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Wednesday, November 8, 2017

The Essence of Capitalism Is Mutual Consent

Capitalism is a loaded word. Try "willing exchange" instead.

George Orwell, in “Politics and the English Language,” wrote that “the slovenliness of our language makes it easier for us to have foolish thoughts.” A good example of such foolishness is the rising of attacks against capitalism, and the implied panacea of ever-more government control, from people with almost no understanding of what they are attacking.

How can defenders of liberty best address the ignorance of capitalism that misinforms its critics? One very useful possibility comes from Leonard Read, among history’s most devoted defenders of liberty, 50 years ago, in “Saying What You Really Mean,” in his book, Deeper Than You Think (1967).   

To better distinguish between aggressive force (coercion) and defensive force (protecting against coercion), Read proposed an alternative to terms such as “capitalism” and “free markets” that was not already twisted beyond recognition. He argued that the contrast between liberty and government domination (however disguised or misrepresented as freedom) could be recognized more clearly by simply asking whether arrangements involve willing or unwilling exchange.

Most labels [for politico-economic beliefs]…are no aid to clarity.  

Recognize how deeply exchange extends into human affairs. It…is fundamental…specialists exchange—or perish!

Shall it be willing or unwilling exchange?

Standing for willing exchange, on the one hand, or for unwilling exchange, on the other, more nearly accents our ideological differences than does the employment of the terms in common usage…there is a minimum of verbal facade to hide behind.

Willing exchange…has not yet been saddled with emotional connotations… Further, its antithesis, unwilling exchange…no one, not even a protagonist, proudly acknowledges he favors that; it does offense to his idealism.

If we cut through all the verbiage used to report and analyze political and economic controversy…much of it boils down to a denial of willing and the insistence upon unwilling exchange.

The list of coercive activities that go beyond the principled scope of government runs into the thousands.

The concept of willing exchange unseats Napoleonic behavior–all forms of authoritarianism–and enthrones the individual. The consumer becomes king. Individual freedom of choice rules economic affairs…[It] is for me, and a willing seller, to decide; it is no one else’s business!

Very few will accord that liberty to others which they personally cherish so much.

A good society…[requires] the unobstructed flow of creativities…in free and willing exchange.

No person, or any combination of persons, regardless of numbers, or any agency they may contrive…has any right of control over any other person that does not exist or inhere as a moral right in each individual. The only moral right of control by one individual over another or others is a defensive right, that is, the right to fend off aggressive or destructive actions. Governments, therefore, should go no further in controlling people than the individuals who organize it have a moral right to go…In short, limit governmental power to codifying the do-nots consonant with the defense of life and livelihood, to the protection of all citizens equally. No special privilege for anyone!

This is to say that, ideally, government should be limited to inhibiting and penalizing all violence, fraud, predation, misrepresentation—that is, to keeping the peace. Insist that it tolerate no unwilling exchange and that it never indulge in what it is organized to prohibit. Let government do only this; leave all else, including welfare and prosperity, to willing exchange.

One of the difficulties of defending liberty has always been the linguistic misdirection of opponents, which makes “foolish thoughts” about social organization more politically palatable, while at the same time making it harder to communicate the benefits that are only achievable through liberty. But Leonard Read knew that liberty was so superior to any possible abridgment, that if what it entailed—and what its absence entailed—could just be made clear enough, it would have a fighting chance against the political tide of foolishness.

Leonard Read’s focus on voluntary exchange backed solely by defensive force can help cut through the tangle of verbal confusion and distortion. After all, at the root of virtually every complaint about capitalism or markets is a claim that it harmed someone in an unjustified way (i.e., it violated some right). If people could see that a system of solely voluntary exchange would not violate anyone’s rights and would only harm those desiring government-backed privileges at others’ expense, such claims would be quickly dismissed.  

  • Gary M. Galles is a Professor of Economics at Pepperdine University and a member of the Foundation for Economic Education faculty network.

    In addition to his new book, Pathways to Policy Failures (2020), his books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).