What Defines Capitalism?

“Capitalism has been around since the first caveman traded another caveman a rock for a stick.” – dumbasses on the internet

The political utility of this braindead definition of Capitalism, and the simplification of all market systems as Capitalism, is as a propaganda tool dating back to the birth of the modern era, cannot be overstated. What it actually is, and why this statement and others used by adherents to deflect critique are wrong, is important to understanding why Capitalism as a system is fundamentally flawed, and historically has not benefitted the majority of human beings.

So what defines “Capitalism”? Simply put, the innovation of Capitalism is a “market of markets”, where fungible vehicles that represent ownership in the real economy can be traded in their own market, independent of the entities represented. So Tesla cannot control who sells or buys their stock, those trades are independent of Tesla itself. Within each meta-market, bonds, stocks, futures, CDOs, MBSes, Treasury Bills, Municipal Bonds, etc. can each be traded outside of, and independently from, the actual economic entity involved.

This fundamentally changed how Capital was allocated, and how it was able to flow. This form of market liberalization – capital mobility – is distinctly different than other models, but requires some moving parts that took a long time to develop. So, some history.

As monarchic exploitation of the “New (to them) World” went on, commercial ventures and the soft power of money supplanted more and more of the heavy lifting for colonial and imperial expansion from State actors. The transition from State to private actors led to larger justifications for corporate exploitation for everything from the horrors of slavery to genocide.

Massive corporations, usually with “East India” in the title, could not raise the funds they needed for expansion – ships, private armies, warehouses, slavery infrastructure and apparatus, etc – simply through royal patronage or direct investment anymore. Around 1609, the Dutch East India Company began securitizing debt in the form of bearer certificates, issuing “stock” that indicated ownership of a certain “share” of the company.

This model, a distinct change from the direct investment model, allowed more people to invest more money, lowering the cost of entry into ownership – a few shares were far cheaper than directly buying a portion of ownership directly. Instead of handing over a bag of gold to buy 25 or 30 percent of a business or venture to the guy in the big office, you could buy stocks from a broker, which were far smaller percentages and therefore much cheaper.

This apparent democratization of the investment model is an important innovation for Capitalism, but still, this is not modern Capitalism. This is the genesis of the mechanisms, but this is still fundamentally a mercantile system. Trade is still largely direct, and while stock markets with brokers emerge pretty much as soon as DEIC becomes a publicly traded company, it is not the integrated market that defines the flow of Capital that gives Capitalism its defining name. It is still a tiny portion of the economy. State and corporate capital is still transferred through direct transactions.

It is not until 1867, with the introduction of the stock ticker, after the invention of the telegraph, and the birth of instantaneous communication across great distances, that we see the development of the modern stock exchange. Once trades are no longer restricted by the speed of information, more and more entities begin to participate in the system.

And that’s the key word here – system. It is not until communications technology is able to bring these “markets of markets” together to create a system that we get actual, factual Capitalism as an overarching economic model implemented across the entire economic landscape.

When we talk about political economics, we’re talking about systems, not individual characteristics of ideological dogma. “Free trade” can – and does – exist under multiple economic systems. “Free markets” can, and do, exist under multiple systems. What defines Capitalism as a system is that “market of markets”, in which most economic and State actors participate, and upon which monetary policy is based. US debt is sold as Treasury Bills and Government Bonds in that “market of markets” as fungible tokens of ownership that can be traded without any interference. China holds a huge amount of our debt. T Bills are wildly popular investments globally. The US has zero say in who does or does not get to buy T Bills. They operate in exactly the same way as any other securitized vehicle, whether based on moergtages or personal debt.

The argument that “free trade” or “Free Markets” are the defining aspect of Capitalism is hilariously wrong. But that’s the line required to deflect critique of Capitalism as a system. As we have talked about before, the lazy fallacy of false binaries is the refuge of the bad faith moron. “Anything that isn’t Rothbardian laissez faire is literally Stalin’s Holodomor” has been the rallying cry of the dumbest fucking people since the Cold War. It is politically useful because faux moral binaries are weaponized thought terminating cliches for God’s perfect idiots.

So what’s wrong with Capitalism?

Well, first off, let’s acknowledge that the claim “Capitalism has lifted the greatest number of people out of poverty ever” is absolute nonsense in the first place. That claim is made about two eras (neither of which are Capitalist, btw) – the age of European expansion, and the age of American development – and the same answer applies to both: slavery, exploitation, and genocide transferred wealth from people these racist dimwits don’t give a fuck about to those they do. Sugar and cotton are two products clearly responsible for much of this economic growth, both are tales of the worst atrocities and human suffering possible. So no, Capitalism didn’t do shit, and what you think did shit was slavery, exploitation, and the inflicting of massive amounts of human suffering for profit.

It’s that last line there that betrays the dark heart of Capitalism. For profit. Because along with the propaganda of Capitalism. we get “the Protestant Work Ethic^tm” and “the Profit Motive^tm“, which demonizes anyone not working themselves to death – literally, in the case of slavery and forced labor – and glorification of the apex predators of Capitalism for being sociopathic enough to exploit their way into being able to tweet on ketamine and get handjobs from Joe Rogan all day while claiming to be “working very hard”.

Lies make Baby Jesus cry, and Capitalism MUST lie about itself to keep people from seeing the Beast beneath. As we have mentioned elsewhere, just as Capitalism tends inevitably towards monopoly, extreme wealth tends inevitably towards narcissistic sociopathy. You have to justify the exploitation, and that requires delusion.

As we have also pointed out elsewhere, Capitalism has zero guardrails. It has no inherent stability, no protection against manipulation, or exploitation against bad actors. It incentives corruption, slavery, lying, fraud, deceit, manipulation, etc. all in the name of “line go up forever”. From the slavery of the American South, the Caribbean, the Congo, forced labor camps in Germany or Russia, or modern China, sweatshops of the Global South, from the cartels and crypto rug pulls, GameStop meme stonks, the Tate brothers’ rapist webcam empire, selling vaporware to tech bros, it’s all allowed to flourish unhindered,if not outright enforced by Capitalism.

Capitalism, by isolating capital as its own commodity, and untethering it from real value or tangible assets, has a fundamental flaw that makes it unstable and unsustainable as a system. Capitalism, by the nature of it’s founding innovation, rewards only one thing: access to capital. One no longer need to participate in the risk and innovation of the real economy – actual goods and services purchased by the broad aggregate consumer spending that drives production and employment – but simply manipulate numbers and scarcity through arbitrage and monopoly.

Those who succeed are those most willing and able to pull hardest on the levers that drive Capitalism – slavery, exploitation, and monopoly. Period.

As we pointed out in our articles, “Emotional Economics”, “Trickle Down”, and “The Purpose Of Building Shoes”, overwhelming the system with capital is shockingly easy and wildly profitable, specifically because of how walling Capital off into the gentrified enclaves of the “market of markets” doesn’t really democratize the market as much as it does open the doors of the casino to the rubes, but the House – Capital – always wins.

Because that’s how the system is built.

For further reading, we like to recommend “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry” by Helaine Olen, “Plunder: Private Equity’s Plan To Pillage America” by Brendan Ballou, “Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism” bu Ha-Joon Chang, and “A Brief History Of NeoLiberalism” by David Harvey.