GroundSwell, September-October 2009]
The following article is reprinted with permission
from the Fall 2009 Georgist Journal, published by the Henry
George Institute, NYC, of which Lindy Davies is director.
Is capitalism the last best hope for wordwide peace and prosperity?
Or is capitalism inherently exploitative, dehumanizing, and inimical
to the preservation of our world for future generations? Here is an
argument that has raged unchecked in the hearts and minds of society
for centuries. Indeed, it is said that a twenty-one year old who is
not a liberal has no heart, and a forty year old who is not a
conservative has no mind. But is it possible to unite heart with mind,
justice with freedom, equity with efficiency in a single argument - or
a single economic system?
These questions will remain impenetrable until we are able to
properly define our terms. The word "capitalism" is used in
two distinct senses. The two senses of this very loaded word may or
may not be incompatible, but they are certainly different. Is
an economy which preserves the power relationships of the
status quo, reducing workers to mere automatons denied both the
value and the dignity of their work, and which seeks growth, of
markets and profits, above all else?
Or is it
an economy which respects the rights of workers to the
fruits of their labor, and uses the natural benefits of the free
market to allocate goods and services in the most efficient way?
True Believers of either the right or the left may not think so, but
the difference between those two statements is more than rhetorical.
They reveal different conceptions of what capital is. If capital is
the rightful property of the person who produces it, then the increase
that comes from that capital's use in production also belongs to the
producer. How then can capital be an instrument of exploitation?
It is more important to our present discussion, though, to note that
the two opposing views contain different underlying assumptions about
economic behavior itself. Can we trust ourselves to cooperate? Or are
human beings doomed to foul up their communities and their
environment, if left to their own greedy devices?
Markets, after all, spring up spontaneously wherever people gather.
None of the essential features of a market economy -- trade,
specialization, entrepreneurship, monetary systems, etc. -- require
any special or conscious direction; they just happen. This central
fact is what Adam Smith called the "invisible hand," and
Henry George dubbed the "body economic" - which exists prior
to the "body politic", and out of which political systems
come into being. These inexorable tendencies toward greater
specialization and more intricate forms of trade, fueled by our
universal impulse to satisfy our desires with the least exertion, will
eventually lead to a market in which workers sell their labor power.
Because of specialization, trade, and efficiencies of scale, workers
will find exchanging their labor for pay to be a better deal. This
will entail, of course, such things as entrepreneurship, and private
ownership of capital, driven by the promise of profits. These
developments are quite predictable and natural - an insight which led
Marx to see an unavoidable "historical materialism" at work
in human economic relations.
If the power relationships of the status quo have arisen out of the
private ownership of capital, which came from the collection of
surplus value by capitalists, then capitalism can't be just.
Furthermore, if these evils of capitalism arise out of natural and
unavoidable historical processes, then eventually the capitalist
system must become intolerable!
Obviously, these two views lead us toward very different strategies
for fixing our economic and social problems.
Before we can sort out what capitalism is as an "ism," we
have to recognize that there is quite a lot of confusion over what
capital is. There are two competing definitions, both perfectly
appropriate for the uses to which they are put - but, as we will see,
they don't mix.
Mainstream economic thought (as well as the daily business page)
conceives of capital, generally, as assets - that is, of things
subject to ownership, and expected to yield an income. This can
include a whole smorgasbord of stuff, such as plant & equipment,
bonds, stocks, real estate, and exclusive licences. The term "human
capital" is often mentioned, in the context of "maximizing
the labor input," making things even more confusing. Intangible
assets like "goodwill" and "name recognition" are
assigned value and counted up as capital. In mainstream parlance,
capital can be seen as a catch-all term that has different shadings in
different contexts, but generally means assets. As in: a business is
said to be "undercapitalized" if it lacks enough savings to
weather a period of slow sales. Or: the country's stock of "human
capital" is weakened by poor public schools.
For the classical economists and Henry George, the definition of
capital is precise. Capital is "wealth used to produce more
wealth, or wealth in the course of exchange". Capital is wealth,
first: that is, material things, produced by human labor, that satisfy
human desires and have exchange value. This unambiguous definition
allows us to understand what payments go to this factor of production.
From these different definitions come our different conceptions of
what capitalism really is.
So: was Jesus a capitalist? Sure! His Father's Word forbade stealing,
and coveting the good of one's neighbor. Is there anything offensive,
to God or humanity, in a system that recognizes the legitimate right
of the producer to the wealth produced? Henry George, for his part,
would hasten to remind us that the people's right to the wealth they
produce depends on the concomitant right of society to the value of
natural opportunities. If not, then many will work, but not eat, while
some, who do no work, will sumptuously dine.
Unfortunately, most of the world, most of the time, doesn't define
capital as Henry George did. Generally, capital is a term for anything
people own that makes them a profit. A "capitalist system"
allows people to own anything they want - anything the world's laws
allow them to own -- and "those with the gold make the laws."
So was Jesus a capitalist? No way! A big part of the Good News He
brought to the poor was that salvation was not gained by enduring
injustice. Nor by perpetrating it, or allowing it: whatever you do to
the least of these, you do to Christ himself.
Apologists for "capitalism" assert that there is no place
in either the theory or the practice of economics for "values."
They proclaim that economics should be a "value-free science"
and that (despite the best of intentions) no good can come from
restricting the freedom of the market's "invisible hand" to
create efficiencies. For example, two things that are constantly
identified with capitalism are the free market and competition.
Wonderful processes; they make the world go 'round - capitalists can't
get enough of 'em, right?
Wrong. Why would capitalists want competition? The more competition
they face, the lower their profit will be. Competition always tends to
bring prices down to the lowest that the seller can get and still stay
in business. While entrepreneurs praise the theory and principle of
the free market, in their own businesses they strive to limit
competition as much as they possibly can.
People seek to satisfy their desires with the least exertion.
Entrepreneurs seek to gain the most profit from the least labor and
risk. Income from other labor (such as land rent, or monopoly income
generally) is the easiest of all. Thus, entrepreneurs will seek to
capture rent whenever they can. In current economic parlance this is
known as "rent-seeking behavior" and it is pervasive in "free-market"
This is the logic that led Marx to conclude that an inevitable
historical dynamic is at work. What will stop the process of big
business getting bigger, securing its control over resources and
workers? What can stop the juggernaut of "capitalism," save
a worldwide workers' revolution, to seize the means of production and
Here is why Henry George's ideas are so crucial to the whole
discussion of liberation, and the just society. George showed that the
community's just share of social wealth is not an endlessly-debatable
matter of amount, but an eternally certain, clearly measurable matter
of kind. The value of natural opportunities is created by the
community, and belongs to it. If we collect that value for public
revenue, the rent-seekers can go ahead and seek all the rent they can
seek. Occasionally they might be very clever, or lucky, and find some
- but not at the workers' expense. If we make sure that the community
collects its rightful share of the social wealth, capitalists
would be unable to capitalize on privilege. They would have to
make an honest living.
(The above essay is also available at