In his latest film, Capitalism: A Love Story, director Michael Moore makes a common mistake. He equates capitalism and free market economics as meaning the same thing. It is an often and easily made mistake. So often made indeed that it has perhaps become the de-facto definition of capitalism. But it is a mistake to loose the distinction between the two, so let us redefine them briefly here.
Free market economics is about trade; It is the freedom to buy or sell any product or service for profit. Through this system the most desired goods are made available at the lowest cost.
Capitalism is about capital; It is about investment and property. It is the freedom to invest or to own without interference or responsibility. It is the ability to accumulate wealth through ownership.
If the free market is about generating a profit through trade, then capitalism is about accumulating wealth through those profits. Capitalism typically requires, and benefits, a free market system. A free market is required in so far as it is the most effective mechanism for generating profits for accumulation. The free market is benefited by capitalism in its investment of profit and property as working capital for businesses.
Tags: capitalism, definition, economics, free market, investment, profit, property, trade
March 30, 2010 at 4:32 pm |
Indeed, this conflation occurs (and is heavily promoted) with free markets and Democracy (or Captialism and Democracy), as if these things are interchnageable or somehow two sides to the same coin.