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Friday, August 17, 2018

“Because Capitalism” Is a Lazy Explanation

In addition to being completely incorrect, blaming capitalism for economic behavior you don't understand is just plain lazy.

I confess: I’m a public radio junkie. Whenever I’m in the car without a passenger, I’m always listening to news headlines or book or film reviews on my local NPR station WABE 90.1.

Yes, I’m bougie and proud (as anyone living in our amazingly abundant society has a right to be).

Enter the annoyingly inaccurate and even dangerous “Because Capitalism” trope.

There’s no question that public radio broadcasts extremely high-quality programming, including perhaps my single favorite show, Marketplace. Hosted by my fellow Emory alumnus Kai Ryssdal, Marketplace is a cheery, informative look at the day’s business and economic headlines. Ryssdal is the epitome of a charismatic and trendy host, a talent whom you would love to have emcee your wedding.

Sometimes, however, trendiness can impede the clear understanding of concepts listeners need to learn clearly, especially controversial ideas.

Enter the annoyingly inaccurate and even dangerous “Because Capitalism” trope.

Because Capitalism?

Lately, Mr. Ryssdal has appropriated “Because Science,” a lazy and highly inaccurate turn of phrase offered by many Millennials to explain how everything works, from liquefied CO2 to cellular signal transmissions.

The learned host of Marketplace has begun to offer “Because Capitalism” for various economic goings-on ranging wildly from explaining a specific stock’s performance to anything else that he just doesn’t want to–or can’t–explain.

He’s been saying it for so long at this point that he encourages his listeners to join him in this linguistic abuse by prompting everyone to join him: “All together now, ‘Because Capitalism!’”

Blaming capitalism for such a turn of events would be like blaming the pavement for the fact that you got into a car crash.

Similarly to using “Science” as an explanation for how something scientific works, “Because Capitalism” confuses an economic structure for a reason.

Step back with me to review the standard, value-neutral definition of the concept of capitalism.

Capitalism is an economic structure characterized by private ownership of the means of production. In other words, factories, print-houses, restaurants, and farms are owned by individuals or groups of individuals (also known as corporations). An economy veers into “mixed” territory when its government seizes, or nationalizes, the capital goods that make the things that you and I consume. An economy becomes socialist when government ownership of capital goods is the rule rather than the exception.

An idea such as capitalism can in no way be a reason for a certain economic event. Even if you regard capitalism as inferior to something else, such as socialism, you must still identify the practical factors within a capitalist economy that may have contributed to a certain outcome. Perhaps the poor decisions of the CEO of a large multinational corporation caused a great number of his employees to lose their jobs, which caused a ripple effect that depressed the entire economy. But you cannot claim credibly that such an outcome occurred simply because ownership of the means of production in the economy is in private hands.

Blaming capitalism for such a turn of events would be like blaming the pavement for the fact that you got into a car crash.

The Words We Use Matter

Imprecision aside, there is a deeper danger when influential people begin to speak in a way that attaches capitalism to inexplicable economic uncertainty. We live in a moment when fewer than half of Millennials favor the idea of capitalism over socialism. Unless users of the phrase “Because Capitalism” such as Mr. Ryssdal intend to besmirch the idea of capitalism every time something confusing or complicated happens, they should refrain.

People with influential economic voices have the responsibility to speak as clearly as possible about the reasons for the world as it is.

Mr. Ryssdal isn’t alone in attempting to explain the often inexplicable human factors reflected in markets and the economy at large. The famed British economist John Maynard Keynes borrowed the Latin term spiritus animalis—or animal spirits—to argue how the instincts and emotions of individual economic actors drive them to make decisions that may be considered irrational. Economic productivity is up yet consumer confidence is down? Blame the animal spirits. Apple’s stock dips 10 points despite a better than expected earnings report? It’s those darned animal spirits yet again.

Economists of the Austrian School reject the notion of mysterious forces at work in the economy because they study individuals’ decisions through the lens of each person’s rational subjective value. In other words, people make economic decisions to achieve a certain desired end. Whether these decisions are sufficient is another question entirely, but they are always rational.

For years, I’ve taken to using a particular phrase whenever my husband presents me with something inexplicable that someone has done. “People are funny,” I say, to which our two pairs of eyeballs roll and we move on. Shorthand like that can be a sufficient way to acknowledge the unpredictability of life without delving too deeply into other people’s heads.

When it comes to a productive global economy of billions of people, it’s impossible to understand the individual motivations that create daily economic outcomes. This is why economic analysis is so tricky, and why even the best analysis is pinned on vast simplification. People with influential economic voices have the responsibility to speak as clearly as possible about the reasons for the world as it is and to avoid using language lazily, even when it sounds cool.

  • Richard N. Lorenc is Chief Growth Officer of Iron Light, an award-winning strategic marketing firm specializing in helping purpose-driven brands change the world. He served at FEE from April 2013-November 2021, most recently as FEE's Executive Vice President.