In the last session, someone asked “what is capitalism?” and said that there are many different kinds of capitalism, e.g. “Japanese capitalism”.

First, it is important to be clear about the meanings and definitions. The kind of economy in Britain, the United States, and Japan, is not pure capitalism because it includes a great deal of government control and regulation. Such an economy should correctly be called “a mixed economy“. “Japanese capitalism”,  therefore, should more correctly be called “Japanese mixed economy”, i.e. a mixture of capitalism and statism or socialism.

Secondly, is America a truly capitalist country? Here is a quote from a financial newsletter “The Daily Reckoning” June 3 2009 “The Eye of the Economic Storm”.

Americans are not necessarily in favour of socialism… But the country has clearly moved towards more government intervention in the economy. In 1986, 40% of Americans thought government regulated the economy too much. Now, 40% think it doesn’t regulate enough. And get this… The Economist reports the results of a worldwide poll. When asked if “people [were] better off under free markets,” 75% of Indians say ‘yes’ and so did about 72% of Chinese. But put the question to Americans and only about 69% think so. Even Italians are more in favor of free enterprise than Americans. Go figure.

Another comment, this time from a British libertarian, Sean Gabb:

big business capitalism we see around us is not the same as a free market”

Finally, another comment from a free-market financial commentator, Bill Jenkins, writing in the Daily Reckoning of May 28th, 2009: To Hell in a Bond Basket:

In a larger sense, the US is at war with capitalism…and with nature herself. Markets have natural rhythms. They go from boom to bust…from inflation to deflation…from expansion to contraction naturally. Trying to stop the bust is futile. It is a fight against Fate…a losing proposition. And it is diabolically unnatural. You have to take the bad with the good in life.

and

“The idea is ‘to make holding money less attractive’ so people will spend it.”

In other words, this is not free-market capitalism: the Federal reserve holds interest rates artificially low to “force” people to spend instead of to save. But where does capital come from? From savings. If people are discouraged from saving, where will capitalism’s capital come from?

Writes Bill Jenkins,

“What we need is to be left alone. The market has been, and remains, the most efficient system for regulating itself. Is it perfect? Not in a moral or theological sense.  Not even in a fairness sense. The market will make some men rich while impoverishing others. Many people do not consider that ” fair”. But it doesn’t matter. The market does what it does because it is the most efficient way of doing things. .. The ironic thing is, bubbles are created by regulation.”

Here is what Ayn Rand wrote about capitalism:

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

When I say “capitalism,” I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism—with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.

We must understand the meanings of the words we use. Then, we must look around at the world around us, and see clearly through our own eyes, not through the eyes of the media, or what we read in the newspapers, or what the politicians tell us.