Does Capitalism Exist?

My starting point here may seem rather remote from the question posed in the title of this essay, but certain background subjects must be given attention before addressing that question.

Thorstein Veblen [1857–1929] closed his “Some Neglected Points in the Theory of Socialism1 with this paragraph (p. 74):

Certainly, the fact that constitutional government—the nationalization of political functions—seems to have been a move in the right direction is not to be taken as proof of the advisability of forthwith nationalizing the industrial functions.   At the same time this fact does afford ground for the claim that a movement in this direction may prove itself in some degree advantageous, even if it takes place at a stage in the development of  human nature at which mankind is still far from being entirely fit for the duties which the new system shall impose.  The question, therefore, is not whether we have reached the perfection of character which would be necessary in order to a perfect working of the scheme of nationalization of industry, but whether we have reached such a degree of development as would make an imperfect working of the scheme possible.

If we ignore here the fact that Veblen should have said “socialized nature” rather than “human nature,” what’s implicit in the above statement is that we’ve grown used to thinking of there being a political realm and an economic realm in our society.  We have, that is, become used to thinking of two distinctly different spheres in our society.  However, by Veblen asserting that there had been a nationalization of political functions in our society, he in effect asked why there could not be a nationalization of economic functions as well.

Veblen pointed out that a “nationalization” of political functions seems “to have been a move in the right direction . . . ;” but that that fact should not be “taken as proof 2 of the advisability of forthwith nationalizing the industrial functions.”  Veblen then added that the “nationalization” of political functions that had occurred does “afford ground for the claim that a movement in this direction may prove itself in some degree advantageous . . . .”  That is, there was enough evidence in support of the claim that the “nationalization” of political functions had been a “good thing” to give consideration of the possibility that a similar “nationalization” of economic functions could be a “good thing” as well.

By claiming that there had been a “nationalization” of political functions, Veblen was asserting that a process had been initiated in the political realm that could be—if so chose—continued by simply expanding that process into the economic realm.  Although the word “process” does not occur in the above passage, the concept is implicit in the passage—and indicates the important role that the concept of evolution played in Veblen’s thinking.

Implicit in the concept of “process” is that change is a fact of life, and an implication of that fact is that our descriptive words, because they imply stasis rather than change, may become obsolete and, thereby, misleading.  This fact has been recognized in the field of what might be termed “classification science,” where the “logical division” procedure of classification—which has been the dominant procedure for centuries—has increasingly been recognized as having limitations.3

An example of a logical division classification is the Dewey Decimal System that was designed for use by libraries.  With this system, first general categories are identified, then subcategories under each category, subsubcategories under each subcategory, etc.  The result is a hierarchy, with the most specificity existing at the lowest level in the hierarchy.

Such a classification can be termed an a priori classification, to distinguish it from the a posteriori type of classification.  Here’s a brief clarificatory discussion:

These terms are used with respect to reasoning (epistemology) to distinguish “necessary conclusions from first premises” (i.e., what must come before sense observation) from “conclusions based on sense observation” (which must follow it). Thus, the two kinds of knowledgejustification, or argument may be glossed:

(a) A priori knowledge or justification is independent of experience, as with mathematics (3 + 2 = 5), tautologies (“All bachelors are unmarried”), and deduction from pure reason (e.g., ontological proofs).

(b) A posteriori knowledge or justification is dependent on experience or empirical evidence, as with most aspects of science and personal knowledge.

The key point in the above discussion is that a posteriori knowledge has an empirical basis; so that an a posteriori classification would have its basis in empirical data. To illustrate this, assume that (a) our observational unit is national economies, (b) for a given set of variables, observations have been made on each national economy, that (c) a mathematical grouping procedure (e.g., principal components analysis) has been applied to the observations, that (d) two “principal” components have been discovered, and that (e) the graph above displays the results of the analysis.

Although real-world data have not been used in creating the graph, I suspect that had such data been used, the results would have been rather similar to those depicted on the graph.

Visual inspection of the graph is likely to lead most observers to perceive three groups (3 units in one group, 7 in a second, and 5 in the third), with three isolates. Now if we are “reading” this graph with such concepts as “capitalist,” “socialist,” “communist,” etc., in mind (highly likely!), we are likely to be puzzled by the results of our analysis. Concepts such as “capitalist,” etc., lead us to expect “tight” clusters on the graph, with one of the clusters clearly warranting the label “capitalist.” However, we perceive no “tight” clusters!

Some implications of this “exercise” are that:

  1. Real-world economies differ one from another; and even if we feel comfortable labeling some economies as “capitalist,” it’s clear that even “capitalist” economies are not clones one of another.
  2. The graph might even cause some to ask whether “capitalism” even exists (to allude to my title)!  Is “capitalism,” one might ask, a word without a real-world referent?!  A word, therefore, that should be expunged from our language?!
  3. An economy as perceived by, e.g., Adam Smith [1723–1790] decades ago differs greatly from any now-existing economy.4 As Veblen might say, change in economies is simply a fact of life.

Language was created in the first place to enable communication between people.  However, the nature of one’s language affects how one perceives things, and also how one thinks about things.  Regarding the latter, a point of relevance for the present essay is that language tends to cause us, quite “naturally,” to create logical division classifications—i.e., classifications that can lead us to “misread” the real world!

Of perhaps even more importance is the fact that language enables the formulation of ideologies—which misrepresent and, therefore, mislead.  Whether a given ideology was deliberately created or not, ideologies function to create a “fog” which serves the (apparent) interests of some at the expense of others—those “others” not being able to see this, because of the “fog” that prevents their seeing clearly.  The importance of that “fog” being compounded by the failure of the press to inform us adequately.

One might view the Veblen statement quoted at the beginning of this essay as an effort to dispel the “fog” surrounding the word “socialism.”  In a sense, he succeeded here in Milwaukee—where “Socialism meant honest, frugal government5—but not elsewhere in the United States.

Could that be part of the reason why the claim was made last year that our species might go extinct by 2026?!

  1. This article was published in 1891, in The Annals of the American Academy of Political and Social Science. []
  2. I added the emphasis. []
  3. This article about Pauli Murray proves my point! []
  4. Although Smith is often touted as the creator of the concept of “capitalism,” Smith did not use that term.  For a discussion of the term, see this, for example. []
  5. When I returned, in 1976, to Wisconsin (the Milwaukee area) from Ohio, I made a point of visiting former mayor Frank Zeidler [1912-2006] in his office.  I felt blessed to be in the presence of that great, wonderful man!! []

Al Thompson retired three years ago from an engineering (avionics) firm in Milwaukee. His e-mail address is: sven3475@gmail.com.

Read other articles by Alton.