Capitalism:
The Story Behind the Word
By
Michael Sonenscher
M. P. Ross 10-16-2022
What’s in a name? That which we call a rose
By any other name would smell as sweet.
Wm. Shakespeare
…je ne suis pas marxiste…
Karl Marx
Words may be etched in stone, but their meanings are not. Like the stone, from bedrock or mountain, subject to change by the forces of nature and society, broke down, raised up, wrought with new meaning, words are taken up, filled and shaped to suit their users, sometimes purposefully, others carried through time by circumstance.
Who and what were Marxists and Marxism, still young terms during the life of Karl Marx. The terms quickly got away from their namesake. Marx is known to have said more or less, referring to a couple of his followers, if that’s Marxism, then I’m no Marxist. There was an element of family dynamic playing out; one of the men was his own son-in-law.
Capitalism is often considered the main foil to socialism, of which Marxism is but one variety. Yet, in his magnum opus, Das Kapital, which as its title announces is all about capital, Marx has little to say of the ism associated with the term. Exactly, what is capitalism? Admittedly a loaded question. For all it gets thrown around, nailing down a definition—and clear path from origin to current use—turns out to be not so straightforward, even as Justice Potter Stewart might have said, we know it when we see it.
Michael Sonenscher unpacks capitalism, laying out its meanings, uses, implications, and remedies in what he refers to as his essay. Capitalism is a slim volume given the scope of its topic. None of Das Kapital’s half page footnotes in French. An extended essay of the kind to which long time readers of The New Yorker would be treated, while best understood by those with a grounding in the source material, it is accessible to the uninitiated, both as introduction and summary.
A capitaliste was the French term for one who financed the state’s wars; in English, an annuitant or stockholder. The concept was one of public debt and expenditure. Capital, in current usage as it was for Marx, refers to the material and financial means of production. But what is capitalism, a system of public finance or industrial production? Much of its meaning was formerly conveyed by the term commercial society. As the book points out, two very different things. Capital is a thing that can be owned, commercial society tells us it is about society. Capitalism has come to be associated with free enterprise. In classical liberalism, along with the rule of law, transparency, and an account of the public will, an independent market economy is the preferred model.
“One of the aims of this book is to describe how the many heterogeneous components of the concept of capitalism came to be crystalized as a single word.” However, “capitalism was something more than a compound term because it was also substantially more morally and politically ambiguous than it now seems.”
Political theory—along with its allied and component elements of social, economic, and religious thought—and its practitioners have generally aimed for society’s progress and improvement. Marx would not have displayed an “I died for Stalin” bumper sticker. Socialism was intended to improve the conditions of society, especially the workers at the bottom of the productive hierarchy.
Capital itself was not the problem. As Louis Blanc asserted, “long live capital…may we go on to attack capitalism.” Likewise for Marx, the problem was ownership of capital, the solution was state or collective ownership. Capitalism was a necessary stage of development, without which society could not progress from socialism to communism. For Adam Smith, considered the father of capitalism, society progressed in four stages from hunter/gatherer, herder/pastoralist, and settled agriculture, to industrial production and commerce. Smith was a moral thinker, contrary to how he is often portrayed, who would not have countenanced a pre-Hobbesian free-for-all without regard for its consequences for society and individuals. Smith died before he could complete his next work, a counterpart to The Wealth of Nations, addressing justice and expediency/utility. Commercial society was the answer, but then there was the matter of division of labor.
Division of labor is a concept central to the book and its topic. A small criticism is that the book does not provide a clear definition or explanation. One is reasonably expected to come to Capitalism with a working knowledge of relevant terms; it is not an introductory text. And today, the reader can quickly fill gaps in knowledge with a web search. Nonetheless, it is worth the expenditure of a few words here.
Simply, division of labor is when a single worker performs only one or a limited number of tasks rather than all of them from raw material to finished product. A common example is the matchstick. A factory where each worker does one thing, over and over—cutting the wood boards into sticks, dipping the sticks, boxing the matches, etc.—is able to produce vastly more matches, cheaper, than one worker who has to make the matches from start to finish.
Not so simply, division of labor has been with us at different levels of society for a very long time. An early example was the result of that great revolution of settled agriculture. Efficiencies of production yielded surpluses which permitted the division of society by class, of rulers, priests, and workers. The industrial revolution brought the division down to ever more discrete tasks. Society is not going back from the division of labor. There is no other way to provide for the needs of the world’s population. Whether the means of production, capital, is individually or collectively owned will not change this. Capitalism, in and of itself, is still not the problem.
Capitalism, for better and worse. It has been the economic model under which more people have been raised out of poverty than any of its competitors at any time in history. Witness modern China and its shift from command to market economy. An immense change in little more than a generation. Leaving aside the question of worker alienation—another topic, like division of labor with its many nuances—capitalism creates undeniable and measurable disparity of wealth, with all its consequences for the individual and society.
As we often find, The Folly of the Pure Model is at least partly at fault. Aristotle remains relevant: society is best served by a mixed constitution, and likewise may be best served by a mixed economy. Dynamic growth is one of capitalism’s most desirable features, less so its portfolio of externalities. Two remedies readily present themselves. One is regulation. Inadequately regulated, capitalism has shown it will outgrow its cage and devour its environment, the free market. Another remedy is found within the term’s own origins.
Sonenscher astutely calls our attention to the original meaning of capitaliste and its implications. What began as a means to finance war debt became a way to finance social spending. One side of capitalism, commercial society and the division of labor, produces income and wealth. Tax revenue on society’s economic output allows the state to repay principle and service the debt on bonds issued to fund government services.
Call it socialism if you want, rationalize that the only legitimate national government expenditure is war, but maintaining the health of the nation requires more than just keeping harm from crossing our borders. However compelling the ethical and moral considerations, capitalism’s survival, its own most selfish interests, requires a society where wealth is more evenly distributed.
FDR did not transform the U.S. into a socialist state, he saved capitalism, which along with the nation enjoyed a robust post-war success. As that arch-socialist, Henry Ford, recognized, you can’t sell a car to someone who doesn’t earn enough to afford one.
Capitalism: the offspring of commercial society and public spending.