The Many Faces of Capitalism

To most Americans, “capitalism” means “free economy,” a market system in which individuals and freely formed groups have the liberty to innovate, collaborate, produce, distribute, buy, and sell, all unencumbered by the heavy hand of government interference. As intellectual historian Michael Sonenscher makes clear in his 2022 Capitalism: The Story Behind the Word, there’s a more complex history to the term. What we call “capitalism” often bears little resemblance to the way the word has been used since it first appeared in European languages.

Capitalism hasn’t always referred simply to the accumulation and productive use of wealth. Louis Blanc, one of the earliest writers to use the “ism” form, declared war on capitalism in the name of capital: “Long may we applaud [capital] and long may we go on to attack capitalism, its mortal enemy, with even more intensity.” For Blanc and other French thinkers, a capitaliste wasn’t a factory owner or entrepreneur, but a financier who profited by loaning money to enable governments to prosecute their wars. Capitalism concerned “power politics, war finance, and public debt.” Such “capitalists” enabled states to grow and organize, first by expanding military and naval capabilities, then by providing peacetime government services like welfare and public investment. By this definition, the state is prior to capitalism because state debt “formed the core of capitalism.” 

Until the late nineteenth century, “capitalism” wasn’t identical to “commercial society.” The former has to do with property and ownership, the latter with the division of labor, markets, and prices. Capital doesn’t require markets. One can own land, for instance, without producing goods for a market; there are landowners even when there’s no market in land, when land is passed on by inheritance rather than through sales and purchases. You can use a loom (a capital good) to make clothes for your own kids, rather than someone else’s. The specialization of the division of labor, on the other hand, does presuppose markets and the mechanism of prices. On Sonenscher’s reading, Adam Smith was a prophet of commercial society rather than of capitalism, since his innovative insights had more to do with the division of labor than with capital as such.

This knot of concepts was further complicated by the distinction of negative and positive liberty (à la Isaiah Berlin) that entered economic debates in the eighteenth and nineteenth centuries. Benjamin Constant insisted that negative liberty would be “trumped by capitalism.” Negative liberty is bounded, setting limits on state intrusion into civil and economic life, but capitalism is unbounded. In the end, Constant warned, “the unbounded would undermine the bounded.”

Constant is one of many thinkers who mounted political critiques of what they called capitalism. Over the centuries, advocacy for capitalism has moved from one end of the political spectrum to the other. Today, most defenses of capitalism come from the political right, from conservatives and classical liberals, while left-wing statists and socialists advocate some level of state management of the economy. During the nineteenth century, royalist and aristocratic conservatives were among the most prominent opponents of capitalism. Following Hobbes, Louis de Bonald distinguished between the union of political society on the one hand, and the free-flowing reciprocity and concord that characterizes commercial society on the other. The two can coexist, but de Bonald worried that commercial activity might erode the solidarity of political society, leading to instability, war, and even the collapse of the state. For traditionalists, social order must be protected against capitalist imperialism.

Sonenscher is alert to the ways non-economic ideas infiltrated into economic thought, calling attention, for instance, to the theological sources of Marx’s theories. From Schleiermacher, Feuerbach, and others, Marx borrowed the notion that the division of labor is “a humanly created analogue” to the Creator. Each human being is uniquely fashioned, Schleiermacher had argued: Individuals don’t “represent the generic attributes of humanity,” but rather each “represent[s] humanity in his own way.” Thus, as more and more individuals express more and more facets of human nature, mankind comes to mirror the “omnicompetence of the divinity.” The division of labor isn’t a mere economic expediency, nor an accident of history, but part of the self-realization of humanity as the image of God. Marx’s conception of class consciousness was indebted to the theological claim that groups take on a corporate personality expressed in social practices. Marx thus told a revised story of creation in which the division of labor generates a proletarian super-humanity through the formation of collective praxis.

Capitalism is intellectual history of a high order, tracing the contours of long-forgotten debates and giving patient attention to the contributions of individual thinkers (Adam Smith, David Ricardo, Hegel, among others). By disentangling strands of intellectual tradition, Sonenscher complicates our too-breezy use of “capitalism,” but it’s a salutary complication that might clarify contemporary debates that conflate historically distinct questions about capital, markets, prices, commercial society, the division of labor, finance, public debt, and war.