Yesterday my long-time friend Sheldon Richman spoke before the GMU Econ Society on “Capitalism versus the Free Market.”  (The video was streamed here, but it doesn’t seem to be archived anywhere; if you’ve got a link, please let us know).  His main thesis: Libertarians should say that they favor the “free market,” not “capitalism.”  Why?  Because for many people, “capitalism” simply refers to the status quo economic system outside of explicitly Marxist nations.  Sheldon elsewhere goes on to argue that libertarians should actually say that they oppose capitalism:

We are a group of libertarians who understand that historically the
word “capitalism” has meant, not the free market, but crony capitalism
— that is, collusion between business and State at the expense of
consumers/workers. Thus we refuse to use the word “capitalism” to
describe what we favor: individual liberty in all respects and free,
competitive markets. We believe that what we have today IS capitalism
— and we oppose it.

I’m not convinced.  If we were starting from scratch, I agree that it would be great to scrap both “capitalism” and “socialism.”  Etymologically, capitalism does sound like a system of rule by capitalists for capitalists – and socialism sounds like a system of rule by society for society.  Since neither etymological suggestion is true, I wish the terms had never been coined.

As Sheldon admits in his talk, however, changing words is like changing currencies.  If they’re already widely accepted, you need a really good reason to abandon them.  Awkward etymology notwithstanding, I think the concepts of capitalism and socialism are good enough to keep using.

Sheldon’s right that people often use capitalism and socialism as binary terms; if you’re not Cuba or North Korea, you’re “capitalist.”  But this problem is easy to correct: Just emphasize that there’s a continuum from pure laissez-faire capitalism to totalitarian socialism, and that most nominally “capitalist” countries are a lot less capitalist than they pretend.  Once you make this conceptual point, the Fraser and Heritage indices of economic freedom are great ways to continue the conversation.

When you “advocate capitalism,” don’t you risk alienating all of the people who hate the status quo but might come to love the free market?   It’s possible, but I doubt it.  Yes, opponents of the free market habitually associate it with “pro-business” economic policies.  But this is usually a deliberate rhetorical strategy on their part.  Almost all self-styled “anti-capitalists” hate free markets per se.  But it’s easier to incite outrage against visible injustices than against the invisible hand, and they take the path of least resistance. 

Don’t believe me?  Try going to an anti-globalization rally.  Tell people you’re for free trade, but against government subsidies for exports.  Tell them you favor freedom to form unions – and the freedom to fire workers for joining unions.  See what happens.  I bet it won’t be pretty.

If Sheldon were merely saying that libertarians’ noun of choice should be “the free market,” rather than “capitalism,” he’d have a decent case.  But for libertarians to reject “capitalism” as an alternate noun is overly defensive – and to announce that we “oppose capitalism” is completely confusing.