Milton Friedman’s most famous work, Capitalism and Freedom, drives home this point. Friedman argues correctly that economic and political freedoms are indissoluble. You simply cannot be politically free without economic freedom. It is not only the case that capitalism or free market economies are superior at producing wealth; without basically free markets people themselves aren’t free.
Both Smith and Friedman point to the most salient point about what we call capitalism, that it isn’t about the efficient allocation of capital. It’s about the maximizing of human freedom.
Capitalism and freedom don’t just coexist comfortably; what we call “capitalism” really is just another way of saying what Smith did: capitalism is freedom expressed in economic relations. It is the economic system of people making free choices. And capitalism works so well precisely because free people trading freely become ever more productive, and do well precisely to the extent that what they have to trade is wanted by others.
Liberal democracies with free markets are so successful precisely because free people prosper precisely to the extent that they are successfully “other directed;” individuals prosper as they learn to satisfy the wants and desires of other free people.
So really, we need to think up a modern version of Smith’s “system of natural liberty,” because in a way people are right to cringe at the term “capitalism.” The focus shouldn’t be on capital, it should be on freedom.
Even “free market” doesn’t capture the essence of what we are talking about, because it still implies that the market is free, but maybe not the people.
Maybe instead of “capitalism” or “free markets” we should just cut to the chase. Our preferred alternative to planned economies or European corporatist socialism is simple: call it “freedom.”
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