After the calamitous century between Russia’s October Revolution and Venezuela’s debt default last week, you might think socialism would be dead and buried. You’d be wrong: It’s capitalism that is back on the rack, being tortured and refitted according to the ideologies of its detractors. But be warned, when you modify the word “capitalism,” you are by definition misallocating capital. I call this fill-in-the-blank capitalism.
Bernie Sanders offers a fine place to start. “Do I consider myself,” he asked at an October 2015 rally, “part of the casino capitalist process by which so few have so much and so many have so little?” (Emphasis mine.) Never mind that it was a progressive hero, Barney Frank, who said in 2003 that he wanted to “roll the dice a little bit more in this situation toward subsidized housing”— which helped lead to the financial crisis. Now Mr. Sanders wants to load the dice: Free college for all. Free Medicare for all. Free rations for all?
Al Gore, an ostensible environmentalist who made millions dealing with oil-rich Qatar, is no stranger to ideological modifications. On these pages in 2011, Mr. Gore co-wrote “A Manifesto for Sustainable Capitalism,” which demanded that markets integrate “environmental, social and governance (ESG) metrics throughout the decision-making process.” Yet messing with critical price signals through “ESG metrics” is exactly what would make capitalism unsustainable. See: Frank, Barney.
A 2014 Huffington Post headline declared “Let’s Make Capitalism a Dirty Word.” This was right around the time that “Capital in the Twenty-First Century,” the French economist Thomas Piketty’s now largely discredited book, was published in English. Mr. Piketty called for a tax on dynastic wealth because of “a strong comeback of private capital in the rich countries since 1970, or, to put it another way, the emergence of a new patrimonial capitalism.” Tell that to Mark Zuckerberg and Larry Page, self-made billionaires who weren’t even alive in 1970.
Nobel Prize winner Joseph Stiglitz tried to one-up Mr. Piketty, complaining in a 2014 article for Harper’s magazine about “phony capitalism.” But he offered a remedy! “A well-designed tax system can do more than just raise money—it can be used to improve economic efficiency and reduce inequality.” Messrs. Stiglitz and Piketty and all the modern-day central planners will no doubt gladly make the economic decisions needed to right the ship after they have sunk it.
The conspiracy theorist and occasional filmmaker Oliver Stone was at the July 2016 Comic-Con to promote his film “ Edward Snowden. ” Speaking to the cosplay crowds, he got nervous about the augmented-reality game Pokémon Go. “It’s what some people call surveillance capitalism,” he warned. “You’ll see a new form of, frankly, a robot society, where they will know how you want to behave.” He was borrowing the term from Shoshana Zuboff, a Harvard Business School professor—another strike against getting an M.B.A.
Much of this technocratic tinkering started with the 20th-century economist John Maynard Keynes, who called for government intervention in the economy to end a depression caused by government. He envisioned economists in control, running the economy. In “The General Theory of Employment, Interest and Money” (1936), his inner socialist comes out. “I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment.”
It never ends. In 2012, Britain’s then-Prime Minister David Cameron talked about “socially responsible and genuinely popular capitalism” and blamed Labour for “turbo capitalism.” Whole Foods CEO John Mackey touts “conscious capitalism.” Postdocs in Che T-shirts whine about late capitalism over $6 soy lattes. China practices state-directed capitalism. The jury is still out.
My advice? Drop the modifiers. There is only one type of capitalism that works, and it goes like this: Someone postpones consumption, invests his savings to produce a good or service, delights customers, generates profits, and then consumes and invests what’s left in further production. These profits are pure, generated from price signals between buyers and sellers, without favoritism from experts or elites. It isn’t hard to grasp.
Profit is the ultimate measure of value to consumers—and therefore to society. Consumers benefit from buying stuff, or else they would make it all themselves, and producers benefit from selling, or else business wouldn’t be worth the effort. Of similar value, profits go both ways. “Experts” who poke their noses in only mess with this fine balance. And who needs central planning when there’s the stock market, where theories melt and reality bites? Stock exchanges are the true consiglieres of capitalism, providing capital to ideas deemed worthy of it and starving the rest.
Most of this was once self-evident, but in 2017 capitalism is losing the mind-share game. Where does all this end up? For something scary, skip the next Stephen King clown movie. Instead read up on postcapitalism and progressive mutualism. It sounds like Venezuela.