Real Capitalism

[0096 2251 2110 8105]

A quick question: I was just reading about different forms of capitalism, like corporate capitalism or state capitalism, for example, and was wondering how do you know that of all variants of capitalism, laissez faire is the “real” one? Since every time someone mentions capitalism, everyone here assumes they’re talking about laissez faire, when I've found it listed everywhere else just as another variant.

[2046]

Those aren't forms of capitalism, but forms of statism.

In any event, you can call the political branch of Objectivism as "glorb-capitalism" and corporate capitalism "bleeb-capitalism" and the welfare state "real-capitalism" and anarchism as "54302594-capitalism" and the mixed-economy as "nkdasn'fa'iw;" it doesn't matter what words you use to represent it, it's the concept the word stands for that matters.

[Jake_Ellison]

Capitalism, as it existed in the West, is essentially as defined by the principles of LFC, not by those other two names you mentioned.

Corporate capitalism is just a meaningless term meant to suggest that corporations are running Western countries. That was never true, and it could never be possible. Corporations are not designed to run countries.

As for state capitalism, that's meant to suggest that fascism is a form of capitalism. It is not, fascism is a form of collectivism, of the same family as socialism. Out of all the political systems countries have experimented with, fascism generally failed the fastest. That is an obvious and irrefutable argument against those who claim that fascism is necessary to reign in Capitalism.

So, I know that LFC is the "real" capitalism, because it is the only one defined in terms that make any sense. That's not to say that there aren't other political systems, just that they are not defined by free trade. (so you can't call them capitalism)

[Zip]

LFC is the only form that recognizes individuals as the prime movers in the economy and is constructed so as to allow them to operate freely.

[Q.E.D.]

If there is any such thing as "corporate capitalism" it is socialism wherein corporations may employ government intervention for the conquest of other men and to gain the unearned. Government subsidies for certain corporations make it very difficult or impossible for competitors to enter the marketplace and to undo (possibly unfair) monopolies. Government bailouts give corporations the ability to act irrationally because there's no threat of the natural repercussions.

LFC on the other hand stresses separation of business and state for the same reasons there is a separation of church and state. Its an absolute perversion of facts and language to attribute corporate influence of government to unregulated capitalism. Whom other than a few corrupt CEOs would politicians consort with before enacting regulations in a field?

[Dr. Dave]

Not sure if this is sufficiently on-topic but I wanted to mention that what we call "corporations" are products (at least since around the 1860's) of state interference in the economy, not the natural workings of LFC.

There is no such thing as a natural right to limited liability. If any one of us damages or injures another, we have a responsibility to pay restitution or some other penalty as needed to "make them whole."

We don't get a "pass" on liability for our voluntary actions when we act in groups.

Corporations, however, have been granted charters of limited liability by governments. This amounts to a promise by the state not to attempt to redress grievances beyond the assets of the corporation. But remember that only individual people exist, and individual people are liable for their actions. Corporate charters are a promise by the state not to exercise the retaliatory use of force in situations where force of fraud have been initiated.

When they picture capitalism, some people imagine the corporations they are familiar with as constituting the market. But capitalism is "the unknown ideal." In a just society, there might not be entities very similar to what we think of as corporations. I say "might" because you can't reliably subtract the undue influence of limited liability and predict what would be left -- there is no "control group".

[softwareNerd]

A quick question: I was just reading about different forms of capitalism, like corporate capitalism or state capitalism, for example, and was wondering how do you know that of all variants of capitalism, laissez faire is the “real” one?

The whole thrust of the question is misguided. What do you mean by "real one"? The term "capitalism" is a label being applied to a concept: a certain type of political system. If two people uses the label "Capitalism" to describe the type of system we currently call "Communism" that won;t make either of those systems more or less "real". It will simply lead to confusion.

Since every time someone mentions capitalism, everyone here assumes they’re talking about laissez faire, when I've found it listed everywhere else just as another variant.

In the context of this forum, it makes sense to assume that people who use the word "Capitalism" are speaking about the concept as Objectivists use it, or something close. One does not make such an assumption with newbies though. One is aware that they sometimes use the term to name a different concept. In such cases, one has to look for additional clues in other things they say, or ask for clarification as to what they're speaking about. Similarly, when one speaks of Objecitivism, people here take it to mean the philosophy of Ayn Rand whereas on some poetry forum it might be taken to mean a certain genre of poetry. Which one is "real"?

Dr. Dave: The notion of "limited liability" is discussed in previous topics here and , here.

Edited December 6, 2009 by softwareNerd

[Jake_Ellison]

There is no such thing as a natural right to limited liability. If any one of us damages or injures another, we have a responsibility to pay restitution or some other penalty as needed to "make them whole."

It isn't true that people who work for corporations get a special pass from government, to damage or injure others. That is not what limited liability means, it simply means that beyond the assets of a corporation, the shareholders are not liable for paying out debt the corporation owes. (be it assumed debt or as a result of lawsuits, against the corporation itself--either way, you cannot owe something to someone, unless they agreed to lend it to you, fully aware of the conditions of the loan --since the list of corporations is publicly available, and they are legally obligated to inform all business partners that they are in fact a LLC.) You have a choice to take advantage of the free flow of investment this arrangement generates, by dealing with these entities, or you may refuse to deal with them. Either way, I have the right to set up such an entity and deal with those who wish to deal with me, and you do not have the right to stop us.

Unless you can mention at least one specific instance in which that limited liability caused one person to get away with a crime, be it murder, theft or fraud, your accusation that they do is in the same vein as all other accusations of criminal behavior Marxists bring against various groups.

We don't get a "pass" on liability for our voluntary actions when we act in groups.

Again, please name at least one individual who got away with a crime because he was working for a LLC, before you accuse millions.

Edited December 6, 2009 by Jake_Ellison

[DavidOdden]

There is no such thing as a natural right to limited liability. If any one of us damages or injures another, we have a responsibility to pay restitution or some other penalty as needed to "make them whole."

We don't get a "pass" on liability for our voluntary actions when we act in groups.

While I agree with this, there is an underlying valid reason for the existence of corporations from the limited liability POV, namely that being a shareholder does not mean that you have thereby caused damage when there is damage. There has to be a separation of the concepts "financial interest" and "caused damage".

[VECT]

Since every time someone mentions capitalism, everyone here assumes they’re talking about laissez faire, when I've found it listed everywhere else just as another variant.

The reason why LFC is listed just as another variant Capitalism elsewhere is because majority of the people, who are politically inept, believe that Capitalism is just whatever system America has. So if US changes her econ-political system to a relatively more socialistic stand, these people will believe it as just another form of Capitalism, and the politicians will also want to label it as such to avoid..problems.

All political systems has its foundation in an ethical system, and that foundation is what separates them apart, not arbitrarily designated names.

LFC is the only system that has its ethical root planted firmly in the soil of individual rights, and ten feet away from that other patch of soil called altruism. That's the reason why LFC is the "real" capitalism.

[Dr. Dave]

It isn't true that people who work for corporations get a special pass from government, to damage or injure others. That is not what limited liability means, it simply means that beyond the assets of a corporation, the shareholders are not liable for paying out debt the corporation owes. (be it assumed debt or as a result of lawsuits, against the corporation itself--either way, you cannot owe something to someone, unless they agreed to lend it to you, fully aware of the conditions of the loan --since the list of corporations is publicly available, and they are legally obligated to inform all business partners that they are in fact a LLC.) You have a choice to take advantage of the free flow of investment this arrangement generates, by dealing with these entities, or you may refuse to deal with them. Either way, I have the right to set up such an entity and deal with those who wish to deal with me, and you do not have the right to stop us.

Unless you can mention at least one specific instance in which that limited liability caused one person to get away with a crime, be it murder, theft or fraud, your accusation that they do is in the same vein as all other accusations of criminal behavior Marxists bring against various groups.

Again, please name at least one individual who got away with a crime because he was working for a LLC, before you accuse millions.

What is your definition of political philosophy?

[brian0918]

Dr. Dave, I am interested in your argument. Can you provide some specific examples of LLC's getting away with something they couldn't have under LFC?

[Robert J. Kolker]

A quick question: I was just reading about different forms of capitalism, like corporate capitalism or state capitalism, for example, and was wondering how do you know that of all variants of capitalism, laissez faire is the “real” one? Since every time someone mentions capitalism, everyone here assumes they’re talking about laissez faire, when I've found it listed everywhere else just as another variant.

State Capitalism is an oxymoron. And people who take this concept seriously are moronic oxen.

Bob Kolker

[0096 2251 2110 8105]

I have two questions:

1) Can someone please explain to me why “an economic system in which the means of production and distribution are privately” is a wrong definition of capitalism, while Ayn Rand’s “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned” is the correct definition above all the others in the history of the world?

2) Also, she said that “capitalism has created the highest standard of living ever known on earth” for example, among many other things that she usually ascribes to capitalism. If according to Ayn Rand, capitalism has never existed, isn’t she contradicting herself all the time saying this?

These questions have been coming a lot lately in many of the discussions with marxists I've been into.

[softwareNerd]

I have two questions:

Definitions are the wrong place to start. Indeed, many a time, they can cripple you rather than help. Start at the concept. Ask what actual facts of reality you're trying to describe. Rand is looking at politics as a whole, and describing a type of political system. The alternative that you presented is looking at the economy alone. The actual facts of reality in that economy-centric collection is subsumed within the larger set of facts in the broader political-centric collection. Put another way, Rand's concept is broader and includes many more facts. So, the real difference in her formulation and the alternative that you offered is not the definition as such, but the facts of reality that she is trying to describe.

As for the second, once again, I think you're too focussed on the words and not on the reality that is being described. Take China and consider why it suddenly changed from decades of poverty to being significantly richer. Then look at the same thing having happened in many other countries. Take all these example and ask yourself what was the fundamental change across all these. You'll find that the fundamental change is that governments stepped back and allowed their citizens to exercise many more rights than before. The reverse can be seen in the deterioration of China and Russia when they turned toward communism, or India when it turned toward socialism. So, the degree to which people are allowed to exercise their rights -- in particular in economic areas -- is the degree to which a county's economy has done well.

[0096 2251 2110 8105]

I ran into an argument about this with my professor today, and it all basically came down to him condescendingly pointing out that I was just "taking for granted that classical liberalism is capitalism." I was heating up so I couldn't think of anything to say from there and got stuck. Perhaps this isn't the right question, but who gets to call what the true capitalism is? The one who came up with the term first? Every school has its own vision and ideal of capitalism. I know that laissez faire is the way to go, but how do you arrive from that at the conclusion that LF is the capitalism? Is this whole argument reduced to "capitalism is this because this is the one capitalism that works" or "this capitalism is in accordance to human nature, etc... therefore this is the one capitalism"?

Like this, for example:

LFC is the only form that recognizes individuals as the prime movers in the economy and is constructed so as to allow them to operate freely.

This isn't evidence that laissez faire is "true" capitalism, this is simply evidence that "LFC is the only form that recognizes individuals as the prime movers in the economy and is constructed so as to allow them to operate freely." I'm not asking for that, I know what LFC is. What I'm asking is...what is this proof that LF is the "true" capitalism and not just some other variant consisting of? Effectiveness? Ancientness? Accordance to man's nature and his life qua man etc etc...? Then what about all the other systems which don't possess this last characteristic? Shouldn't they get a name then or be called "real"? I'm getting more confused now.

Edited May 11, 2010 by 0096 2251 2110 8105

[Pokarrin]

What I'm asking is...what is this proof that LF is the "true" capitalism and not just some other variant consisting of?

Words matter, but they aren't primary. If someone objects to your definition of Capitalism in an argument, you can simply concede the (often arbitrary) point and see if they will accept your definition of "Laissez-Faire Capitalism", then continue arguing about the ideas that actually matter. Trying to argue about the true definition of a word is more often than not a completely pointless exercise.

On the other hand, you should object to an attempted definition that either contradicts itself (state capitalism), or necessarily involves fatal equivocations (corporate capitalism). Arguing from faulty definitions is a good way to get lost in the details and lose sight of the actual concepts the defined words are supposed to represent.

In your specific case, I think the point you would like to make is that Laissez-Faire is the only variant of Capitalism that actually remains coherent as a concept. Corporate capitalism involves equivocating on the definitions of corporation and capitalism. Corporation in the sense that it can mean either "a group of people cooperatively engaged in a productive enterprise", or "a group of rich people who use their wealth to gain unfair advantage over those less fortunate". Capitalism as either "a social system based on the recognition of individual rights, including property rights, in which all property is privately owned", or "a social system based on the aggregation of political power to the most wealthy". In any argument regarding corporate capitalism, the terms will be used in one sense by one party, and in the other sense by the other party, leading to confusion and frustration for both, as they are actually mutually exclusive. If both parties agree to the first set of definitions, there is no reason to have the word "corporate" in there at all, and if both agree to the second set, there is no reason for the word "capitalism", as you could simply call it "corporatism". I trust the inherent contradiction in the term "State Capitalism" is sufficiently obvious that I need not explain it.

Based on the above, "Laissez-Faire Capitalism" is needlessly redundant (but not wrong), since there aren't any other Capitalisms. Hope this helps you.

[0096 2251 2110 8105]

Words matter, but they aren't primary. If someone objects to your definition of Capitalism in an argument, you can simply concede the (often arbitrary) point and see if they will accept your definition of "Laissez-Faire Capitalism", then continue arguing about the ideas that actually matter. Trying to argue about the true definition of a word is more often than not a completely pointless exercise.

On the other hand, you should object to an attempted definition that either contradicts itself (state capitalism), or necessarily involves fatal equivocations (corporate capitalism). Arguing from faulty definitions is a good way to get lost in the details and lose sight of the actual concepts the defined words are supposed to represent.

In your specific case, I think the point you would like to make is that Laissez-Faire is the only variant of Capitalism that actually remains coherent as a concept. Corporate capitalism involves equivocating on the definitions of corporation and capitalism. Corporation in the sense that it can mean either "a group of people cooperatively engaged in a productive enterprise", or "a group of rich people who use their wealth to gain unfair advantage over those less fortunate". Capitalism as either "a social system based on the recognition of individual rights, including property rights, in which all property is privately owned", or "a social system based on the aggregation of political power to the most wealthy". In any argument regarding corporate capitalism, the terms will be used in one sense by one party, and in the other sense by the other party, leading to confusion and frustration for both, as they are actually mutually exclusive. If both parties agree to the first set of definitions, there is no reason to have the word "corporate" in there at all, and if both agree to the second set, there is no reason for the word "capitalism", as you could simply call it "corporatism". I trust the inherent contradiction in the term "State Capitalism" is sufficiently obvious that I need not explain it.

Based on the above, "Laissez-Faire Capitalism" is needlessly redundant (but not wrong), since there aren't any other Capitalisms. Hope this helps you.

Hmm… Thanks, but I’m not asking this just so that others accept the definition and I can have nice discussions, I’m asking this because I truly don’t see what the answer is. So… I’m not interested in trying to “lose them,” or keeping my head down when the issue comes up, or deliberately obscuring the fact so that no one asks, or using any kind of diversion really. I'm looking for a real answer. Pointing out the flaws in other systems does nothing in this respect really, and it doesn’t automatically make mine “true.” If we were to use that logic, then no other system in the world other than capitalism could be called “pure” X or “real” X, simply because it involves contradictions or equivocations. That was exactly my point. I’m not asking if corporate capitalism works or not. I appreciate your answer, but we basically ended up were we started. You are begging the question in all your examples. Before you say things like “State capitalism contradicts itself” or “Corporate capitalism involves equivocating on the definitions of corporation and capitalism” or “the inherent contradiction in the term state capitalism is sufficiently obvious…”, etc. you have to first establish and prove that LF is the capitalism in the first place, and you didn’t. You’re just assuming it as a self-evident truth and starting from there, begging the question, as I was told by my professor yesterday, which is true, even if I don’t like it. Like when you say that “laissez faire capitalism” is redundant, or that there aren’t any other capitalisms. Why? And remember: first things first. Anyway, I can live without using the terms as synonyms. It's really not a big deal. I'm just curious because everyone here does, and I still don't see why. Thanks anyway.

Edited May 12, 2010 by 0096 2251 2110 8105

[Jake_Ellison]

If we were to use that logic, then no other system in the world other than capitalism could be called “pure” X or “real” X, simply because it involves contradictions or equivocations.

Something that contains contradictions cannot be called a properly formed concept. Using concepts that aren't properly formed is illogical (and pointless as a result). Not sure why you think every system in the world involves equivocations. My definition of communism, fascism, or socialism contains no equivocations: my concepts are properly formed to describe reality. And reality does not have contradictions.

That was exactly my point. I’m not asking if corporate capitalism works or not.

Are you asking if it can exist or not? If you're not, then you are divorcing the concept from reality. You have no argument against someone pointing out that there cannot be "corporate capitalism", because that's a contradiction. Corporations do not control an elected government, the way the name implies, and if they do that's fascism, not capitalism.

I appreciate your answer, but we basically ended up were we started. You are begging the question in all your examples.

Agreeing on the word to use for a concept is not begging the question. Neither is citing the dictionary for it:

Capitalism : an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

You can't have a free market determine the prices of goods, and the claims those other definitions presuppose, coexisting without contradiction, therefor, if we speak English as it is defined by Merriam Webster' Online, the terms "corporate capitalism" and anarcho capitalism are false concepts, and the only real form of capitalism is LFC, in which the rights of individuals are protected by government.

Where am I begging the question in the above paragraph, and what specifically is the assumption I am both starting with and concluding?

Edited May 12, 2010 by Jake_Ellison

[Pokarrin]

Pointing out the flaws in other systems does nothing in this respect really, and it doesn’t automatically make mine “true.”...I’m not asking if corporate capitalism works or not.

My arguments were epistemological, not economic; I didn't argue that corporate or state capitalism don't work, I argued that they are not valid concepts, and therefore can't even be reasonably argued about. You seem to be confused about the nature of concepts. There is no such thing as the concept of capitalism, or any other concept, without a mind to conceive of it. The referents of a concept may well exist on their own (though not in this case), but the concept can't, unless someone first thinks of it. You need words as symbols in order to communicate ideas regarding those concepts. Those words' definitions must be previously agreed upon (as with a dictionary) and so defined as to avoid contradiction and equivocation, otherwise neither party to a discussion will understand what the other is saying, either because as a contradictory concept it can't refer to reality, or because the definition is arbitrarily subject to change within the context of the argument.

Hmm… Thanks, but I’m not asking this just so that others accept the definition and I can have nice discussions, I’m asking this because I truly don’t see what the answer is.

The defining attribute that distinguishes capitalism from other systems has been established (re: Jake_Ellison's post) as individual ownership of capital. Any system that is not capitalist, then, necessarily involves ownership on other than an individual basis, thus creating a contradiction if you attempt to combine them. If it does not, it might as well be subsumed under capitalism without any need for further differentiation. The only reason to create unnecessary differentiations is to breed confusion so as to get away with what would otherwise be an obvious equivocation. I believe that the reason Ayn Rand insisted on LFC as the only true capitalism was to avoid those very equivocations. LFC, while needlessly redundant, is a valid concept, unlike all other alleged "capitalisms". It gains that distinction by being neither self-contradictory nor equivocal. Perhaps you could come up with another "variant" that meets those criteria, but I would be very surprised if you could distinguish it from LFC, or simply capitalism, in any meaningful way. In fact, one of the possible definitions of "corporate capitalism" in my previous post does in fact meet the criteria, though that's not the way the term is normally used.