What is capitalism?

“When I say ‘capitalism,’ I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism—with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.” — AYN RAND

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

Under capitalism the state is separated from economics (production and trade), just like the state is separated from religion.

Capitalism is the system of laissez faire. It is the system of political freedom.

What is the purpose of government under capitalism?

It is to protect rights that governments are instituted. A proper government’s only responsibility is to protect the rights of the individual, by banning the initiation of force, thus making all relations between men peaceful, i.e., free from the threat of violence and fraud.

In a political context, freedom has only one specific meaning — freedom from the initiation of force by other men. By initiation I mean those who start the use of force to achieve their ends, i.e., a bank robber. Only the initiation of force against a man can stop his mind, thus rendering it useless as a means of survival. Only by the initiation of force can a man be: prevented from speaking, or robbed of his possessions, or murdered. Only through the initiation of force can a man’s rights be violated.

 

Suggested Reading:

The Nature of Government by Ayn Rand

What is a capitalist?

An advocate of laissez-faire is known as a capitalist, e.g., novelist Ayn Rand is a capitalist; e.g., though economically Engels came from a wealthy background, politically he is recognized as a socialist/communist because of his ideas; e.g., billionaire Warren Buffet and George Soros are not capitalists as they do not advocate capitalism, but variants of statism. Soros like Ted Turner is a “socialist at heart.”

What is the difference between competition under capitalism and competition under collectivist societies?

All social systems have competition, the only difference is that in capitalism, all such competition for economic power results in the creation of wealth, whereas in collectivist societies such competition for political power results in the destruction of wealth.

Under capitalism, competition is an economic process where men do not compete to put down others, but to raise their self up by creating values which are potentially unlimited, and raising their competitors up in the process.

Under all collectivist systems competition is a political process where men compete not to create values, but to lobby or kill for positions of political power which they can use to legally extort the wealth of their fellow men.

Politically, in today’s context, what is a capitalist system?

A capitalist system is a republic and not a [pure] democracy. It is a system of checks and balances so ordered to protect the rights of the individual, from criminals and most importantly from the democratically elected voices who claim to speak for the “public good.” It is a limited “democracy”.

For those who are confused by the issue, the essential point is this: is it right for another man to rape, rob and murder another? Capitalism says never; democracy says yes — if the majority wills it.

Isn’t capitalism a system of exploitation?

If “exploitation” means increasing the standard of living of the masses, tripling the life span of the average man, and bringing wealth and prosperity to all those who live under it, then capitalism is a system of “exploitation.” If “exploitation” means making the masses slaves — then I refer one to Nazi Germany, the Soviet Union and Communist China.

If capitalists “exploited” the masses by stealing their “surplus”, as the Marxists allege, where was this “surplus” before capitalists existed? If not for capitalism, many of the masses you cry about would not exist — capitalism did not create poverty it inherited it.

What is the foundation of capitalism?

Politics is not a primary. Politics is the application of ethics to social issues. One’s politics depends on one’s ethics; and one’s ethics depends on one’s metaphysics (studies the nature of reality) and epistemology (studies the nature of grasping reality). In other words ones view of what is the proper social system for men to live together in, depends on how one views man, and the world he lives in — that is one’s view of politics is shaped by one’s underlying philosophy.

Capitalism is a political system that if based upon the wrong philosophical base, is like a towering skyscraper, built on quicksand.

A philosophy today that provides a proper foundation for capitalism is Ayn Rand’s philosophy: Objectivism.

Suggested Reading:

What Philosophy Is, and How to Study It
by Leonard Peikoff

What is freedom in a political context?

Freedom, under capitalism, has only one meaning: freedom from the initiation of force by others. In a political context, freedom means to live in a social system based on individual rights, or in practical terms, freedom has only one specific meaning — freedom from the initiation of force by other men. By initiation I mean those who start the use of force to achieve their ends, i.e., a bank robber. Only the initiation of force against a man can stop his mind, thus rendering it useless as a means of survival. Only by the initiation of force can a man be: prevented from speaking, or robbed of his possessions, or murdered. Only through the initiation of force can a man’s rights be violated.

Isn’t capitalism, which is based on individualism, opposed to man living in society?

Individualism is not opposed to a man living in society, so long as he is free from the initiation of force by others.

Individualism is only opposed to man living in society as a non-individual amorphous member of a collective, i.e., a slave. Individualism holds that it is much better for man to live on a deserted island, than to live in a society where he is nothing more than a pawn ready to be sacrificed to the altar of the “public good.”

Doesn’t capitalism “centralize” wealth via inheritance?

As wealth is not a static quantity, to be looted and stolen, the wealth that you can earn is not affected by how much wealth someone else has, creates, or inherits. Since wealth is the result of man’s mind, as long as someone has a mind, and is left free to use it, wealth is his to create.

As the creation of wealth is not automatic, those who cannot manage their wealth, will soon lose it. As evidence of this fact witness what happens when a rich man passes on his money to a worthless heir — the heir soon loses it. Such is the meaning behind the popular American saying, “from shirtsleeves to shirtsleeves in three generations.”

Doesn’t capitalism lead to the lower labor wages?

No. Under capitalism ones wages depend on how much one can produce. That is why Michael Jordan — or a doctor — gets paid millions of dollars more then the minimum wage. It depends on how well and how much they produce. The reason why factory laborers receive more wages in America is because they are rendered more productive by productive use of capital.

Isn’t capitalism immoral?

No. Capitalism is the moral system, since it is the only system that allows man to be virtuous — to pursue the good — by leaving him free to act by the use of his reason. Freedom to act is a precondition of morality. This is Capitalism’s moral justification.

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