Blackadder’s Lair

The home of many a cunning plan

Is America a Capitalist Country?

Distributism is often said (particularly by its adherents) to be an alternative both to socialism and to capitalism. But as G.K. Chesterton notes in his masterly work on Distributism, The Outline of Sanity, capitalism is a term that can mean several quite different things:

When I say “Capitalism,” I commonly mean something that may be stated thus: “That economic condition in which there is a class of capitalists, roughly recognizable and relatively small,
in whose possession so much of the capital is concentrated as to necessitate a very large majority of the citizens serving those capitalists for a wage.” This particular state of things can and does exist, and we must have some word for it, and some way of discussing it. But this is undoubtedly a very bad word, because it is used by other people to mean quite other things. Some people seem to mean merely private property. Others suppose that capitalism must mean anything involving the use of capital. But if that use is too literal, it is also too loose and even too large. If the use of capital is capitalism, then everything is capitalism. Bolshevism is capitalism and anarchist communism is capitalism; and every revolutionary scheme, however wild, is still capitalism. Lenin and Trotsky believe as much as Lloyd George and Thomas that the economic operations of to-day must leave something over for the economic operations of to-morrow. And that is all that capital means in its economic sense. In that case, the word is useless. My use of it may be arbitrary, but it is not useless.

If capitalism means private property, I am capitalist.

If capitalism means capital, everybody is capitalist.

But if capitalism means this particular condition of capital, only paid out to the mass in the form of wages, then it does mean something, even if it ought to mean something else.

Is modern day America capitalist in Chesterton’s sense? I would argue no.

Recall that, for a society to meet Chesterton’s definition of capitalism, it must be the case not only that a small group of people hold most of the capital, but that because of this fact it is necessary for a very large majority of that society’s citizens to work for that group for a wage. Now the second part of this definition is ambiguous. It could mean that it is necessary that the vast majority work for a wage, or it could mean that, for the vast majority of individuals, it is necessary that the given individual work for a wage. To see the difference here, consider the case of a wedding reception at which there will be 100 guests and two dinner options: chicken and vegetarian. Suppose that (for whatever reason) the caterers have prepared 85 chicken dinners and 25 vegetarian dinners (the extra ten being available on the “better safe than sorry” principle). It must therefore be the case that most people at the reception will have a chicken dinner. But it needn’t be the case of anyone at the reception (let alone the majority) that he or she will have a chicken dinner. So long as most people at the reception prefer chicken to a vegetarian meal, everyone can choose the dinner of their choice despite the overall ratio of chicken to vegetarian dinners. For easy of reference, let’s call these two senses the individual sense, and the collective sense.

If a capitalist society is one where most people are forced to work for a wage in the individual sense, then America is clearly not a capitalist society. It’s true that most people in modern America do work for a wage, but it is not true of most of them that they have to do so. Pretty much anyone could, if they really wanted, quit their job and join a commune, or follow the example of this guy (or this guy), or, less radically, start their own business. The fact that most people choose to work for a wage rather than exercise any of these options may be vexatious to a Distributist, but the fact that he doesn’t like most people’s choices doesn’t mean that they weren’t free to choose.

What if we take Chesterton’s definition in its collective sense? It is theoretically possible that most people will wake up tomorrow and decide that “wage slavery” isn’t for them. It is highly unlikely, no doubt, but so long as capitalism means more than just a society where people choose to work for a wage (as opposed to one where the majority are forced to work for a wage) then the fact that this is unlikely is not sufficient to make America a capitalist society (in this way the choice of people to be employed in America is different than the choice of dinners in the example above, since in that example most people would be forced to eat chicken dinners if nearly everyone wanted vegetarian).

Further, to the extent that large numbers of people are forced to work for wages in the U.S., the reason for this has little to do with the concentration of capital in the hands of a few. Even if businesses were all extremely small, having on average 9 employees a piece, it would still be the case that 90% of the workforce was working for a wage. Pretty much the only way one could avoid a situation in which a majority of people in a society worked for a wage is if a significant percentage of the workforce in that society was neither an employer or an employee. Historically, that has meant most people working in subsistence agriculture.

In each case, the basic problem for Distributists (who, I take it, generally think that America is a capitalist country) is that they assume the only reason why a person would choose to work for a wage is that they lacked sufficient capital to do otherwise. But that’s not necessarily so. In the case of myself, I’m glad that I don’t have to worry about all the things (from meeting payroll to office repairs) that my boss has to worry about. I much prefer being able to do my job in exchange for a wage, and spend my free time on other, more worthy pursuits (such as this blog).

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April 19, 2008 - Posted by | Capitalism, Distributism

8 Comments »

  1. You prefer working for a boss who has all the worries of a payroll. But how certain is your job? Have you remarked on the numbers being fired when the boss is incompetent? Consider but this week – 9000 fired by Citibank. Would you be willing to do what many middle managers at IBM had to do when that company lost half its stock value – work at McDonald’s for $6 an hour? And that with families to support.
    You seem to live far from the experience of ordinary working people.

    Comment by Gabriel Austin | April 20, 2008 | Reply

  2. Dear Blackadder,

    Your post is very nearly correct, and therefore completely wrong. The problem you mention is real enough, and it was the subject of Belloc’s book, The Restoration of Property.

    You say that people do not have to work for a wage, and then you offer them two choices: drop out of society, or found a business. Very well, but in regards to the first choice, we can restate that by saying the choice is between participating in society and “droping out”; in other words, you can be a slave of capital or a hippie. Some choice.

    As for the second choice, the capitalists do their best to make this less of a choice. In the first place, vast collectives occupy as many market niches as possible, making it impossible for the small businessman or woman. As the space for individual and family businesses shrinks, the power of corporate collectives expands. The great irony of capitalism is that it has both collectivized production and captured the state more thouroughly than any Stalinist could ever have imagined. And what have they used this vast state power to do? They have not, as the popular myth has it, freed business from the state; rather, they have subordinated the state to the coporation, so much so that it is difficult to say where one begins and the other ends. And (again contrary to the popular myths), they use their power to raise barriers to competition. This is as Belloc predicted. The walls of regulation are high indeed, keeping out the small businessman while protecting corporate capital. The cost of regulation is a very small part of a large corporation, and a very large part of a small business; the effects are asymetric and all in favor of the corporation. It is no surprise that you (or I, for matter) do not wish to take on the job, because the real job is not the job we wish to do (that is, make some useful and marketable product or service), but the job or filling out all the paper and complying with all the requirements. I am a businessman, but I limit my employment to contract employees; it is not that I have any wish to deny benefits, but I would rather pay them extra and deal with the other issues themselves.

    All of these things combine to kill even the sentiment for property, and without this sentiment no proper state is possible, save for a servile state. And that is what has happened. Here is a sign of this from my own personal experience. I teach a class to business students at the University of Dallas. Remarkably enough, very few of the business students want to become businessmen or women; rather, they want to become something entirely different: managers. That is, they would rather be clerks than entrepreneurs. Now, there is nothing in the world wrong with wanting to be a clerk, even a highly responsible and authoritative clerk. But, when this desire becomes so widespread that it is the determining force in society, you get a very peculiar kind of society. When most people would rather serve the strong rather than beome their own men. When the manager replaces the entrepreneur as the dominant social type, then you get a peculiar kind of society. You get, in fact, the society we have: the Capitalist society and the servile state.

    Comment by John Médaille | April 20, 2008 | Reply

  3. If using capital is enough to make one a “slave of capital” then everyone is a slave of capital, including the hippie. Even a subsistence farmer, after all, is going to use capital goods like shovels and hoes to make his work more productive. Chesterton recognized this, which is why he says: “If capitalism means capital, everybody is capitalist.” No, to count as a capitalist society, further conditions must apply (namely, the vast majority must be force to work for wages on account of the concentration of capital in the hands of the few). As I argued in my post, these conditions do not apply in the modern United States.

    I actually agree with you about the disproportionate harm many regulations have on small businesses and the way many businesses often get the state to intervene in the economy to stifle competition. I would favor the repeal of such restrictions. If these restrictions were to be repealed, would people be more likely to start their own businesses rather than work for others? Probably. But even if the conditions for starting one’s own business were ideal, the number of people who owned their own business would still be a small fraction of the total working population (as I note in the post, even if business had an average of only nine employees, you’d still have 90% of the working population who were so-called wage slaves).

    The truth is that starting one’s own business takes a lot of time and effort and creativity, with a greater risk of failure and a greater cost of failure than simply working for another. (as Mr. Austin notes, every job has some risk – the subsistence farmer risks starvation if there is a bad season, weatherwise – but the chance of something bad happening to you and the cost if it does are often much higher for employers than employees). Most people are just not cut out to be bosses, and would rather spend their time, energy, and creativity on other worthy pursuits. I see nothing wrong with that.

    Comment by Blackadder | April 20, 2008 | Reply

  4. In some ways, the comments from Distributists here remind me of why I find distributism so perplexing. The insecurities and indignities of working for another are constantly built up, and yet the far greater insecurities and indignities which often come with not being an employee are either ignored or blamed on “the system”.

    Now, with Blackadder, I am strong in favor of reducing regulation in order to help make small business life easier. I would love to see it involve less paperwork (and less fear of the IRS and employment bureau) to run a small business or be self employed.

    But I’ve also done it. (And unlike the above commenter did indeed file all the paperwork to have real employees — even though only on a part-time basis.) It is very much doable, but it is an incredible amount of work. When I was running my business (or “being my own man” as it was put above) I often worked 90 hours a week, and when I had to tell a client that I wouldn’t be able to get the planned work done on time, it was several times threatened that I simply would be paid at all, or that our fee would be arbitrarily reduced.

    Similarly, in the agrarian lifestyle which is so often idolized by modern city dwellers, a bad crop could mean debt, ruin, or even starvation. And through no fault of one’s own or another’s — simply bad weather or pests.

    In all honesty, “wage slavery” to an international corporation (with over 100,000 employees spread across every continent except Antarctica) over the last four years has been much easier on my family than running my own company was. I have every intention of running my own business again some day — but contra the above commenters I would argue from experience that not only is following the demands of an employer much less time consuming that running one’s own business, but that recovering from being layed off is actually much less difficult than facing a bad business cycle or the loss of a major customer as a small businessman.

    Comment by Darwin | April 21, 2008 | Reply

  5. I agree with what you are saying: the regulations serve as a barrier to small business. This is what corporate capitalism looks like. Lots of regulation to keep out small businesses, the very businesses that could challenge corporate control. This is exactly what Belloc predicted: ownership by the few protected by law. Not too long ago, I witnessed a conference put on by the American Enterprise Institute, a big right-wing think tank. One of the speakers was waving a copy of his book, “proving” that regulations were largely the work of corporate America, and not popular or even liberal movements. Well, Duh!

    No, not everybody wants to be in business for themselves, but in a corporate state, unnatural barriers are raised to keep out as many people as possible. That’s not speculation, that’s the actual situation.

    As for farming, I am a city-boy, New York born and bred, and I have no desire to go back to the farm I never came from, or flee to the fields I never owned. Nevertheless, I believe a proper relationship between town and country is necessary not only for a proper civilization, but for a proper economy. Corporate farming is supposed to be “efficient,” yet requires immense subsidies to make it pay.

    Not everybody has to be an owner. But the kind of society we have is dictated by the amount of ownership people have. And I mean real ownership: use, control, profit, etc., not the abstract “ownership” of a 100,000th share in an immense bureaucracy. A society with wide-spread ownership is a proprietary society; where ownership is concentrated in vast production and financial collectives, it is a collectivist society. If there is only one “collective”, it is a socialist society. You take your choice; I prefer the first. The third won’t work, and the second is collapsing.

    Comment by John Médaille | April 21, 2008 | Reply

  6. In the same sense, you might argue that the USSR wasn’t a state socialist economy because there were still some small private shops and self-employment: not everyone *has* to work for the state.

    The American economy is capitalist in the sense that wage labor and absentee ownership of capital predominate far, far beyond the levels that would have existed in a free market, absence the massive levels of state coercion involved in expropriating the laboring classes and setting up the structural foundations of the existing system.

    As for the economic insecurities of self-employment compared to wage employment, I have two points:

    1) economic volatility, as it affects small and medium-sized businesses, is probably greatly exaggerated by the artificially large market areas, inflated boom-bust cycle, etc., that have been promoted by the state. In the kind of economy that would likely prevail in a free market (small-scale manufacturing for local markets), there would probably be a great deal more long-term stability.

    2) in a wage enterprise, there is a zero-sum, moral hazard relationship between employer and employed when it comes to jobs. For example, my employer (a hospital) has repeatedly and drastically downsized patient care staff over the past several years (to the point of creating grossly unsafe conditions), cancelled our PTOs, frozen wages, etc., etc., all while giving the poor mouth about how it was necessary to prevent bankruptcy. But in the meantime, they have sunk millions of dollars into ill-advised capital investments that were a total loss. And guess what? They just announced their lease of a “corporate suite” in the skybox at the local corporate welfare baseball stadium!

    A worker cooperative, on the other hand, will gear its capital investments and compensation decisions toward preserving its members’ jobs.

    And owning a membership in one’s employer isn’t necessarily an “all your eggs in one basket” situation. There are all kinds of ways of diffusing the risk of unemployment through federative insurance arrangements between enterprises, etc.

    Comment by Kevin Carson | April 22, 2008 | Reply

  7. I would strongly question the degree to which large corporations are simply the result of government intervention in favor of large companies. Sure, it’s a great conspiracy theory, but it just doesn’t seem to fit.

    I mean: Small scale steel founderies? Small scale auto manufacturing? Small scale semi-conductor fabrication?

    Many products that his the market at fairly modest price points require thousands or tens of thousands of man hours to design, protype, and then manufacture. The only way to make that back is through massive scale.

    I’m skeptical that a modern economy can function without large corporations. Now one can certainly advocate going back to a circa 1700 technological toolset, but it’s not something that’s attractive to most people, for obvious reasons.

    Comment by Darwin | April 22, 2008 | Reply

    • I strongly question the degree to which anyone claimed “large corporations are simply the result of government intervention in favor of large companies.” Sure, it’s a great strawman, but it just doesn’t seem to fit.

      Some corporations are large because their industry has huge natural economies of scale, first-mover advantages, and other conditions that favor largeness. Some are large (or larger than they otherwise would be) because of government intervention. Government regulatory regimes create significant artificial economies of scale. Government tax policies are notorious among microeconomists for spurring the growth of conglomerates, even to the point of encouraging gross malinvestment.

      I have worked in more than one small scale semiconducter manufacturing plant so I know such things are possible. And I know of some small steel foundries. Small scale auto makers? They could exist but for government regulation – consider how many examples of each model must be destroyed to meet U.S. government safety testing requirements, that alone would amount to almost all of a small scale firm’s annual production.

      Comment by Micha Elyi | August 21, 2011 | Reply


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