A Libertarian Critique of Capitalism

Posted April 7, 2022

By Garon Jones

Class of 2021 Staff Editor

Capitalism. It’s arguably one of the most common politically-charged buzz words I’ve seen thrown around in heated debate. It’s used by politically uninterested moderates and reactionary radicals alike. But it’s precisely the people with the strongest reactions, both for and against it, who tend to have the most incoherent idea of what the term actually means.

This is hardly surprising. Capitalism in public discourse today, doesn’t really have a coherent meaning at all. If you were to ask a variety of people regardless of political affiliation what the term ‘capitalism’ actually meant, you’d get a pool of definitions so different from one another, that if you were to compile them together on a single sheet of paper, many of them would outright contradict each other. And that’s unsurprisingly a big problem. If a term is being used in debate or discussion by two different people with entirely opposing definitions of what the term in question actually means, you are clearly not having a productive or enlightened conversation. This may seem obvious, but it’s remarkable just how rarely people actually seek to properly define the terms they’re discussing. Allow me to provide a rudimentary example. Suppose you’re a self-described ‘conservative’ debating politics with a self-described ‘democratic socialist,’ and your opponent proceeds to make the following pronouncement: ‘True freedom and equality among all people can be achieved by enacting economic justice, establishing reparations for marginalized groups, and finally abolishing the capitalist system.’ You may attempt to latch on to a single claim and immediately try to craft a strong rebuttal. One option could be a strong defense of capitalism and the efficiency of a free market. Another could be an argument attacking reparations, calling them unfair and unnecessary. But clearly, before you can make such responses, there are quite a few important questions that need answering. Such as: What is ‘freedom’? What is ‘equality’? What does it mean to enact ‘economic justice’? Who will be enacting it? What is ‘regular justice’? What do you mean by ‘reparations’? What counts as a ‘marginalized group’? What is ‘capitalism’? By simply asking these questions, you can see that your opponent’s statements alone are meaningless. Your opponent likely means very different things when they use these terms than you do. Your opponent might not even be able to provide you with a coherent answer for any of them. And this ultimately leads me to my first critique of capitalism: When added to the discussion, it doesn’t make the discourse clearer, it makes the discourse far more confusing. But what if we were to narrow down capitalism to its most common definitions? Would it still be compatible with libertarianism? It would not.

You may have read the title and expressed shock at the mere prospect of a libertarian critiquing capitalism. But yes, your eyes are not deceiving you. Capitalism and libertarianism are fundamentally incompatible concepts. I can already sense the confusion, so allow me to make things somewhat clearer. First, let’s delve into what exactly ‘libertarianism’ even is. In modern discourse, the term has become so misrepresented and warped that it’s only a hollow remnant of the principles it once stood to represent. Libertarianism dates back centuries. Yes, centuries. Far before the lamentable Libertarian Party was formed in 1971. Commonly understood today, libertarianism is at best used synonymously with classical liberalism, an ideology which recognizes individual rights as paramount, and seeks to justify a limited state authority for the sole purpose of preserving individual rights. At worst, it is synonymously used with or associated with conservatism. This fact alone shows just how uninformed the public has become on the subject at hand. Libertarianism is a free will philosophy, which cites moral agency as the base explanation for its principles. All individuals have dominion over themselves and the products of their own labor. For this reason, libertarians see all initiations of force as ethically unjustifiable. Libertarians, as a result, recognize that there exists a powerful organization in society which by its inherent nature uses the initiation of force to achieve its ends: The state. The state, by merely existing, interferes with the rights of individuals due to the coercive nature in which it maintains itself in society. The state, at its basic core, is a monopoly on arbitration over a given territory. To uphold this monopoly it must use violence against the great mass of innocent people within said territory. The state may steal as much revenue from anyone it so pleases without even the slightest consideration of whether or not the public consented. If an ordinary man sees another aimlessly walking down the street and proceeds to point a gun at him and rob him of his money, we see him as a criminal and a violator of the basic moralities of man. Yet, if a small group of men seek to do the same to the great bulk masses of the people, we call them ‘the state,’ and applaud them for their role in "maintaining order."

The statements I have just presented are just some of the core beliefs of libertarians. They are not aligned with capitalism. Even when boiling such an incoherent term to three of its most commonly understood definitions, we are presented with a couple of major problems. For the purposes of this essay we shall label these three definitions "capitalism 1,’' "capitalism 2," and "capitalism 3" respectively.

Capitalism 1: The current economic system that exists in the United States

Capitalism 2: An economic system where the means of production are privately owned

Capitalism 3: An economic system where only voluntary actions take place

I’ve found this first use of the term capitalism to be the most common among both its opponents and defenders, especially in the United States. It's likely you may have heard claims by conservatives that the United States is a ‘capitalist country,’ or by socialists that ‘the current capitalist system in the United States’ must be dismantled. Using such language, both sides attempt to attack or defend the United States on the basis that it’s a beacon of free market voluntary exchange. The problem is that the United States, nor any other developed country for that matter, is a truly free market. The current economic system in the United States is one where the state dramatically interferes with the voluntary exchanges of its own citizens. We live under an economic system where the United States government grants billions of dollars in subsidies to large corporations so they are able to stay afloat while employing business practices in direct opposition to consumer demand. We live under an economic system where corporations are propped up and maintained through countless regulations and barriers to entry on the legal market, where competitors find it nearly impossible to compete. We live under an economic system where the government, often during financial crises it created, bails out businesses and banks on a routine basis. We live under an economic system where the government creates protectionist tariffs, seizes property via eminent domain, provides explicit monopoly and cartel enforcements for businesses, enforces monopolization through intellectual property laws, breaks up labor unions, benefits corporations through wartime production, and protects polluters against lawsuits. We live under an economic system where all citizens have a portion of their purchasing power removed from them without their consent via taxation. We live under an economic system where all exchanges are manipulated by legislative fiat. We live under an economic system where the state routinely prints money and devalues the currency, drastically hindering the economic interests of its people. Libertarians support none of these! And yet, we are told time and time again that the United States is a capitalist system! If this is the capitalist system, we outright reject it.

By listing just some of the acts our government takes to manipulate the economy we can see just how intertwined the government and the corporation really are. Most of us clearly see how corporations privilege state politicians through billions of dollars in campaign donations. Is it really surprising to see state politicians returning the favor? In fact, it’s unlikely that the large scale corporation as we know it today could even exist without the state apparatus. Let’s put aside the fact corporations are legally recognized entities by the state, and discuss some of the economics. When companies become large enough, they form what are called diseconomies of scale. Diseconomies of scale are cost disadvantages that firms face when they reach a size so large that they become difficult to manage. In a freed market without the state’s tentacles in the pockets of big business, it’s likely that few corporations would reach the size and scale that they operate at today. It’s plain to see from this examination alone just how troubling the term ‘capitalism’ has become. In fact, using the term ‘capitalism’ in conjunction with a ‘free market’ provides us with a very Orwellian form of doublethink. The United States is described as both a ‘capitalist’ system riddled with state privilege and intervention, and a free market where people may freely exchange and compete.

But capitalism faces other problems as well. Rhetorically, it loops many well-intentioned conservatives and libertarians into defending institutions in our economy that shouldn’t be. For example, a Conservative who becomes looped into the idea that the United States is a ‘capitalist’ economy may try to defend our current healthcare system. But the socialists are right on this one. Our healthcare system is a disaster. However, what both the conservative and the socialist fail to recognize is that the United States healthcare system is one of the most regulated industries in the country. Regulations on an economy artificially make the cost of production that much more expensive. Look to any industry that has been monopolized, cartelized, or is simply unaffordable to the average American struggling to get by, and you’ll find the state’s slimy fingers all over it. No, our healthcare system is not working for the average American. And neither is the state.

Our second version of capitalism, ‘capitalism 2’ presents many other problems incompatible with libertarianism. It’s defined as an economic system where the means of production are privately owned. Sometimes the qualifier is added that it is a system where the means of production are used specifically to obtain profit. Major problems arise with both. The biggest problem with ‘capitalism 2’ is that there are instances where purely exclusive private ownership of a resource could not be justified under libertarianism. Consider for instance an individual who exclusively owns four roads surrounding a block of houses and seeks to defend her property by force. By simply owning this property, she has violated the rights of other moral agents, and in this particular case, exclusive private ownership of the roads could not be justified. The roads under these circumstances would likely fall under null ownership, or in other words, they would be a commons. To be clear, this position does not take the stance that all, or even most, private property is unjustified, as some libertarians may attempt to claim. All moral agents have the exclusive right to control, manage, and distribute all the fruits of their own labor, without subject to violent appropriations. The position I’m seeking to establish merely recognizes that in a truly free society, certain property claims could simply not be defended.

Adding on the qualifier to ‘capitalism 2’ as mentioned previously, where all property is owned for the explicit purpose of obtaining profit, immediately makes the capitalist system defined in this manner incompatible with libertarianism. After all, in an economic system based on purely voluntary exchange, individual agency, and property rights, it wouldn’t matter exactly what one uses their means of production to achieve so long as it doesn’t interfere with another’s right to self ownership. Consider a private charity, a non-profit, worker co-op, or voluntary commune. But what if we were to use the final definition, ‘capitalism 3?’ What if we were to simply define capitalism as an economic system based on purely non-coercive voluntary exchanges? As libertarians, we have no problem with this. However, other problems arise when it comes to rhetorical strategy. As we've already gone over with the previous two definitions of capitalism, the general public most commonly sees capitalism in ways that openly oppose our goals and actions. So identifying with a label which has such common associations to principles we aren’t in support of would be foolish at best. There should be big red alarm bells ringing in every libertarian’s head when you have politicians like Hillary Clinton self-identify with the capitalist label. Capitalism is intended to be an explanation of certain principles, but there’s practically no limit to the amount of things that can be ascribed to it, up to and including things that openly contradict each other. And as we’ve seen, this isn’t just a problem with different individuals having a unique conceptualization of what the term capitalism means, but it’s a problem to the extent that even a single person may offer an explanation of capitalism that has contradictions within said explanation. Capitalism, therefore, it has been argued, is what Ayn Rand described as an anti-concept, a term which has so many conflicting meanings that when introduced in the conversation, makes it harder to actually discuss the subject matter at hand.

But even among the consistently defined definitions I’ve provided in this essay, capitalism is still incompatible on a fundamental level with the philosophy of libertarianism. Our first definition, ‘capitalism 1,’ the most common usage of the term I’ve seen in political discourse, is totally antithetical to libertarianism even in premise! Our other definitions, ‘capitalism 2’ and ‘capitalism 3’ present us with further problems, as I’ve already highlighted. Nearly any definition of capitalism will ever have a consistent explanation for what actually counts as private ownership, a coherent ethical property claim, why private ownership is valid or even how one can derive private property rights. Libertarianism is a coherently principled philosophy which answers all of these. Capitalism is a politically charged buzz-word which answers none of these. It’s time for libertarians to recognize the difference. Our philosophy, our goals, and our beliefs cannot coexist with capitalism. It’s time to cut the umbilical cord. I hope that true champions for liberty from this point forward are able to reject capitalism, and blast it with all the contempt such a label rightfully deserves. As Mark Fisher once said, “it’s easier to imagine the end of the world, than the end of capitalism.” And that statement couldn’t be more true for self professed libertarians. Now I call on all of us to finally see capitalism for the state-riddled economic system that it currently is, and to put that system to its glorious end.