Liberty Matters

The Problem of Terminology: Why ‘Capitalism’?


In the year of the bicentennial of Karl Marx's birth it is fitting that we should provide a proper accounting of his ideas given the current renewed interest in his life and work.[1] This should include a list of the very deep conceptual errors Marx made in his economic, political, and social theory. This is especially important to note as the attempt to implement these erroneous ideas by force in the 20th and early 21st centuries has led to death and profound misery for many millions of people. However, Virgil is correct to also include in this accounting the few things in Marx's thought which he may have got right and which economic and social theorists today should continue to explore. In his opening essay Virgil identified the issues of "exploitation" and "alienation" as two such avenues of thought which we should pursue further.
As part of the accounting of his errors, I think it would be a useful exercise as part of this discussion to compile a list of the key economic and social ideas which Marx put forward and which history and modern economic thought show that he got wrong. I will address this matter in a later post.
Before we get too far into the discussion I would like to put on the table my reluctance to use the term "capitalism" as Virgil does because it was coined by the opponents of free markets and voluntary exchange, and this inevitably creates an intellectual straightjacket from which it is hard to escape. Similarly with the 17th-century English revolutionaries and proto-classical liberals the Levellers. They had to spend much effort in refuting the idea implied in the name given to them by their political opponents that they wanted to "level" all property ownership to a common, even "communistic" level.[2] Classical liberals have had to do the same thing with the term "capitalism" in my view.
The word "capitalism" suggests a system in which a society is ruled by capital or the owners of capital, i.e., capitalists. I much prefer to use the expression "free markets" or "the free market system" instead of this baggage-ridden term "capitalism."[3] A true free-market society is ruled by no minority in their own interests, such as owners of capital or any other group, and exchanges take place voluntarily between individuals or groups of individuals with the sole proviso that property rights are respected and no coercion is used.
The origin of the term le capitalisme [4] can be traced back to the late 1840s when socialists like Pierre Leroux (1848), Louis Blanc (1849), and Pierre-Joseph Proudhon (1851) began using it in a detrimental way to describe the free-market system as part of their campaign to introduce socialist reforms such as the National Workshops employment program, "free credit" and Peoples Banks in the Second Republic.[5] It was taken up by the Economists such as Frédéric Bastiat and V. Avril in their battle against socialism in 1849.[6] Bastiat, for example, took issue with three socialist terms which were then used to attack his ideas: le propriétarisme, le capitalisme, and l'individualisme (private ownership of land or landlordism, capitalism, and individualism), which he discussed in what would become the chapter "On Wages" in the posthumously expanded edition of Economic Harmonies.[7] Perhaps Blanc gave the most concise definition of le capitalisme in July 1849 when he stressed the limited ownership, or monopolization of capital, not capital itself, which was its defining characteristic:
On voit en quoi consiste le sophisme qui sert de base à tous les raisonnements de M. Bastiat. Ce sophisme consiste à confondre perpétuellement l'utilité du capital avec ce que j'appellerai le capitalisme, c'est-à-dire l'appropriation du capital par les uns, à l'exclusion des autres. Comme si l'utilité d'une chose résultait de son accaparement et non de sa nature!We can see what makes up the sophism which lies at the foundation of all of Bastiat's thinking. This sophism consists in constantly confusing the utility of capital with what I am going to call "capitalism," that is to say the appropriation of capital by some to the exclusion of others. As if the utility of a thing is due to its monopolisation and not from its nature![8]
It is interesting that the German word der Kapitalismus is of later origin (possibly 1870).[9] Although Marx lived and worked in Paris between 1843 and 1844 and visited again in 1848 (to distribute his new pamphlet "The Communist Manifesto" to the German Workingmen's Club after the Revolution broke out in February 1848), he did not use the term der Kapitalismus at all in Das Kapital vol. 1 (1867; DK1), and it appeared only once in volume 2 (DK2), which was posthumously edited and published by Engels in 1885, so possibly it was an insertion by him. The term did not appear at all in volume 3, which Engels published in 1894. In the English translation of all three volumes, which appeared in the late 19th century (1886, 1890, 1909), also with the assistance of Engels, the word "capitalism" appeared several times even though it had not been used in the German language original. So we need to be careful when quoting from these later English translations that we keep in mind the vocabulary that Marx himself used to describe the economic system he was criticizing.
Instead of "capitalism," Marx in DK1 preferred to use phrases such as die kapitalistische Produktionsweise (the capitalistic mode, or way, of production) and der kapitalistische Produktionsprozess (the capitalistic production process). He also only rarely referred to it in the general sense of a "system" such as das kapitalistische System (the capitalist system).[10] Instead of an abstract noun to describe an economic "system," Marx much preferred to use the adjectival form kapitalistisch (capitalistic or capitalist) in the expressions mentioned above, as well as to describe a series of methods of exploitation and plunder which he believed was inherent in the "capitalist system," for example, die kapitalistische Exploitation (capitalist exploitation), die kapitalistische Exploitationsweise (the capitalist mode of exploitation), die kapitalistische Ausbeutung (capitalist exploitation or plunder), and die kapitalistische Ausbeutungsweise (the capitalist mode of plunder).
All that being said, I think Virgil is quite right to identify "exploitation" and "alienation" as two central problems raised by Marx which still need to be addressed today. On each I will be brief here as I will return to them in later posts.
Concerning "exploitation" it should be noted that many 19th-century classical liberals, especially the French, had a well-developed theory of class and "exploitation" (Bastiat called it la spoliation, plunder) from which Marx borrowed, as he acknowledged, in order to develop his own theory.[11] The liberal theory was a combination of empirical analysis (who controlled the state and how did they use it to benefit themselves at the expense of others) as well as moral condemnation and outrage. The latter was a result of their theory of individual property rights and opposition to the use of coercion. What seemed to occur in the late 19th and early 20th centuries is that classical liberals abandoned this way of thinking and thus handed over to the socialists and Marxists a monopoly, as it were, in looking at the world in this way. It would not be until the 1960s when Murray Rothbard and Leonard Liggio revived interest in classical-liberal class analysis that some classical liberals and libertarians (like myself) began talking about class and exploitation again. Nevertheless I would say the bulk of free-market economists and classical-liberal political theorists still reject this tradition as somehow "tainted" with Marxism. I think typical of this practice was Mises who did not like the term "class" (using it in the sense of social class) preferring to use the term "caste" as he did in his books Socialism and Human Action, and his essay "The Clash of Group Interests" (1945).[12]
Concerning "alienation," I am less sympathetic as I think it is based upon a false romantic notion of what labor was, is, or could be in the future. It is not clear to me that there ever could be a form of labor which is not "alienating" in some way, simply because of the fact of and need for the division of labour and the enormously greater wealth it makes possible. Outside of primitive hunter-gatherer societies, when did human beings ever have full and total control of how they went about their business of making and doing things? Can one imagine in a socialist or communist society there not being a division of labour of some kind? What market societies have increasingly provided all people at every level of wealth are tradeoffs between work, income, leisure, specialization, and choice of occupation. When one gets anguished over the poor conditions faced by some people at any given stage of economic and historical development, one is obliged to ask two fundamental questions: compared to what and why were they poor in the first place?
[1.] This renewed interest in Marx's ideas ranges from the sublime to the ridiculous as these examples indicate: the acclaim for Thomas Picketty's book Capital in the Twenty-First Century (Cambridge, MA: Harvard, 2017) and the new biography of Marx by Gareth Stedman Jones, Karl Marx: Greatness and Illusion (Penguin, 2017); a series of articles in the New York Times Opinion section, "Red Century: Exploring the History and Legacy of Communism, 100 years after the Russian Revolution" <>; the critical success of Raoul Peck's film "The Young Marx" (2017); and the Teen Vogue article extolling Marx by Danielle Corcione, "Everything You Should Know about Karl Marx," Teen Vogue, May 10, 2018<>.
[2.] In a late anonymous pamphlet from February 1659, The Leveller: Or The Principles & Maxims Concerning Government and Religion, a member of the so-called Levellers party complained about: "And do not some English men now suffer deeply upon the same account, from the Peoples hands for whose sakes they have prodigally hazarded their estates and lives; are not some lovers of their country defamed and esteemed prodigious monsters, being branded with the name of Levellers, whilst those that reproach and hate them, neither know their principles, or opinions concerning Government, nor the good they intend to their very enemies; those that have designed to prey upon the Peoples estates and liberties, have put the frightful vizard of Levelling, upon those mens faces, and most People are agast at them, like children at Raw-head and Bloody-bones, and dare not ask who they are, or peep under their vizard to see their true faces, Principles and designs." In Tracts on Liberty by the Levellers and their Critics (1638–1660), 7 vols, ed. David M. Hart and Ross Kenyon (Indianapolis, IN: Liberty Fund, 2014–2018), vol. 7 (1650–1660). </titles/2602#Leveller_1542-07_2300>.
[3.] The same also goes for the term "private enterprise," which could equally be used to describe "politically privileged" privately owned and operated enterprises or private enterprises which have no such political benefits to ensure their profitability but only their competence at satisfying the needs of voluntary consumers.
[4.] The word "capitalist" (or le capitaliste) appeared much earlier. On the origins of the term le capitalisme, see Edmond Silberner and Lucien Febvre, "Mots et choses : le mot capitalisme," in Annales d'histoire sociale. 2ᵉ année, N. 2, 1940. pp. 133–34; Michel Leter, Le Capital – L'invention du capitalisme (Paris: Les Belles Lettres, 2015), pp. 259–65.
[5.] See for example a speech by Pierre Leroux in the Assemblée nationale (30 Aug.1848) in L'ami de la religion, jeudi 31 août 1848, (Paris: D'Adrien le Clere, 1848), vol. 138, p. 621; Louis Blanc, Le Nouveau monde. Journal historique et politique, rédigé par Louis Blanc. No. 1 - 15 juillet 1849 (Bruxelles: J.J. Joostens, 1849), p. 319; and Pierre-Joseph Proudhon, Idée générale de la Révolution au XIXe siècle (Paris: Garnier frères, 1851), p. 223.
[6.] See V. Avril, Histoire philosophique du crédit (Paris: Guillaumin,1849): vol. 1, p. 153–54.
[7.] Until the new Liberty Fund translation of Bastiat's Economic Harmonies appears, see the Foundation for Economic Education edition (Irvington-on-Hudson, NY: 1979), p. 405.
[8.] Louis Blanc, Le Nouveau monde. Journal historique et politique, rédigé par Louis Blanc. No. 1 - 15 juillet 1849 (Bruxelles: J.J. Joostens, 1849), p. 319.
[9.] Edmond Silberner thinks the German economist Albert Schäffle popularized the term in the German-speaking world as late as 1870 in his book Kapitalismus und Sozialismus mit besonderer Rücksicht auf Geschäfts und Vermögensformen: Vorträge zur Versöhnung der Gegensäze von Lohnarbeit und Kapital (Tübingen: Laupp, 1870).
[10.] There is one reference to das kapitalistische System (the capitalist system) in DK1 (0502: 483) </pages/marx-k1-1867> and another in DK2 (0440 : 406) </pages/marx-k2>.
[11.] See the Introduction to the anthology Social Class and State Power: Exploring an Alternative Radical Tradition, ed. David M. Hart, Gary Chartier, Ross Miller Kenyon, and Roderick T. Long (New York: Palgrave Macmillan, 2018).
[12.] Ludwig von Mises, The Clash of Group Interests and Other Essays. With a Preface by Murray N. Rothbard. Occasional Paper Series #7.(New York: The Center for Libertarian Studies, 1978.) Originally published in Approaches to National Unity (1945).