The Hallmark of Capitalism

Most people do not understand capitalism. Those who think they love it often do not understand it. People who hate it don’t understand it either. To begin to get a sense of what capitalism is, we should search for its hallmark, the feature that separates it from socialism, and other forms of economic organization. The hallmark of capitalism is failure. It is not extreme profits; let’s call these excess profits. It is not greed.

When a capitalist makes a bad business decisions, he or she can expect to bear losses and to fail. When a socialist enterprise makes a bad decision, the government may just double down. Government bureaucrats will typically say that the reason that their project did not do well is that they did not do enough of it . . . or it is an infant industry and just needs subsidies for a little while longer.

When a capitalist makes excess profits, he or she can expect that these profits will go away. Competitors look at these excess profits and begin to copy the successful capitalist until the excess profits have gone away.

Yes, Virginia, there is greed in capitalism. However, there is greed in every other type of -ism too. I think that it is worth our time to define greed. I’ll define it as desiring benefits that one has not legitimately produced or earned. So there is greed in unions, greed in universities, greed in corporate management, greed in governmental bureaucracies, and the list goes on and on. What economic organization provides a control on greed? It is capitalism. The control is that consumers vote against greedy capitalists with their dollars. Greedy capitalists will fail.

Please do not confuse state-sponsored business with capitalism. A governmental industrial policy is not consistent with capitalism. Too-big-to-fail is not capitalism. Crony “capitalism” is not capitalism; let’s call it crony capitolism (sic).