Down With Mercantilism! Or, Capitalism: The Seldom Known Ideal

In trying to explain how we would be better off under capitalism, the situation one may find oneself in is the encounter with the widely held belief that we are under "capitalism" already, and that many of our problems are to be blamed on the free market (for example, the most recent economic downturn---but as I've written elsewhere this is not true).

Dom Armentano back in 2011 in his piece "Capitalism and the Wall Street Protesters" wrote---

"So what is capitalism? Free market capitalism is based on the individual right to own and freely trade property. It permits owners of property (land, labor, capital, etc.) to enter (or exit) any contract on mutually agreeable terms. It gives entrepreneurs the freedom to start any business (without government permission) and to borrow money and develop products for consumers. It permits land owners to rent (or sell) their property for any peaceful purpose. It gives adult workers the liberty to lease their services to any business at any agreeable wage and to terminate that agreement at will; employers would have the same right.

Capitalism allows firms to compete (and cooperate) with other firms; it allows firms to succeed and reinvest their profits; it allows firms to make losses and fail and go out of business. It allows consumers to choose any product or service (drugs and prostitution would both be legal) and allows parents to educate their children in any manner and for any length of time that they decide is appropriate.

Under capitalism, there would be no government bailouts; no Federal Reserve; no Fannie Mae or Freddy Mac; no state restrictions on competition (so-called antitrust laws); no tax-supported schools and no government supported monopolies of any kind. Crony capitalism, after all, is not real capitalism."

Clearly Dr. Armentano does not believe we are in a capitalist society.  We currently have government bailouts, a Federal Reserve, etc.  We also have illegal drugs and prostitution is illegal, no matter if the transaction is voluntary on the part of both parties. 

See also this 8-minute video that also bursts asunder the mainstream thinking about what exactly capitalism is.

The confusion comes about perhaps because the term "capitalism" achieved the popular usage it has because of the spread of Marxism.  Prof. David Osterfeld, in his article "Marxism, Method, and Mercantilism" which appears as Chapter 4 in the anthology "Requiem for Marx" (see here at unz.org) looks at Karl Marx's treatment of capitalism and finds that he does not use a consistent definition for it.  "Marx did not distinguish between mercantilism and capitalism," he concludes.

Economic historian Murray Rothbard explained that mercantilism "was a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state," which reached its height in the Europe of the 1600's and 1700's.  What we have now is a revival of mercantilism, although for this new version it seems we can argue that the focus is international or global rather than the national focus of the old mercantilism.


Osterfeld compares and contrasts mercantilism and capitalism.  "In brief, capitalism is generally defined in terms of free trade and the absence of government intervention.  Mercantilism is defined in terms of highly restricted trade and extensive government regulation of economic activity."  In his comparison of mercantilism and capitalism, Osterfeld reveals precisely how mercantilism harms the general public, both as consumers and workers as well as producing conflict in society.  (I also found this from Osterfeld on mercantilism vs. capitalism in the journal Review of Austrian Economics).  

This profitable video, which includes links within it, is itself just under 15 minutes---"Capitalism In One Lesson."  

For the historical angle, there is this piece by Thomas J. DiLorenzo at mises.org about the political legacy of Alexander Hamilton, one of America's "Founding Fathers," this legacy DiLorenzo refers to as "Hamilton's curse" on America.