Reagan on Capitalism

December 12, 2007

Ronald Reagan, April 16, 1979, Radio Address (from Reagan: In His Own Hand p. 228): 

It isn’t unfair to say that today the world is divided between those who believe in the free marketplace and those who believe in government control and ownership of the economy. 

Most of us aren’t really conscious of how recently the capitalist system came into being.

Maybe our trouble is caused by the term capitalist itself.  Actually all systems are capitalist.  It’s just a matter of who owns and controls the capital – ancient king, dictator or private individual (emphasis added). 

The insight in bold has stayed with me ever since I read these words several years ago.  Such clarifying statements are rare. 

I agree with President Reagan that the problem may be the word capitalist itself.  It’s shape doesn’t seem to match the hole that it’s supposed to fit through.  It has a sterile quality that shrouds its true meaning and lends itself to be hijacked by other meanings.

To most people, capitalist is interchangeable with greed, evil or robber baron.  But that’s equivocation*.  To strip it of its negative association and shine the light on the true evil, Reagan equivocates capitalist to its root word capital.

Capitalism is a system where individuals (you and I) owns and controls the capital rather than it being owned and controlled by the goverment or king.  But, capital is anything we can use to derive a benefit.  Capital is roads, machines, factories, tools, buildings, property and so forth.  To that extent, every economic system uses capital.  Even the most primitive tribes in the Amazon have homes, tools, weapons and livestock – all of which are capital. 

In his equivocation, Reagan punches you in the gut with the root difference between economic systems: who controls capital.  Greed and evil exists everywhere.  Capitalism doesn’t enable it any more than any other system.  In fact, it keeps greed and evil in check better than any other system (more on that in future posts).

Reagan’s two sentences left me with the sense that freedom and choice are better associated with capitalism, and I find it puzzling why anybody would be against that.

*Equivocation is another one of those sterile words that is often misunderstood.  To save you a trip to dictionary.com, equivocation is the use of two meanings of a word with the intent to mislead. 

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