I noticed three things the other day, and it got me thinking. The first was a preview of Michael Moore’s soon-to-be-released “Capitalism: A Love Story,” of which a significant part is an attack on America’s bailout culture of the last year or so. The second was a picture of a G20 protestor with a sign that read “No Bailouts No Capitalism” (the A’s were circled). The third was Ahmadinejad’s criticism of an unnamed nation for its “unbridled capitalism” which operates under a fiat currency system and a central bank that creates “[trillions] of dollars of unreal wealth…by printing worthless paper.”
Anyone else detect a misunderstanding of terms? How in the world did capitalism become associated with bailouts and central banks?
If Moore truly wanted to mock the bailout culture, wouldn’t a better title be “Government: A Love Story”? And shouldn’t the protester (especially given his anarchist sympathies) have chosen the slogan “No Bailouts No Government”? And the nation described by Ahmadinejad? Well, it exists in the same realm as square circles and four-sided triangles, because it’s a logical contradiction. He should be criticizing “unbridled government.” What’s going on here? I have a few thoughts on the matter.
My first thought is that it all could be an extension of the myth that the free-market caused our current economic woes. Of course, an easy response is to simply ask, “Where is this free-market of which you speak?” An economy is anything but laissez-faire when it is plagued by implicit promises of government bailouts; the presence of GSEs like Fannie and Freddie; not to mention the government programs, tax-codes, and artificially low interest rates which encourage unsustainable borrowing and spending. Now, I’m not sure that Michael Moore, the G20 Protester, and Ahmadinejad are willing to acknowledge these as the true causes of the most recent boom-and-bust. But they seem to acknowledge at least that there now exists large government intrusion in the economy. Yet they still aim their attacks at capitalism.
This leads me to another possible explanation, which has to do with different definitions of the word “capitalism.” On one definition, “capitalism” refers simply to a free-market economic system. Here, a “capitalist” might refer to someone who is ideologically inclined to favor a free-market economic system, regardless of how he participates in it. On another definition, “capitalism” refers (roughly) to the process or strategy by which an entrepreneur invests capital in order to make a profit. Here, a “capitalist” might refer to an economic actor who is out to maximize profits, regardless of his ideological inclinations. Somehow, I think these two definitions have become muddled together, such that “capitalism,” for many, has come to mean something like “an economic system that is favorable to the process by which entrepreneurs and firms maximize profits.” According to this definition, “capitalism” is consistent with bailouts and other government interventions. And this, I suspect, is where we get such notions as “crony capitalism,” which is in fact closer to fascism than laissez faire.
So, if I am on to something here (and I could be wrong), then is it possible that once we get past semantics we can find common ground with Michael Moore? Maybe. I mean, we’re against the bailouts too. But I wouldn’t pay to sit though one of his “documentaries” to find out. And besides, that’s not the point, as I mention Moore and company only to illustrate a point. And the point is simply that language is important. Unfortunately, “capitalism” has proven to be not only misleading, but in such a way that it suggests something completely opposite of what we really mean. I suggest dropping it in favor of “free-market” or “free economy.”
–Matthew Allen Miller