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Economics

Define Capitalism

One problem when discussing capitalism is that definitions vary. I’ve had many discussions where I assumed someone supported capitalism because we agreed on a policy, such as getting rid of a government handout to industry. But when I welcomed them as a capitalist, they vociferously denied it.

Then we have examples like this:

When I say capitalism, I mean markets function with minimal government involvement. A huge bailout is not capitalism by my definition. For AOC apparently it is. Again, we agree on the policy — less bailouts for well-connected companies. — but disagree on definitions.

What about the following?

  • the mortgage bailout
  • fossil-fuel subsidies
  • corporate private jet fuel perks
  • carried interest deduction used by hedge funds to reduce taxes

Many call these capitalism, or crony capitalism. I call them cronyism, and in my book are the exact OPPOSITE of capitalism.

What is my definition of capitalism? Basically a marketplace like Etsy, where artists are free to create what they want and price as they wish, and consumers decide what they like and are willing to pay. This doesn’t describe all markets. Healthcare has political, maybe even economic, concerns that make market capitalism difficult. And we definitely need to adjust markets for bad things like pollution (there are simple market-based solutions for this). But it should be easy to distinguish my capitalism from what some call capitalism, and I call cronyism.

Going forward, we could continue to argue about terminology, but since most of us agree that cronyism sucks, how about we get rid of that first? Later, we can discuss terminology over a beer.

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