Is Capitalism Dead?
How would we know? And what should we do about it?
In order to know if someone or something is dead or alive, we need to be able to measure “aliveness.” And so, how could we measure if capitalism is alive, and if so, to what extent it is alive?
We could derive a measurement from the definition of Capitalism.
The current dominant definition is as follows:
Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. [Wikipedia]
Private Ownership
A wide range of statistics have been published on how private individuals and entities own land, businesses, and other assets. The proportion of private ownership is high in so-called free-market economies, lower in mixed economies, still lower in state-directed economies, and technically zero in communist economies.
The portion that is not private is considered public or state owned.
Effective Private Ownership
The problem with the definition of “private ownership” is that while in theory we can differentiate between private and public, in practice we cannot. Because in practice, some private individuals will control what is publicly or state owned.
So, in practice, all ownership is private.
Legal Private Ownership
One might argue that private individuals cannot legally control public property, as if it was their private property. In theory, this is true.
But in practice, the argument is pointless for two reasons.
Firstly, “So what?”
Theory and De Jure do not matter. What matters is what happens in practice. De Facto.
Secondly, the law tends to converge to power. If it is illegal for a powerful person to use public property as if it was their private property now, then they will change the law to make it legal.
Free Markets and Competition
To me, a better definition of Capitalism is one where “capital is free.” Or in other words, where capital can not just “live”, but “thrive” in a free market. Almost by definition, free markets have robust competition.
Hence, personally, I prefer this definition of capitalism:
Capitalism is an economic system based on free markets and competition.
And so, a better measurement of “Is Capitalism alive?” is to ask the question “Is the market free and is there competition?”
Defenders of “Private Ownership” argue that Private Ownership “causes” Free Markets and Competition. But statistically, the proportion of private ownership and the freeness of markets are completely independent.
However, there is a very specific type of Private Ownership that correlates strongly with Free Markets and Competition. Namely, one where private ownership is equitable.
To see why, let’s consider the converse, or “Why no private ownership leads to no free markets and no competition.”
Authoritarian Economies
But wait. Didn’t I say that all ownership was private? Then, isn’t “no private ownership” meaningless?
Yes and No. Yes — it is meaningless. But also, No — because when we talk about “no private ownership,” we are actually talking about a very specific type of private ownership.
An excellent example is North Korea.
Officially, North Korea is a communist state, and by definition has no private property. But in practice, all the property in North Korea is owned by a very small number of people. Or to be exact: one person.
The very specific type of private ownership that North Korea has is one that is very asymmetric and very unequal.
When ownership is highly asymmetric and unequal, free markets and competition become difficult or impossible because it is easy for the few owners to create monopolies.
Economic Inequality
Hence (for me at least), the real measure of capitalism is economic inequality. With more economic inequality, we have less free markets, and less competition. And in other words, we have less capitalism.
Conversely, the most equal places in the world have the freest markets and the most competition.
Is Capitalism Dead?
This question is difficult to answer, because the world economy is not one economy, but a large number of economies which are coupled and decoupled to various degrees.
In some of these economies, competition is vibrant, and markets are free. Capitalism is alive and well.
But not in others.
What should we do?
Several things.
First. We need to recognize that “Private Ownership” is both a misleading and a useless term. Not because private ownership doesn’t exist. But because nothing else does. All ownership is private ownership.
Second. We need to understand why people promote private ownership and the private ownership centered definition of capitalism. Broadly, there are three types of promoters.
- Type 1, and most obviously, people with a lot of capital and want more promote this argument. Many of them even go as far as promoting monopolies and unfree markets.
- Type 2, people in the pay of the first group, who are paid to promote this argument.
- Type 3, a bunch of idiots who have adopted Private Ownership as a sort of religion, who promote it for free.
Third. We need to protect and promote free markets and competition.
But why?
Many people argue that free markets are bad in many cases. They go on to give examples — healthcare, for example. They often go on to argue for state ownership of these examples.
I tend to agree with them that there are many examples of free markets that don’t seem to work. But I’d argue that the problem with these free markets are not the free markets, but the lack of regulation and its effective enforcement, and the lack of competition.
This is often the case in healthcare markets, which seem to have forgotten to heal the sick. In addition to the lack of proper regulation, many of these markets are increasingly monopolistic — and hence not free markets, and void of competition.
Personally, I’m a fan of free markets and competition because there seems to be no other alternative. The moment we weir away from them, whether towards authoritarian states, or the serfdom of private owners, the world as a whole seems to lose out.
How to keep Capitalism alive
Simple. Focus on two things.
- Enforce standards through regulation.
- Proactively preserve and promote competition.
