and are “constantly trying to…erect various rules, restrictions, [and] regulations that help them.”[5]

This struggle has gone on for centuries, since the roots of capitalism took hold during the eighteenth century. This economic premise can be attributed to Adam Smith and his 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations. The collected minds of the era and their various studies of past great thinkers brought forth Adam Smith’s concept of “natural liberty,” Edmund Burke’s “natural society,” and Thomas Jefferson’s “all men are created equal, that they are endowed…with certain unalienable Rights.”[6] These philosophies all contributed to the ideal of capitalism, which when implemented brought great prosperity to those nations engaged in it.

With tremendous advancements in technology and innovations in commerce, the world was forever changed in the fifteenth century. Great wealth came out of this period and the drive to acquire more launched European colonization. The Revolutionary War was fought with capitalism and freedom at its heart. Americans fought against mercantilism as it reached its height during that period. They struggled to overthrow the “system of statism” and tear down the “subsidy and monopolistic privilege to individuals or groups favored by the state.”[7]

Even though Americans won their freedom to engage in capitalism and other liberties, the modern economic system in America is not based on those ideals of free trade. In fact, capitalism again lost out to the American promoters of mercantilism, which “included Hamilton and the Federalists and later, the politicians of the Era of Good Feelings in the 1820s who eventually became Whigs.”[8] The once greatly opposed British System was now relabeled and packaged as the “American System,” which brought with it the old world problems of “national debt, political corruption, and Court party…”[9]

Bibliography

Carden, Art. “The Myths of Capitalism’s History.” Mises Institute, May 11, 2009. http://mises.org/library/myths-capitalisms-history.

Chamberlain, John. “The Roots of Capitalism.” Mises Institute, March 23, 2010. http://mises.org/library/roots-capitalism.

Davies, Steve. “Capitalism is NOT Imperialism.” Learn Liberty, June 3, 2013. http://www.learnliberty.org/videos/capitalism-not-imperialism/.

DiLorenzo, Thomas J. “Trade and the Rise of Freedom.” January 31, 2000. http://mises.org/library/trade-and-rise-freedom.

Miron, Jeff. “Top Three Common Myths of Capitalism.” Learn Liberty, August 22, 2011. http://www.learnliberty.org/videos/top-three-common-myths-of-capitalism/.

Paul, Ron. “Has Capitalism Failed?” Mises Institute, April 16, 2008. http://mises.org/library/has-capitalism-failed.

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[1] Art Carden, “The Myths of Capitalism’s History,” Mises Institute, May 11, 2009, http://mises.org/library/myths-capitalisms-history.

[2] Ron Paul, “Has Capitalism Failed?” Mises Institute, April 16, 2008, http://mises.org/library/has-capitalism-failed.

[3] Steve Davies, “Capitalism is NOT Imperialism,” Learn Liberty, accessed on March 7, 2015, http://www.learnliberty.org/videos/capitalism-not-imperialism/.

[4] Ibid.

[5] Jeff Miron, “Top Three Common Myths of Capitalism,” Learn Liberty, August 22, 2011, http://www.learnliberty.org/videos/top-three-common-myths-of-capitalism/.

[6] John Chamberlain, “The Roots of Capitalism,” Mises Institute, March 23, 2010, http://mises.org/library/roots-capitalism.

[7] Thomas J. DiLorenzo, “Trade and the Rise of Freedom,” January 31, 2000, http://mises.org/library/trade-and-rise-freedom.

[8] Ibid.

[9] Ibid.