Three Meanings of Capitalism

Capitalism

The term "capitalism" is often used interchangeably with "democracy," "freedom," and "free enterprise," but such usage is misleading and inaccurate. There are at least three major meanings of the word "capitalism." First, aristocratic capitalism is where the laws treat those with high levels of capital differently than those without. In the U.S. Commercial Code, for example, investors with a high net worth are allowed the best investments. It is illegal for companies to offer such investments to those with low or middle net worth. The idea is that government must protect unsophisticated investors from debilitating losses, but the flip side of the coin is that such policies help the rich get richer and prohibit the rest from such returns. Under this model, the gap between the rich and poor continues to expand. Second, democratic capitalism is pure free enterprise, where the government requires all laws to treat everyone equally--regardless of their economic status. The tenets of such capitalism include representative government, free commercial interactions, entrepreneurialism, and limited government. This is the type of capitalism that the American founders promoted. Third, mercantile capitalism occurs where the government is the major investor and where high levels of regulation keep even non-governmentally owned companies under the thumb of the government. This is often called state capitalism, and it was widely popular in the era of British dominance and is now the system of choice in many Asian nations. When most Americans say "capitalism" they are referring to the democratic capitalism, but the United States is now following aristocratic capitalism. Indeed, most leaders of the current Right consistently promote aristocratic capitalism while the Left is attempting to shift the United States to mercantile capitalism. There are few pushing the real solution: a return to true democratic capitalism, or free enterprise. The thesaurus lists the following as synonyms of capitalism: "free enterprise, private enterprise, and entrepreneurship." Again, these meanings are only consistent with free enterprise, not with aristocratic or mercantile capitalism.  - Oliver DeMille

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