Is this capitalism?!!

The great economist Pierre Lemieux published the Substack post, "If this is Capitalism, Give Me Socialism," recently. He wrote that surveys revealed, "...more than 50% of voters aged 18 to 39 would like a democratic socialist candidate' to win the 2028 presidential election; and that three-fourths agree that 'Major Industries like health care, energy, and big tech should be nationalized.'” 

Dr. Lemieux notes that people are attracted to socialism because they think the current system in the U.S. is capitalism. But is it? 

When I was earning a degree in economics in the late 1980s, no respected economist referred to the U.S. as capitalist. At best, it was a mixed economy. So, how did it become capitalist? Socialists declared it so with the election of Reagan as President in 1980 because Reagan ended price controls on energy and transportation. The mainstream media, historians, the social sciences and humanities promote socialism. Socialists claimed that Reagan had unleashed wild west, no-holds-barred, totally unregulated, laissez-faire capitalism. But he hadn't. 

Reagan did not deregulate any industry. He ended the practice of the federal government setting the prices of trucking and airlines. Carter had already ended price controls on oil and natural gas. But the Federal Register of new regulations had been growing by 70,000 pages since 1970 and continued that growth through the Reagan years until the 21st century when it jumped to 100,000 pages every year. 

Reagan also reduced the top marginal tax rate of about 90%, which few people paid, and his tax "reduction" increased the taxes of most people by eliminating many deductions. The tax increase in his second term was the largest tax increase in U.S. history. I show in greater detail in this post the path the U.S. traveled throughout the 20th century toward greater socialism. Today, I think the U.S. is more socialist than capitalist. 

But what is capitalism? Most people will answer with a microwaved version of Marx's definition: the system where capitalists exploit labor through profit derived from extracting surplus value from wage labor. In other words, profits are theft from workers. No business should earn a profit. His Communist Manifesto is the best explanation of the Marxist brand of socialism in spite of what many socialists today call socialism. 

However, is it right to allow the enemies of capitalism to define it? Do we allow Marx to define Christianity as the opium of the people? Of course not! Those who created the system should define it, not its enemies. A longer definition of capitalism is here. In short, capitalism is the only system that takes "Thou shalt not steal" seriously. It doesn't allow the rich to steal from others. The Bible condemns the rich because they got their wealth by stealing from the poor (James 5). 

The world was mired in starvation poverty for millennia until the advent of capitalism blocked the rich from using the power of the state to steal from the poor. Capitalism protects the poor. The rich don't need protecting because they have the money and power to protect their own wealth. 

Just as important, capitalism doesn't allow the state to steal from citizens. God warned Israel about that evil in I Samuel 8 when he explained to Israel the evils that a king would unleash upon them by taking their wealth in taxes. Most people think the state has a right to take as much of our income as it wishes. It can take 100% if it wants. But the founders of capitalism, the theologians at the University of Salamanca during the Reformation, thought differently. They argued that God gave the state a very limited role to punish criminals (Romans 13), provide courts (Deuteronomy 16) and national defense. It could tax for those purposes, but if it taxed more it committed theft.  

In short, capitalism is the system that enforces the rights of individuals to life, liberty and property. But what is property? Property requires control by the owner to buy, use and sell or dispose of his property as he wishes as long as he doesn't defraud, steal or coerce others. Without control, property doesn't exist. Such control requires very limited government and free markets. The Salamancan theologians insisted on free markets for that reason and because they determined that only free markets could generate just prices. 

Regulations by the government beyond prohibitions of theft, which includes fraud or coercion, shift control of property from the owners to the state, and is a form of theft. Most people don't see regulation as theft. To them, the government is protecting the health and safety of its citizens. But Nobel Prize winner James Buchanan proved that is not the case. Corporations write most regulations to protect themselves from competition. 

The Declaration of Independence and the Constitution are the best implementations of capitalist, or Biblical principles of government. The U.S. had enjoyed capitalism from before its founding until the 20th century. The first steps toward socialism came during the Wilson presidency with the creation of the Federal Reserve and the implementation of progressive taxation. The Federal Reserve is central planning (socialism) of the most important sector of the economy, the money supply. A gold standard is a capitalist system. 

The U.S. isn't capitalist because of the Federal Reserve, massive taxation and regulations, but it isn't a Marxist system because Marx insisted on government ownership of the title deeds to property, as implemented in the Soviet Union and China. So, what is it? The U.S. should be described as an older form of socialism, called guild socialism or corporativism, that left paper titles in the hands of owners while having the state control every aspect of property. As mentioned, property without control is not property. 

Mussolini drew from guild socialism to create his fascism. President Franklin Roosevelt was a devotee of Mussolini and tried to implement guild socialism in the U.S. Americans see taxes for redistributing wealth and regulation of businesses as a "third" way between socialism and capitalism, but it's only an older form of socialism. 

Guild socialism or corporativism are good names for the U.S. system because massive regulations have turned most industries in the country into what economists call oligopolies, but in plain English are cartels. In corporativism, the government organized industries into cartels for easier control. In the U.S., corporations capture regulatory agencies by buying politicians to put people friendly to the largest corporations on regulatory boards. Then corporations have regulations written to impede competition and favor the largest corporations in ways similar to what medieval guilds did. 

The problems most people attribute to capitalism result from the massive shift to socialism during the 20th century, problems such as rising inequality, stagnant wages, de-industrialization, affordability, inflation, excess profits and more. 

I agree with Dr. Lemieux: if this is capitalism, please give me socialism! But those who know economic history know that this is socialism, not capitalism as the media claim.