Was The Us Founded On Capitalism?

Was the US Founded on Capitalism? A friend recently indicated that he thought that the US was founded as a “Capitalist Country”. As nice as it sounds to say this, it is not an accurate statement based on my understanding of history. This statement has some basis in fact, but actually is more of a statement of historical conditions that existed at our country’s founding rather than on political concepts that guided our founders. In their rebellion against the tyranny of Great Britain, and then later, as they wrote a constitution to govern our new nation, they were thinking more along the lines of political liberty and independence, not free enterprise. However, by creating a government with limited powers for the first time in human history, they inadvertently created the conditions under which a free enterprise system could develop, the extent of which had never before been seen. What is capitalism? In my view, “Capitalism” or “free enterprise” is what naturally happens when ever people are free to voluntarily pursue trade and commerce in the absence of government interference. Just as darkness is the absence of light, capitalism is what happens in the absence of coercion, driven by human needs and ingenuity. And, since there are varying levels of coercion in any society, there are varying levels of capitalism. It is not really an “ism” at all, in the sense of being a school of thought or philosophy. It is fundamental to a free human nature. This is true even though there are various schools of thought that argue for or against the virtues of “capitalism” and / or free enterprise. The very meaning of “capitalism” itself is in dispute. (Look it up on Wikipedia and see for your self). Purely free enterprise has never really existed (even in the US) because from the beginning of mankind’s existence there has always been someone who could take goods they did not gather or produce themselves from others by use of force. (IE: dominant ape eats first). Early clans of humans were led by the strongest members until overthrown by younger stronger leaders. This evolved into the idea of chiefs, and then kings and emperors. (I am over simplifying this evolution for the sake of brevity, but this is basically what happened). As tribes discovered agriculture and became civilizations, the government as an institution grew out of this power so as to organize and manage (some would say steal or redistribute) the surplus wealth that grew out of the resulting specialization of labor that defines civilization, and channel it to the powerful elite. The idea that government derives it’s legitimacy from the will of the people and should be limited in its powers is an eighteenth century enlightenment idea, with roots in Greek and Roman democracy. Prior this revelation, the highest concept of government was the “Divine Right of Kings”, reflecting the role of religion as a proponent and arm of the state. The idea of government by the permission of the people, reflected in the concept of government of, for and by the people is a defining concept of the US and is why we are exceptional in this world. The US is the first and only country founded on an idea: that of government of, for and by the people. Elements of free enterprise and modern capitalism could be found in all civilizations of course, but as a concept it was not defined or understood as anything more than ordinary commerce and trade. And it was always subject to the whim of a powerful elite. Prior to industrialization, and at the time of our country’s founding, the primary form of commerce was mercantilism, in which the state protected domestic merchants and industry thru a system of monopolies and protective tariffs. Some free

enterprise certainly existed, due to the fact that commerce and trade between individuals was taxed but otherwise not regulated, but major commercial activity and trade between nations and states was regulated and controlled to varying extent by government laws and actions for the benefit of an elite group. One of the grievances the American colonists had with Great Britain was that Britain did not allow them to freely trade with other countries and powers. The second major grievance was the imposition of taxes on the colonies by parliament with out representation. Thus, while one might argue that the American Revolution had its roots in a rebellion against mercantilism, this was not the case. The colonists simply wanted to be free to pursue their own form of mercantilism that favored Americans instead of the British. (See: Wikipedia: Mercantilism) The modern concept of Capitalism did not even exist in the eighteenth century, when the ideals upon which the US was founded were developed, though the concepts of liberal capitalism had their roots in ideas from that period, in particular from Adam Smith and others. Prior to the nineteenth century, the term merely referred to the ownership of wealth that could be used to produce goods. The initial usage of the term capitalism in its modern sense has been attributed to Louis Blanc in 1850 and Pierre-Joseph Proudhon in 1861. Marx and Engels referred to the capitalistic system (kapitalistisches System) and to the capitalist mode of production (kapitalistische Produktionsform) in Das Kapital (1867). The use of the word "capitalism" in reference to an economic system appears twice in Volume I of Das Kapital, p. 124 (German edition), and in Theories of Surplus Value, tome II, p. 493 (German edition). Marx did not extensively use the term. Thus, it would appear that term “capitalism” is a concept used to distinguish the new industrial economic conditions that originated in nineteenth century England. Karl Polanyi argued that capitalism did not emerge until the progressive commoditization of land, money, and labor culminating in the establishment of a generalized labor market in Britain in the 1830s. For Polanyi, "the extension of the market to the elements of industry - land, labor and money - was the inevitable consequence of the introduction of the factory system in a commercial society." See Wikipedia: Capitalism The original 13 states all had laws on the books that regulated commerce, a form of mercantilism. Freedom was understood as the right to live free of coercion and intimidation. It was unbridled mercantilism and tariffs between states that led to the constitutional convention that wrote the U.S. Constitution. By stating in its preamble that one purpose of the union was to promote the general welfare, and by providing Congress with the power to regulate interstate commerce, the new constitution recognized that the regulation of commerce was necessary to preserve the commonwealth, protect the interests of the people and to provide a means for the enforcement of contracts (rule of law). The first ten amendments to the constitution were added in order to protect the natural human rights that defined freedom and had motivated much of the American Revolution. There intent was to limit the power of the new government to infringe on these freedoms. Since it was the norm, government regulation of commerce was considered normal, but free commerce flourished because the conflicts and perceived inequities that grew out of the industrial revolution and increasing urbanization had not yet developed. This was a result of the natural condition of a relatively un-coerced people, not by design or plan. As the US developed and became an industrialized country, achieving a higher standard of living than Europe by the end of the nineteenth century, conflicts between urban and rural interests and between labor and management, together will abuses by some industries and businesses led to calls for more and more regulation of the economy in the stated, if not real interest of promoting the common welfare. The interstate commerce clause was used to justify this expanding intervention, and the courts have upheld this expansion as constitutional,

(rightly or wrongly). Thus, the US has always had a mixed economy and the battle continues. Throughout our history, people have argued for and against this expansion, and unfortunately, the trend has always been toward more intervention, briefly interrupted by President Reagan and his administration. This is because our congressman can get away with demanding protection money (campaign contributions) from their constituents to promote legislation in favor of one group over another. Ina sense, we are moving back toward a type of mercantilism. So, in my opinion, it is not really correct to say the US was founded as a “Capitalist Nation”. The free enterprise system that we have enjoyed due to a historical low level of government interference in our affairs is not inherent in our constitution. This is because it was not fully understood as fundamental to political freedom at the time of our founding. Only after the development of a modern industrial economy and its enemy, collectivism, has this mistake become better known, yet still disputed by the collectivists. Had the founding fathers anticipated the enormous expansion of government regulation into the private sector that has happened over the course of our history, at the insistence of the people themselves, perhaps there would have been an economic version of the First Amendment. I imagine it would be something like this: Congress shall make no law respecting any establishment of commerce, or interfering with the free exercise thereof.

Maybe it is time to push for such an amendment. What a revolution that would be! This is my two cents. What's yours?