A spate of recent stories (examples here and here) reporting the devastating double-whammy of COVID-19 and the George Floyd protests and riots on African American-owned businesses offers a teachable moment. Who are these people whose livelihoods have been destroyed? They’re capitalists. That’s a good thing, and it’s important to understand why.
Question: What is capitalism? Answer: Capitalism is an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. It can be as small as a lemonade stand or as big as Microsoft, but it’s still capitalism if there is a voluntary investment of privately-owned resources and energy into creating goods or services that someone else might want to trade for other goods, services, or money.
Question: Who is a capitalist? Answer: Anyone who produces something to sell or trade. The butcher, the baker, the candlestick-maker. Probably the first capitalist was our ancestor who traded his artisanal stone spear points for a slab of Mastodon. Barbers and hairstylists are capitalists, investing in scissors and chairs and applying their tonsorial skills for money. So are musicians who get paid to play clubs, record, and tour; artists and artisans who make a living with paintbrushes or pottery wheels. They may not rake in the big bucks but they are definitely in the game if they invested in guitars or canvas and someone occasionally gives them something for their troubles. The kid mowing lawns is a capitalist. (The parent who bought them the lawnmower is a venture capitalist, an angel investor, staking a startup.) The caterer working out of his kitchen and the restaurant owner working in hers. The folks who print t-shirts. The editor of the local “free” newspaper who funds journalism with advertising and attracts advertisers with journalism that draws readers who see ads. Capitalists, every last one of ‘em, whether they like it or not.
Question: What does capitalism require? Answer: Three ingredients. First, whatever you happen to have that can be put to use, be it a sack of gold, a pile of wood, or an idea. Second, the freedom to do something with whatever you’ve got. It is essential, as Rose and Milton Friedman observed years ago, is that you be “Free to Choose.” what you do with the materials at hand. Third, the rule of law to protect the fruit of your labors from being plundered by predators.
Question: What is capital? Answer: Forget Karl Marx. Capital assumes an infinite variety of shapes. Capital can be a bank balance or a credit line, but that’s not its only form. Money isn’t capital until it starts doing something. Capital can climb out of the slot on the top of a piggy bank or be inherited. Tools and skills and knowledge and ideas can be capital. Capital is labor’s magic wand, what makes it come alive. That rock was just a rock until great-great-grand-uncle Thag shaped it into a spear point. It’s what you choose to do with whatever resource you have at hand that turns it into capital and you into a capitalist.
Capitalism is the polar opposite of bondage. An enslaved person is one compelled to work for another solely for the other’s benefit, who by definition lacks authority to direct their own labor towards their own betterment. It is an affront to human nature and rightly to be reviled. I’m not just talking about Simon Legree. Evil corporations have practiced this vice. Evil governments have enslaved entire populations. Labor does not have to be coerced for capitalism to thrive. In fact, capitalism – and societies – thrive where laborers are free to make their own choices about when, where, and how to work.
Question: What’s with all these self-styled anti-capitalists running wild in the streets? Answer: They’re knuckleheads, heartless, selfish, and criminal predators who consume and destroy. Sadly, they are taking down a lot of exemplary capitalists when they strike and destroy businesses in marginal neighborhoods. Restaurants, stylists, and mom-and-pop shops in struggling communities have been the first rung on the ladder of success for generations of oppressed people, foreign and domestic. Destructive pseudo-“woke folk” show them no respect. Entrepreneurs who take up the challenge these communities present deserve encouragement and investment, not broken windows and looted shelves.
Capitalism isn't perfect. (Nothing, in this world of sin and woe, as Winston Churchill observed about Democracy, is.) Yet it is by far the best system ever employed for consistently and provably making the poor and workers economically secure and even affluent and promoting the general welfare. Bonus: capitalism enhances human dignity because people take justifiable pride in their ability to provide for themselves and their loved ones rather than being patronized as incapable of doing so and handed a bare subsistence by the state.
Capitalism comes in all colors, shapes, and sizes. It scales from tiny to tremendous. It is fluent in every language. Anyone can do it! It’s the greatest anti-poverty program ever to hit the planet. Declaring war on capitalism is tantamount to declaring war on the human spirit. Its detractors deserve to be seen for what they really are: the enemies of freedom, most particularly of economic freedom.
A sage once said that ignorance can be cured but stupid is forever. Let’s use this teachable moment to better understand the virtues of capitalism.
Betsy Dorminey is a lawyer in Georgia and an entrepreneur in Vermont. Her columns have appeared in American Spectator, Western Journal, Townhall, and The Hill. She is Georgia state director of The Capitalist League.