Government Watch / Politics

Please Don’t Call It Capitalism: The Essential Link Between Economic and Political Freedom

AMAC Exclusive – By David Lewis Schaefer


This is the second installment of a two-part series. To read the first installment, click here.

Self-described “democratic socialists” in the mold of Senator Bernie Sanders and New York Congresswoman Alexandria Ocasio-Cortez argue that they represent the interests of “workers.” Yet looking at the American experience and beyond, no objective history of the past two centuries can deny that workers have benefited far more economically from living under a free-enterprise system than they did under socialist or communist (or, previously, feudal) ones.

In the first installment of this series, I challenged the mislabeling of the free-enterprise system long exemplified by the United States as “capitalist.” Contrary to the claims of socialists, the chief effect of the U.S. economic system has not been to serve the interests of a minority of wealthy owners of capital at the expense of the rest of society.

Furthermore, I argued, even labeling the free-enterprise system “capitalist,” following Marx’s terminology, is misleading because it obscures the fundamental difference between capitalism and socialism. The former rests on individual freedom, while the latter is inherently authoritarian. Moreover, “socialism” sounds so much nicer – as if it were characteristically “sociable,” as opposed to mean, heartless “capitalism.”

The account of the evils supposedly wrought by “capitalist” (free-enterprise) economies during the nineteenth century, highlighted in the Communist Manifesto – including long working hours, poor health conditions in factories, and the routinization of labor – stems from a confusion between the short-term effects of free enterprise and those of industrialization.

The introduction of the factory system in the West, efficient though it was (and hence productive of a larger supply of consumer goods at lower prices), initially shocked well-off observers in England (although Marx’s and Engels’s work, it should be recalled, was financed by the factories that the well-off Engels owned, having inherited them from his father).

But the horror that British reformers and social critics initially experienced, including their regret at seeing the green English countryside made ugly by smoke-belching factories, partly reflected a lack of awareness of just how impoverished the lives of farm workers had previously been, causing them to migrate to factory towns like Manchester and Birmingham in search of higher, and more regular, wages.

As the great French political theorist Bertrand de Jouvenel observed in his contribution to Hayek’s Capitalism and the Historians, later historians who “stressed the hardships of the British working classes in the nineteenth century [found] nothing to say about the violent impressing of Russian peasants” into inefficient Soviet collective farms a century later, all designed to guarantee government control over ordinary people’s economic lives. Nobody forced a British worker to seek factory employment, let alone work for one particular employer on terms entirely dictated by the boss.

Working conditions in the industrializing West rapidly began to improve in the second half of the nineteenth century as the result of economic growth along with government health and safety regulations.

As a visit to the Lowell, Massachusetts, National Historic Site will demonstrate, even in the early days of the industrial revolution, not all factory conditions were simply repellent. The Lowell site retains the dormitories that manufacturers maintained for the young women who had left the New England countryside for the mills so as to earn a better living.

But in any event, no evidence has ever been brought forward to show that the conditions of labor under communism represented an improvement over the worst that the free-enterprise system offered – let alone provided a political outlet for protesting abuses.

As for the environment, which today’s socialists sometimes blame capitalism for abusing, by far the greatest single peacetime, manmade environmental disaster in history was the 1986 explosion of the Chernobyl nuclear power generator in the Soviet Union, the result of faulty design and construction by engineers who were under pressure to meet arbitrary deadlines set by their superiors, with far less attention paid to safety than would be demanded under any system of free, representative government, characterized by popular accountability.

The economic deficiencies of socialism are clear. But the denial of economic and political liberties under socialist systems is of even greater import.

As one of the leaders of the Russian Revolution, Leon Trotsky, put it, “in a country where the sole employer is the state,” government’s power to deny employment to its opponents “means death by slow starvation.” Socialism, strictly understood, is incompatible with any right to serious criticism of the government.

Hence the millions of political prisoners who were exiled to the prison camps of Siberia – the “Gulag Archipelago” – under Stalin’s rule; the million or more Uighurs sentenced to prison camps by the current Chinese regime to compel their “assimilation” to the Chinese Communist way of life; and the thousands of political prisoners who have suffered and often died in the Castro brothers’ Cuba.

The tale of communism/socialism (terms typically used interchangeably by Marxists) gets worse than that.

Communist regimes haven’t relied merely on mass starvation (as in Ukraine in the 1930s, or under Mao Zedong’s insane “Great Leap Forward” in the 1950s, or today’s North Korea) or brutal imprisonment to force their will on their subjects. In the 1990s, the publication in France of The Black Book of Communism: Crimes, Terror, Repression (edited by Stéphane Courtois and others) caused a great shock among much of that country’s “intellectual” class, for whom the appeal of Marxism (among theorists like Jean-Paul Sartre) had never faltered.

Courtois and his co-authors offered detailed statistics showing that the overall death toll inflicted by communist regimes during the twentieth century was approximately 100 million. Courtois’s figure was almost surely an underestimate at the time, even more so now.

The French Communist Party, which had consistently received as much as 20 percent of the electoral vote since the end of the Second World War (partly as a “protest” vote) disappeared practically overnight under the influence both of Courtois’s book and the publication by the great Soviet dissident Aleksandr Solzhenitsyn (then living in exile in the U.S.) of The Gulag Archipelago, an exposé of the prison camps where he himself had spent years.

The correlation between communism and despotism was, as Marxist theoreticians used to say, “no accident.” In the Communist Manifesto, as well as elsewhere, Marx and Engels called for a violent revolution by the proletariat that would be led by “Communists,” that is, intellectuals or propagandists who had discovered the inevitable “laws of history.”

That revolution would be followed, immediately, by a “dictatorship of the proletariat” – which in reality meant Marxist intellectuals claiming to rule in their name. Those dictators’ first steps would include seizure of all property owned by “emigrants and rebels” (anyone who opposed Communism), a “steeply progressive” income tax, and the abolition of all inheritances (with the proceeds confiscated by the state).

Other elements in the Marxist ten-step program outlined in the Manifesto included state control of “the means of communication and transport” (forget about free speech or freedom to travel), the establishment of “industrial armies” (forced labor), and the compelled redistribution of population across the country so as to make it more “equable” (the recipe for Pol Pot’s “killing fields” in Cambodia during the 1970s).

A quarter-century after the Manifesto, it must be added, Engels, in a brief essay titled “On Authority,” designed to fend off the challenge to communism by Russian anarchists who wanted to fulfill the Marxist promise of an ultimate “withering away of the state” without first passing through the dictatorial stage, explained that the Communist revolution wouldn’t literally overthrow all authority, even after its completion.

Instead, Engels explained, while “all Socialists” agreed that the “political” state, that is, the oppression of the workers by capitalists, would be destroyed, it would inevitably leave in place, as a necessity of industrial production, the “despotism of the machine,” which by its nature is “much more despotic than the petty capitalists who employ workers ever have been.”

Just as on a ship, Engels explained, the success of the communist/socialist enterprise with its promise of universal abundance would depend on “the instantaneous and absolute obedience of all” to the “administrators” who enforced the previously agreed-on hours of factory work (including by “men, women, and children”). Notably, there was no mention of holidays or trade-union negotiations.

In Engels’s words, “a revolution is certainly the most authoritarian thing there is,” being “the act whereby one part of the population imposes itself on the other by means of rifles, bayonets, and cannon” in order for the “victorious” socialist party not to have “fought in vain, it must maintain this rule by means of the terror which its arms inspire” in its opponents.

In sum, the totalitarian impulse wasn’t some add-on by Lenin or Stalin to Marx’s original program, as some apologists for Marx like to claim. It was there from the beginning.

So was the distinction between the “enlightened” elite, who merit absolute power, and the uneducated (or potentially dissenting) multitude, in whose interest Communist apparatchiks purport to rule.

But what of the so-called “robber baron” industrialists and financiers of nineteenth-century America, who supposedly used their economic power to keep the people down?

As historian Burton Folsom demonstrated in The Myth of the Robber Barons (1981), those tycoons who were subsequently most reviled with that title – men like Cornelius Vanderbilt, John D. Rockefeller, James J. Hill, Andrew Mellon, James Schwab – gained their wealth by producing quality products at competitive prices, thus launching America’s monumental economic growth between 1850 and 1910.

Folsom contrasts these “market entrepreneurs” with “political entrepreneurs” who used political or personal influence to gain government subsidies or regulate competitors out of business. He notes that the real story of how market entrepreneurs benefited America has been obscured in widely used classroom textbooks, written under the influence of “progressive” historians.

The term “robber baron,” it should be noted, is deservedly applied to the stock swindler Jay Gould. But the chief victims of his swindles were gullible or greedy investors who lost their shirts, just as their predecessors had done long before the industrial revolution in the Dutch tulip craze and the English South Sea Bubble.

While, as the stories of Bernie Madoff and Sam Bankman-Fried indicate, no way has been discovered under any governmental system to entirely prevent unscrupulous individuals from gulling and defrauding the credulous (including the government), under communism, political entrepreneurship (that is, corruption) has been practically the only way for an ambitious individual to advance.

As the late historian Robert Conquest (author of the definitive study The Great Terror, on Stalin’s purge trials) observed, the mentality of successful communist functionaries is unknown to Western observers outside the confines of criminal gangs like the Mafia. That is why naïve academic “Sovietologists” who once claimed in the 1960s and 70s that communism and capitalism were gradually “converging” thanks to factors like industrialization and the need for efficient administration entirely missed the truth about communism.

But what shall we make, finally, of today’s self-proclaimed “democratic socialists,” led by politicians like Sanders and Ocasio-Cortez?

If by democracy we mean liberal or constitutional democracy, a system that protects individual rights while basing government on the consent of the governed, rather than mob rule, then the term “democratic socialism” is an oxymoron. In itself, democratic government is fully compatible with an extensive welfare state, as the U.S., Canada, and most nations of western Europe have demonstrated.

How far people should be taxed to finance goods like government-provided health care, old-age pensions, food stamps, or unemployment insurance (and what limits should be imposed on such programs to avoid suppressing individual initiative and economic growth) is a matter for democratic decision-making, subject to restraints imposed by our Constitution.

But to seize control over major industries, to use government influence to favor some producers (like electric-car makers) over others, or to use the regulatory process to drive disfavored industries (such as producers of non-“green” energy) out of business, or similarly to use antitrust laws to break up large corporations for no other reason than their size (when no detriment to consumer welfare has been demonstrated), as members of the Biden administration and their leftist Congressional supporters (along with some populist Republicans) currently seek to do, is an abuse of the democratic process.

So, too, are arbitrary executive actions like the president’s attempted cancellation of student debt without any legislative authorization. Such actions threaten not only to undermine our system of constitutional freedom, but to kill the goose of free enterprise that laid the golden eggs of prosperity and the opportunity for self-advancement from which all Americans stand to gain.

They teach the corrupting lesson that the way to get ahead in life is not to invent or produce goods that benefit the public, but to pursue political influence for the sake of feathering one’s own nest at relatively little cost.

Sanders, it might be noted, has mastered the art, like numerous academic Marxists (along with the plutocrat Engels), of playing both sides of the game. According to the New York Times, Sanders has risen to “the ranks of the very wealthy Americans he criticizes” partly thanks to a book he published following his campaign for the 2020 presidential nomination titled Our Revolution. His economic status can be expected to rise still higher in consequence of his latest volume, which he is currently “hawking,” It’s OK to Be Angry about Capitalism.

Meanwhile, Ocasio-Cortez took part last spring in the prestigious Metropolitan Museum of Art gala, populated by tycoons who paid $30,000 each to attend, as the guest of media conglomerate Condé Nast, which sponsored the event.

The House Office of Congressional Ethics unanimously voted this month to support the Ethics Committee’s investigation of her apparent violation of rules prohibiting a sitting member’s receipt of such private donations, including the rental on her behalf of a haut-couture gown bearing the slogan “Tax the Rich,” along with the private provision of other personal-care items for the event.

The gown’s message and Ocasio-Cortez’s very presence amid the rich capitalists she purports to oppose exemplified what journalist Tom Wolfe once called “Radical Chic.”

As Sanders boasted in 2019, “If you write a best-selling book, you too can be a millionaire.” But if the triumph of the socialism he espouses should come to pass, what might become of the rest of us, who may lack the capacity (or the willingness) to author “revolutionary” books? Established socialist regimes have, after all, shown a noteworthy unwillingness to tolerate the publication of anti-socialist writings. (And as for the gratis invitation to swanky balls for us mere proles, “fuhgeddabout it!”)

Let us liberate ourselves from the illusion that the fight against socialism is merely a battle over what economic system is most efficient, rather than a quest to protect the political and personal liberty and the legal equality of opportunity of all human beings.

Let freedom ring!

David Lewis Schaefer is a Professor of Political Science at College of the Holy Cross.

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2 months ago

Obama’s Solendra ( solar panel) disaster is the prime example of govt interference in the private sector. Obama, as many politicians, knew and still knows nothing about business, income statements, or balance sheets. The most abused word in our language today is facism which has one meaning and one meaning only – govt control of privately owned business. Facism is death.

2 months ago

Capitalism ranks with inalienable rights from God and the right to vote as the three tripod supports
of a thriving economy. We must always have robust, ready to die for, commitment to all three.

2 months ago

A great and thorough piece. He notes that peasants everywhere flocked to the newly industrialized cities to be ‘exploited’ . Why is this? Its simple. Subsistence farming is almost impossibly difficult. When your survival depends on weather, sweating in a dirty factory for 10-12 hrs a day looks good. So, the workers flocked to industry because it was a sure thing compared to farming.

Chris Karl
2 months ago

From the Hoover Institute. Is the socialism?

Federal subsidies to U.S. businesses now cost American taxpayers nearly $100 billion a year. If all corporate welfare programs were eliminated, Congress would have enough money to entirely eliminate the capital gains tax and the death tax. Alternatively, Congress could cut the personal and corporate income tax by 10 percent across the board. Either of these alternatives would do far more to enhance the competitiveness of U.S. industry than the current industrial policy approach of trying to help American companies one at a time.

Chris Karl
2 months ago

So what happen if we ended all the Government subsidies for big business?

anna hubert
2 months ago
Reply to  Chris Karl

That would be a step in right direction and a path to get out of this mess If only government could mind it’s own business and let business to mind it’s own as well

2 months ago

Well done, Thank you.

2 months ago

There is no better icon of elitist hypocrisy than AOC herself. Wearing the now infamous “Tax the Rich” dress, sporting a $500 hairdo, and with all the other accoutrements lent or given to her and her boyfriend for the Met Gala event, she didn’t even think about who would pay the bills. The only reason she opened her wallet was because she faced being dragged before the Office of Congressional Ethics.

AOC’s table was sponsored by Instagram–easy to see that connection. She dismissed this publicity stunt by claiming, “New York officials are routinely invited…due to our responsibilities in overseeing the city’s cultural institutions for the public.” But, when it comes to welcoming a corporation and its thousands of high-paying jobs to her district, well, that wasn’t the sort of look she was after for her district. So, Amazon went elsewhere…another one of those “arbitrary decisions” that cost her constituents dearly.

Socialist systems and all other governments around the globe do not lay out the limits of government powers like our Constitution does. This country is based on governing of, by, and for the people. America’s history has taught us that a strong, free people will assemble and protest unfair government practices. The people hold their representatives and their government in check, not the other way around. Aren’t we fortunate to be American citizens?!

Because we have the protections of the Constitution, it is up to us–the people–to make sure they survive for future generations. This can happen only in a free political system and is why each of us must vote when the opportunity arises. Not voting–as some AMAC members have advocated–is the first step toward a less free society and closer to those government systems that none of us would welcome if we knew how terrible they are. Research your candidates; those who promise all kinds of “free” programs must take more of your income to fund them. It’s very simple; big government will challenge your “personal liberty”. We have a voice; we must use it. Otherwise, we’ll have more AOC’s, Schumers, and Schiffs running our lives, and fewer freedoms that many of us now take for granted.

Steven Coughlin
2 months ago

Never forget that the USSR stood for Union of Soviet SOCIALIST Republics and the Nazis were German Democratic SOCIALISTS. How did those work out?

2 months ago

Excellent article!!

2 months ago

A truly outstanding article on the subject written in a concise and clear manner. The real-world examples sprinkled throughout should help the average reader understand the inherent hypocrisy and flaws of those arguing for either socialism or full-blown Marxist communism. Socialism or Marxism, at its core, has always been about the naked grab for personal power and wealth at the expense of the very people that most socialists or Marxists claim to represent.

If one looks at the personal wealth accumulated by such leaders as Stalin, Mao, Peron, Chavez, Mugabe, Putin, and Xi, as well as many others that make up the roster of past and present leaders of socialist or Marxist communist countries, you will find each managed to accumulate vast personal fortunes while supposedly serving on very meager salaries for most or all of their lives.

There is of course no great mystery to how each managed such an incredible feat. Both socialism and Marxism is, at its core, about the forced transfer, through either confiscation, taxation or regulation, of the accumulated private wealth and assets of a nation into the hands of the so-called ruling elite that run the country. So, while both socialists and Marxists talk endlessly about the need for radical change, in order to cure some perceived inequities that usually don’t actually exist or are greatly exaggerated for political purposes, the real drivers for most of the individuals pushing for socialism or Marxism in the United States are their desire for vast political power and the kind of personal wealth they would otherwise never be able to obtain through what they could produce or contribute to society. Which is also why most socialists and Marxists so thoroughly detest those that have actually made their wealth by either creating businesses that fulfill a public need or demand or through innovation that accomplishes the exact same thing.

Socialists and Marxists are very envious people by their very nature. However, rather than trying to emulate those that they envy, so they can potentially obtain the same things others have, they instead opt to try and take what other people have created or have through the use of government force I have outlined above. The Democrat Party in this country has been dominated by so-called “Progressives” for well over 100 years now. Some are more overt than others, but they all share a common view and agenda at the end of the day as demonstrated by how Democrats in Congress vote in lockstep on ALL major legislation that advances their socialistic agenda.

I agree with the author’s summation of what needs to be done, before it is too late. “Let us liberate ourselves from the illusion that the fight against socialism is merely a battle over what economic system is most efficient, rather than a quest to protect the political and personal liberty and the legal equality of opportunity of all human beings.” The question is how many other Americans also agree, because it will take the vast majority of this country to stand up to stop the trend we are on and due to the laziness and apathy of the last 50 years. Time is NOT on our side, if everyone just thinks the left will stop what they are doing in this country.

Enjoy the weekend.

2 months ago

… you can’t get the girl half pregnant. There is no such thing as, “good quality,” or “bad quality.” Either it’s quality? Or, it isn’t. There is no socialism; there is no capitalism. Either, it’s a free market economy? Or, it isn’t (e.g., reciprocity based economy). Hallmark characteristic of a free market economy, currency divisibility (e.g., the US$10 bill in your pocket is worth exactly the same, as the US$10 bill in mine). When we see currency divisibility eroded, breaking down, hyperinflation (e.g., the ten dollar bill in your pocket was worth more than the ten dollar bill in mine but for no good reason than, you spent your first?), your free market economy is backsliding, into a reciprocity and redistribution based society (e.g., political control; ESG; EDI; there is no longer an economic system, per se). Karl Polyani rides again!

2 months ago

A bit pointless? I didn’t learn anything and I doubt anyone did. Complaining about a word is kind of wokeish isn’t it? Isn’t it enough to point out that you lose freedom without free enterprise and communism and socialism are interdependent?
So the government has the power to outlaw little inexpensive heaters that give off free light and you you complain about terms?! Hey, we have already lost “free enterprise”. It’s just that now the noose is tightening and the blinders are applied because we are too free using fossil fuels. I’m not worried about fossil fuel loss …as soon as we are fully enslaved it will be back because wind and solar don’t work. (Do the math… I did). Then, in the future, when we slaves are failing to provide the needs of the masters we will get nuclear. The problem there is the masters will just do something stupid and endanger us all (like order a LOC test on a huge commercial powerplant) and blaim it on the technology and the operators who are following orders they know will be disasterous. Oh I forget the world is better because we’re not capitalist.

2 months ago

FINALLY, someone else understands!! I have railed against the mislabeling of Our economic system for decades.

Doug Ruland
2 months ago

Concisely written and historically factual. Neither system is free from the problem of human nature that only God has an answer for, but only one of them provides for that answer to be included and provided.

Chris Karl
2 months ago
Reply to  Doug Ruland

God has no answers

Letts Brandon
2 months ago
Reply to  Chris Karl

for those who cannot see.

2 months ago

Time to start calling it out for what it really is…COMMUNISM ????????

Lowell Hyett
2 months ago
Reply to  Modelo


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