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How to Define Capitalism and Anti-Capitalism

By: Steve Johnson

8/31/2009 - 51 Comments

Capitalism is the greatest contribution to the rise of financial success in the West.

The term ‘capitalism’ is difficult to define, having originated not as an economic concept of prosperity but as a term first used by nineteenth-century leftists to condemn wealth and individual privileges.

The term ‘capital’ came into use to identify ‘funds having the capacity to return income’. The term ‘capitalism’ came into use to refer to the use of wealth to earn wealth.  Not to confuse the term with simply lending money in exchange for earning interest.  Capitalism is the notion of risking your money and also your time and energy, in the pursuit of increasing your original wealth. 

Capitalists are more than investors because they take an active role in their enterprises as compared with pure investors that only put money at risk.

Rodney Stark gives a very good definision in his book, The Victory of Reason.

Here is Rodney's definision;


“Capitalism is an economic system wherein privately owned, relatively well organized, and stable firms pursue complex commercial activities within a relatively free (unregulated) market, taking a systematic, long-term approach to investing and reinvesting wealth (directly or indirectly) in productive activities involving a hired workforce, and guided by anticipated and actual returns.”

What this definition uncovers is that the private owned small business sector is the only group of true capitalist in the economy.  Most large businesses and all government activities are not part of capitalism.

Many large businesses are not owned by the people that run the business and some are also dependent on controlled labor wages vs. free labor wages, which capitalism is very dependent upon.  Likewise, all government activities do not risk capital and are not guided by profit and losses and therefore are not part of capitalism. The only money the government spends is the money produced by capitalist.  

Therefore capitalism is primarily represented by the small business sector of the economy, which is not doing very well in the so called recovery.  In fact, the small business sector is getting crushed under the weight of more government regulation and a growing government burden of increased taxes and government supported competitive advantages of the largest businesses.  The wealth producers are getting squeezed out of the economy.

The current administration and congress are perhaps the most Anti-Capitalist regime in the last century.  It is impossible for their policies to lead to the creation of more wealth.  From an economic perspective, the nation is headed to the poor house without a drastic change in policy. 

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