Libertarians have long understood that “capitalism” originated as a term of abuse. In Human Action, Ludwig von Mises wrote, “The system of free enterprise has been dubbed capitalism in order to deprecate and smear it.” We may wonder, then, why most libertarians today embrace the term. They might do so for much the same reason that Pierre‐​Joseph Proudhon called himself an “anarchist” and Ayn Rand embraced “selfishness” as a virtue: there is a certain appeal in adopting such a position of rhetorical defiance, in thumbing one’s nose at conventions and expectations. Such provocations can draw attention to important and challenging ideas. For libertarians, though, “capitalism” draws the wrong kind of attention, repelling those who associate the word with sundry injustices that have nothing in fact to do with libertarian ideas or principles. We libertarians should stop saying that we advocate capitalism or that capitalism is a system of economic freedom.

Both the left and right halves of the political mainstream seem to take it for granted that corporate capitalism just is a free market, or at least something closely approximating one. The left takes this to mean that the free market, left to its own devices, allows the rich to exploit workers, befoul the natural environment, steal shared natural resources, and generally monopolize wealth. The free market, then, must be reined in by a responsible government devoted to what’s good for society as a whole, not just the wealthy. For the right, seeing corporate capitalism as a free market means that its outcomes and institutions must be essentially above reproach, immune from ethical attack. Thus convinced that corporate capitalism is the natural and inevitable result of free and open competition, American conservatives believe that the success of giant multinational corporations has been fairly achieved, that government efforts at wealth redistribution are essentially unfair, robbing the industrious and entrepreneurial of the fruits of their labor to benefit the idle. But what if the version of capitalism that prevails today is not actually representative of a free market and the principles upon which a free market system is supposed to be based? What if it wouldn’t survive without the sustained intervention of government? What if free market competition would actually eat away at inequality and the power of many of our most powerful economic institutions? These assumptions granted, the political spectrum would potentially be turned on its head, with pro‐​government economic interventionists ending up on the reactionary right and laissez‐​faire free marketers moving to the radical left. The whole of our narrative would have to change, to be corrected.

The modern corporation is, as Douglas Rushkoff notes, “a very specific entity, first chartered by monarchs for reasons that have very little to do with helping people carry out transactions with one another.” The history of the modern corporation, and therefore capitalism itself, is inextricable from that of the modern state. A central assumption of classical political economy is the idea that international free trade and market competition subvert the power of monopolies—and, therefore, capital itself—rather than aggrandizing or serving that power. Nineteenth century liberals such as Richard Cobden often spoke of attacking the “citadel of privilege,” their free market advocacy highlighting the socially egalitarian and equalizing tendencies of markets. This old idea of economic freedom serving the goal of equality as a practical or instrumental matter breaks the political spectrum as we know it. Everything said and written about politics and economics today seems to take it for granted that markets, left alone, produce monopolies, inequality, economic crisis, and the like, with government restraining these tendencies. When we treat “capitalism” and “free market” as synonyms, we promote this deeply mistaken narrative, sewing confusion where we might clarify the philosophy of liberty.

In The Information Nexus: Global Capitalism from the Renaissance to the Present, economic historian Steven G. Marks notes that polling in the United States reveals a pattern of apprehension at the word “capitalism,” Americans associating it with “the unrestrained power of big corporations.” In 2016, the results of a widely publicized Harvard poll showed that more than half of the 18‐​to‐​29 contingent opposed capitalism, with 42 percent supporting it. (Importantly, socialism is likewise rejected by this age group, almost three out of five indicating that they do not support socialism.) Marks observes that Europeans also respond very negatively to the term, far more negatively than when they are asked “about the free market without mention of capitalism.” Marks notes, too, that this is “not just about left‐​wing prejudice,” most respondents showing a similar distaste for communism. And indeed, around the world, the vast majority of people tend to agree with the statement, “Most people are better off in a free market economy, even though some people are rich and some are poor.” People intuitively understand that “capitalism” and “free market” have different meanings, that the former stands for the pulverizing power of sprawling global concerns, while the latter stands for voluntary exchange and fair, open competition. One is an unjust system that exists today as a matter of fact, the other an ideal that has never been fully realized. That, in poll after poll, the idea of a free market fares better than does “capitalism” seems to reflect a difference in meaning fairly widely, even if only tacitly, accepted around the world.

To understand why it is wrong for libertarians to fly the banner of capitalism, it is helpful to consider the origins of the term. Though widely credited with coining “capitalism,” Marx was far from the first to use the term; neither was William Makepeace Thackeray’s 1854 novel The Newcomes: Memoirs of a Most Respectable Family first, though it, too, is often cited as the term’s first appearance. The French socialist Louis Blanc’s employment of the term in Organisation du travail precedes Thackeray’s and is, in any case, more significant in the history of both the use of the term and of social and political thought generally. As economic historian Geoffrey M. Hodgson observes, the word capitalisme did not appear “in at least the first five editions” of that book (1839 to 1848), but emerges in 1850’s ninth edition, in which Blanc argues that the fact of capital’s usefulness should not be “confused with what I call capitalism, that is to say the appropriation of capital by some, to the exclusion of others.” Hodgson notes a still earlier appearance of the term, possibly the first, 1 in the English translation of an article Blanc penned during his exile in London. Writes Blanc, “The suppression of capitalism cannot, then, have anything to do with the suppression of capital.” For Blanc, as for Proudhon, 2 capitalism was fundamentally about the power that capital enables the capitalist to wield. 3 In Pierre Larousse’s Great Universal Dictionary of the 19th Century, published in 1867, capitalism is quite similarly defined as “power of capital or capitalists.” 4

The early definitions Blanc and Proudhon give capitalism align them with American individualist and mutualist contemporaries such as William B. Greene, Lysander Spooner, and others. Greene, also writing in 1850, looked forward to a time when “the distinction between the capitalist and the laborer would be entirely done away with,” the privileges of the former swept away. Libertarians like Greene, building from the insights and principles of classical economics, regarded capitalism as a system of unearned income, of rents derived from anti‐​competitive privileges granted through the coercive power of the state. They distinguished rents of this kind, derived from government‐​backed monopoly, from economic rents owing to naturally occurring scarcities and the practical imperfections of real‐​life markets and competition. Capitalism was the legal and political repudiation of liberal free market ideals, not the expression of those ideals. It was, like feudalism, a system of tribute and economic subjugation. Indeed, this led Greene to call capitalism “industrial feudalism,” though this didn’t mean that he embraced socialism, which he equated with “the intervention of society in all the private affairs of life,” “destructive to both liberty and equality.” 5

Libertarians may reasonably worry that joining (or, more accurately, rejoining) the ranks of the “anti‐​capitalists” would misguidedly associate us with opponents of the individual right to own property. But, of course, one needn’t reject the notion of private property itself in order to assail the evils of capitalism. Indeed, we might argue that a principled defense of private property logically entails a certain critique of capitalism. The American decentralist and distributist Herbert Agar argued that “the institution of private property” had “been largely supplanted by thoroughgoing capitalism,” that “the essence of capitalism” was the dispossession of the many. Agar reproved liberals for speaking “as if capitalism meant private property,” when in fact capitalism was its negation. He argued that the American dream of individual liberty and autonomy was in fact derided by both the communists and “the friends of Big Business, who dishonor the dream by saying that is has been realized, that it lies all about us today.” Capitalism and communism are fundamentally alike as centralizing, hierarchical, authoritarian systems, built upon the division between the economic rulers and the ruled. The anarchist Paul Goodman remarks that both “trap people and push them around,” similar as systems of exploitation and central planning. Were libertarians to listen more closely to the left’s complaints about capitalism, we may be surprised to hear appeals to the dignity and autonomy of the individual and to the problems with hierarchy and bureaucracy—traditionally libertarian concerns. Deirdre McCloskey raises still another objection, that the word capitalism emphasizes capital, or the accumulation thereof, which is really neither all that important nor a unique attribute of the system of trade‐​tested betterment McCloskey’s work honors. “Capitalism,” she writes, “is a scientific mistake compressed into a single word: a dramatically misleading coinage of our enemies, and of the sadly misguided among our friends.”

Many contemporary libertarians disagree, insisting that the meaning of “capitalism” has changed sufficiently to make it safe for use by principled proponents of private property, free markets, and individual rights. Ludwig von Mises and Ayn Rand used the word to describe their ideas, and so, they say, should we. As we have seen, however, it’s not clear that for most people in most places, “capitalism” properly and effectively conveys our message of liberty. Even a century ago, German economist Richard Passow’s review of the literature turned up no less than 111 definitions of “capitalism.” A word with such varied definitions is practically impossible to put to use—to good use, at least; perhaps we shouldn’t try, particularly if we, as free market advocates, are interested in sending a clear message about what exactly it is we champion. Capitalism is, as a term, deeply alienating relative to, for example, the clearer, simpler, and more descriptive “free markets” or “free‐​market competition,” etc. Today’s libertarian movement might do well to follow William B. Greene in disavowing both socialism and capitalism, to recapture a tradition that makes the free market an alternative to both.