Guest Editorial


menckens ghostThe USA and Cuba are both capitalist countries

This and other unconventional thoughts about capitalism

Well, here we go again.  Polly-the-parrot pundits in the mediocre media are screeching about capitalism once again, obsessing about Bain Capital after having become bored with the Occupy movement.

As usual, they have given little thought to what the word “capitalism” means.  Most of them incorrectly equate capitalism to banking, or, more specifically, to the banking cartel run by the Federal Reserve. 

In their defense, it’s not as if the various textbook definitions of capitalism are interesting, enlightening, original, or thought-provoking.  For example, at the risk of making you drowsy, here is the most common one:

Capitalism is the private ownership of the means of production; that is, the private ownership of the tools, machines, factories, and infrastructure needed to produce wealth. 
Still awake?

This standard definition doesn’t count labor (human capital), raw materials, and financial capital in the means of production.  In other words, it excludes one of the things that the media have been blathering about:  the financial capital of Bain Capital.

Before turning to what is wrong with this definition, let me offer a brief history of how we got to the prevailing understanding of capitalism.

Ironically, we owe much of our thoughtless thinking about capitalism to the anti-capitalist Karl Marx, who spoke of the factors of production, not the means of production.  To him, labor was the most important factor.  Also, of course, he was influenced by the rigid European class structure of his time during the upheaval of the Industrial Revolution, when, unlike the United States, there was little movement between classes, due to a long history of monarchism, aristocracy, and serfdom.

For all of his brilliance, Marx was loony.  He actually held the ridiculous notion that after the communist revolution, the second phase of communism would lead to a workers’ paradise where the division of labor and specialization necessary for industrialization and prosperity would give way to a social and economic system in which workers would move from one fulfilling vocation or avocation to another, at will, without any economic consequences of doing so.  Workers would go from being alienated to being self-actualized.  Or for a modern example, college students could major in women’s studies, get tattoos and body piercings from head to toe, rail against fossil fuels, spend their adult lives as baristas or patrons in bohemian cafes, and then demonstrate about their low income.

Marx trapped us in a false dichotomy with his thesis of capitalism:  that free-market economies (or half-free economies) like the USA are capitalist, but that centrally-planned (or communist) economies are not capitalist.

Actually, all developed and semi-developed economies are capitalist, in the broader sense that they depend on the creation of capital.  That is, they depend on a portion of economic output being saved instead of consumed so that the savings can be used as capital to be invested in new tools, machines, factories, infrastructure and other means of production, as a way of increasing output and wealth, in a virtuous circle.  Cuba does this, North Korea does this, the United States does this, the former Soviet Union did this, and all industrialized countries do this with widely varying results.

The real difference is how this is done.   In communist countries it is done by force.  The authoritarian state, treating its citizens as slaves, forcibly takes the fruits of workers’ labor to use as capital for state purposes, whether building a power plant, a sugar refinery, nuclear weapons, or whatever the central planners at the top think that those at the bottom need or will tolerate.  Naturally, master-slave relationships and central planning are not conducive to creativity, innovation, industriousness, prosperity, or self-actualization.  (This will be demonstrated once again, as it has throughout history, when American physicians become de facto slaves of the state under nationalized medical care.)

In free-market countries, by contrast, capital is created by means of personal choice, property rights, and voluntary savings--not by confiscation.  The result is creativity, innovation, industriousness, prosperity, a better chance for self-actualization, and, yes, on the negative side, creative destruction and booms and busts.

So why is prosperity waning in the USA, especially for the proletariat?  Because the nation is shifting from free-market capitalism to state capitalism.  Governments at all levels now confiscate 50% of national income through taxes and regulatory compliance costs, for the purpose of furthering government goals, as determined largely by central planners and special interests in Washington, in state capitals and in city halls.  At the same time, the easy credit of the banking cartel, coupled with a population deluded into believing the state will take care of them in old age, have dramatically reduced private savings and thus capital for investment in new means of production to create new wealth. 

In other words, we are adopting the wrong kind of capitalism, the Cuban kind.   

Mencken’s Ghost is the nom de plume of an Arizona writer who can be reached at