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What and When Is Capitalism?

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What and When is Capitalism?

William Thackary was evidently the first to use the word capitalism in print. That was in his 1854 novel The Newcomes. Its essential mark was ownership of capital. So if one knew what is capital, one should have a definition of capitalism. By that simple definition, I’d say capitalism goes back at least to the periods of the various archaic states, that is, back at least to the social organization coming after hunter-gatherer groups, after tribes and chiefdoms.

Capital

Rand took the essential mark of capitalism to be purely private ownership of property. (note) That would include private ownership of capital goods. Rand called mixed economy one having both private and public ownership of property. Purely private ownership would mean that the entire bundle of specific rights in each property is held by the private owners. I own a couple of acres, but with that does not come the right to make bonfires under all wind conditions (city ordinance). So there is some public ownership of my land property, though the bundle of my rights over the property is preponderate in the total bundle.

Rand and many others have thought of our modern mixed economies as mixtures of capitalism and socialism, and that is right, but I think the more fundamental characterization of the mix is the mixture between private and public ownership.

Ideologues of either pure capitalism or pure socialism tend to see only each other as what is other in the mixed economy. I’ve come to realize this is an enormous error. There is an important third component, and it is a publicly owned thing. It has been present since those archaic states and apparently isn’t going to go away or be made to go away. That factor in nation states is outlay for common defense of the country. And in the contemporary world with its greater wealth and technology, that common defense has expanded beyond defense against aggressions to common defense against natural catastrophes (warnings and evacuations), against contagious diseases, and against all sorts of manmade dangerous things within the country.

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Consider also: Capitalism

 

 

Edited by Boydstun
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A distinction between ownership and control is common. It's probably more common about business, e.g. corporations with publicly traded stock, than about politics. Ayn Rand did make the distinction in politics (link).

Regarding your land, I believe "public control" fits better than "public ownership."

Edited by merjet
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Posted (edited)

Melin, I don't think that ownership rights come to anything but control rights. And I take ownership to mean having some bundle of ownership rights. That is, ownership is rights-relations between persons, rights of exclusion, rights against interference with what to cultivate on the land, and so forth. The distinction of public control (or regulation) as against public ownership would seem useful in labeling a common proportion of control rights in different items: the land that is Yosemite National Park would likely be put under public-ownership talk, and what I'm not allowed to chuck into the creek in my ravine put under public-control talk. But most fundamentally, it's specific bundles of rights of control all around and all the way down for any and all occasions of ownership. To really see the levels and kinds of public versus private ownership, I think we need to think of all specific rights of control as specific ownership rights.

Edited by Boydstun
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1 hour ago, Boydstun said:

I don't think that ownership rights come to anything but control rights.

That seems fine in some contexts. But there is a bigger difference in business corporations with publicly-traded stock ("public" meaning general public, not government) between ownership and control. The outside owners own part of the corporation, but the only control of the corporation they have is to elect the board of directors or, rarer, on some other matter put to them. If the corporation pays dividends, the outside owners are owed the dividends. I wouldn't call receiving dividends "controlling." 

Amazon does not pay dividends. Jeff Bezos owns about 11% of the stock. His control of Amazon is far larger. Outside owners own the majority of the stock, but don't have near the level of control as Bezos. I have no basis to give a specific number to either.

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I understand that those are the things such relations are customarily called, Merlin. And thanks for getting that into considerations.But every single right of the participants in that association is a set of particular controls over property, whatever they may be customarily called.

There are no property ownerships in the association you describe that are not private property ownerships. All of that is occurring within the wider setting of private property. Insofar as the government is regulating a firm--say the EPA being the ultimate control on the maximum release of chromium into water effluents from a manufacturing plant of GM--they are that small bit controller of the firm's conduct and that bit owner in the firm, even if it is not customarily called that.

Surely a distinction between the property frameworks of capitalism and socialism significantly turns on the distinction between private ownership and public ownership in the widest legal context. That is the big distinction--private/public--within which the finer arrangements can be made, and public ownership is where the third component of our economic system (the component of common defense, et al) resides. That third component, so far as I've seen, has always been present where there is capitalism (private property) from organization of the archaic state in Mesopotamia to our own modern state, that is, a significant public ownership antedating socialism.

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Before I read Rand, I would have said Capitalism is an economic only system, independent of politics.

After Rand, Capitalism is a new concept for me (as new as morality became for me), and is not so much economics as an economy defined by politics... and I cannot but utter the implied preface "Laissez-faire"... even though ironically insistence on that is as redundant as saying "independent" before "thought".

Ownership, refers primarily only to the rights in one's property.  But can we say that (capital C) Capitalism is a system agnostic to freedom of speech?  What about freedom of association or movement of the press, the rule of law, equality under the law, and the right to one's life itself?  As everything to a hammer is a nail so too I would suggest a current day Economist of the academy would see Capitalism, technically defined, as purely an economic system (see how "purely" serves as the great compartmentalizer) and hence as independent of such things since they are in the political realm.  If we have enough economic activity technically conforming to our concepts of capital etc. it matters not that people do not have free speech or equality under the law.

 

After years of saturating myself in Rand's ideas, I have come to see that there are a few ways to look at economic "systems" which depend implicitly on what one thinks they are.  First, in a manner analogous to a biologist, and second in the manner of a Hermann Goering.  The first is concerned with the study and description of nature, because that is what is meant by a "system" in the context something which arises naturally, while the second is concerned with a "prescription" for the organization of people for reaching the aims of the state or its ruler, because that is what is meant by "system" in the second context, i.e. what is to be imposed and put into place.  A biologist observing a natural system would never conclude there is no system, she would point to what is happening and identify it, whereas a Goering who has specific goals for his master, unless there are specific edicts put into place for specific goals he would (quite consistently with his definition of a "system") be correct to say there would be no system.... and to him "Laissez faire" at most is a system of "no system", so to speak.  In the first sense, the economy is what people do and in the second sense, it is what we (or the state) make or allow people to do.

Why the point about the two ways of looking at economic systems?  First, almost everyone I meet, no matter how much of a proponent of freedom and rights, when speaking of economics, especially in the comparison between Socialism and Capitalism, tends to inadvertently slide toward usage of terms similar to that which would be used by a State central planner.  Of course, the conclusions are different for what "we" should do about, this or that "social ill", which implicitly is the "responsibility" of "us" (or the state) to "manage", but the philosophical perspective where the "the ends" are firmly pulling the leash, and the "means", almost forgotten and apologetically being tugged hither and thither by an some untrained pooch, is all too salient.  What is an economic system, how does one validate and assess its success?  Outcomes or method, ends or means?

Anecdotally, but not unrelated, some years ago, a pre-law acquaintance of mine essentially told me that Rand had tried to justify Capitalism on the economic outcome, but that such outcomes do not result as of a necessity, and hence she was wrong, other interventions are "required", and hence Capitalism is not the "best" system.  I of course retorted that was not the case.  Rand had not argued, Capitalism is "right" because it always makes everyone wealthier.  It is right because it is the result of the activity of free individuals whose rights are protected by a proper government, i.e. a proper political system.  [That said any "system" (which can be described) as arising within such a context would be a proper Laissez-faire economic system...  I do not discount the possibility that some such economic system might not be best labeled or associated with "Capital". Presumably Rand, (as I do) tended to believe it just so happens that Capitalism happens to be the natural way free peoples voluntarily act and trade with each other.... and one day maybe a Laissez-Faire Economy (LFE), as such, including several aspects, will be the correct term to use]

It comes full circle for me that those thinking to prescribe and solve so-called "problems" will never understand the true meaning of what Rand identified as LF-Capitalism, economically it is descriptive not prescriptive, but it goes hand in hand with a certain, a proper political system.  Hence the circle, Rand is certainly prescriptive about what the proper society is politically, i.e. what a proper government is and does, and what individual rights are.  So Rand's economic system is not prescriptive in the second sense of an "economic system" but it requires a prescription for a political system which makes it possible.  Given that the proper politics here literally defines and brings about the economic system arising therefrom... even in the first sense of "economic system" it becomes difficult to simply identify Capitalism as "purely" economic.  In other words IMHO, LF-Capitalism is a description of an economic system naturally arising from a certain prescribed and proper political system...

 

I'll try to focus this meandering, about description and prescription, ends and means, economic and political... so as to conclude my ramblings on the when and where:

 

I tend to see Capitalism as arising naturally and spontaneously from a correct political system whose sole role is to protect individual rights. 

It's existence requires nothing less, and imposes nothing more.

 

Edited by StrictlyLogical
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On 8/30/2020 at 8:22 AM, Boydstun said:

Ideologues of either pure capitalism or pure socialism tend to see only each other as what is other in the mixed economy. I’ve come to realize this is an enormous error. There is an important third component, and it is a publicly owned thing.

I agree. I've been focused on this problem in Rand's writing for a couple years now, ever since I noticed a mistake in her article on "The Property Status of Airwaves." I recently traced the problem to her definition of capitalism. Thank you for articulating your view and adding some historical perspective.

I believe a critical context is missing in most Objectivist arguments against public property. That context is the purpose of forming a community, a society, a village, a town, a city, a state--any social group. The purpose here is to benefit the individuals qua members of a group, not the individuals qua individuals. Yes, physically only individuals exist, but this does not mean that the purpose of forming a group must be to protect any particular individual over the group of individuals as a unit. Sometimes what is objectively best for the group will conflict with what is objectively best for a particular member of the group. In these cases, some governing body must decide whether to rule in favor of the group or the individual. If the very existence or growth of the group is at stake, by what right does a member of that group claim more importance than the group on which he depends for his own existence or growth? The problem is that such conflicts typically take place in this false-dichotomy context of pure capitalism versus pure socialism, where either the individual or the collective is the political primary. Instead, we need an injection of objectivity, where we recognize the purpose of the society in which this conflict takes place.

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5 hours ago, MisterSwig said:

If the very existence or growth of the group is at stake, by what right does a member of that group claim more importance than the group on which he depends for his own existence or growth?

Wouldn't this actually be some kind of argument for public property? Are you saying that Objectivism lacks arguments against public property, but in fact the truth is that public property is valid?

Part of Rand's individualism is that groups depend on individuals. Individuals do not depend on groups. 

Of course you can argue this is false, but this is what she means by capitalism. The individual is absolutely primary, which is the major justification for private property. Anything additional is simply not private property, and therefore to that extent, the system is against individuals or at the very least puts them as secondary. I'm not seeing any reason to change my mind about individuals being primary. 

The when of capitalism seems to be nothing more than acknowledging private property, protecting it, and if done consistently, without forcefully harming any individual. 

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Boydstun and Merjet,

Public ownership and public control, neither of these concepts is what gives us the fundamental insight into the core differences between a mixed economy and a pure, laissez-faire capitalism.

A pure laissez-faire capitalism would still have controls.

For instance, under laissez-faire, risky business ventures would contract with insurance companies in order to guarantee some return on investment, instead of relying on bankruptsy protection and bailouts, because bankruptsy protection and bailouts are against the principle of a free market, in which every new venture must suffer the consequences of failure if it is not profitable.

The sign of a mixed economy is that the government will protect the failures of large businesses, as happened during the economic crisis of 2008.

Is the insurance company's contract with the new risky business venture a public control?

In some ways it is, because it is a so called "public interest" for the new venture to be successful.

When I say it is a public interest, I mean that there is more than one individual who might be affected by a business failure.

In the example of this risky business venture, those affected include both employers and employees, as well as shareholders.

Since there is not such entity as society, there is no entity we can call the public, unless we say that the public is a group of individuals, in which case we must refer to all of the individuals involved.

What we have currently is a government which caters to the public interest, by protecting individual rights.

This is obviously not wrong, evil, or immoral, because this is exactly the definition of what a public interest is: protecting every individual who comprises the public.

 

 

 

 

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So public ownership and public control are nebulous concepts.

Every control that is designed to protect more than one individual is a public control.

If there is no entity called the public, other than the totality of individual members of that public,

then we cannot use the concept of the public to designate the difference between mixed economy and laissez-faire.

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11 hours ago, Sebastien said:

Boydstun and Merjet,

[1] Public ownership and public control, neither of these concepts is what gives us the fundamental insight into the core differences between a mixed economy and a pure, laissez-faire capitalism.

A pure laissez-faire capitalism would still have controls.

[2] For instance, under laissez-faire, risky business ventures would contract with insurance companies in order to guarantee some return on investment, instead of relying on bankruptsy protection and bailouts, because bankruptsy protection and bailouts are against the principle of a free market, in which every new venture must suffer the consequences of failure if it is not profitable.

The sign of a mixed economy is that the government will protect the failures of large businesses, as happened during the economic crisis of 2008.

Is the insurance company's contract with the new risky business venture a public control?

In some ways it is, because it is a so called "public interest" for the new venture to be successful.

When I say it is a public interest, I mean that there is more than one individual who might be affected by a business failure.

[3] In the example of this risky business venture, those affected include both employers and employees, as well as shareholders.

Since there is not such entity as society, there is no entity we can call the public, unless we say that the public is a group of individuals, in which case we must refer to all of the individuals involved.

[4] What we have currently is a government which caters to the public interest, by protecting individual rights.

This is obviously not wrong, evil, or immoral, because this is exactly the definition of what a public interest is: protecting every individual who comprises the public.

[1] Obviously. You omitted private ownership and private control.

[2] I believe you have much to learn about the principle of insurance. Why would an insurance company underwrite any business, no matter how poor its prospects?

Bankruptcy might be a free market proceeding. However, government overseeing or conducting a bankruptcy proceeding is needed much of the time. The alternative is a chaotic free for all by insiders, all creditors, and others with a reasonable claim on the bankrupt company’s assets. Such assets are clearly inadequate to satisfy all claims, else there is no need for bankruptcy proceedings.

[3] Creditors are usually the major claimants in bankruptcy.

[4] The Obama administration certainly did not during the financial crisis. His people overturned longstanding bankruptcy rules in favor of unions and against bondholders.

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11 hours ago, Sebastien said:

So public ownership and public control are nebulous concepts.

Every control that is designed to protect more than one individual is a public control.

If there is no entity called the public, other than the totality of individual members of that public,

then we cannot use the concept of the public to designate the difference between mixed economy and laissez-faire.

You are not using "public" in the sense I did, and probably Stephen did. I was using it to distinguish between the government and the private sector.

The term "public" as you used it is fine for some contexts. For example, there in stock which is publicly-traded versus not publicly-traded. The latter does not mean the stock is government owned, but (partly) owned by the general public (people in the private sector). 

Edited by merjet
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Correcting my last post:

The term "public" as you used it is fine for some contexts. For example, there is stock which is publicly-traded versus not publicly-traded. Neither means the stock is government owned. Publicly-traded means the stock can be owned by members of the general public (generally in the private sector). The opposite means only a select few can own it.

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