What is Capitalism?

Capitalism is a social system based on the principle of individual rights. Politically, it is the system of laissez-faire (freedom). Legally it is a system of objective law (rule of law as opposed to rule of man). Economically, when such freedom is applied to the sphere of production its result is the free-market.

Ten Principles of Capitalism

 

1. Capitalism is the moral ideal

Capitalism is the moral social system as it leaves the individual free to be virtuous — to pursue the good — by acting by reason.

“The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve ‘the common good.’ It is true that capitalism does—if that catch-phrase has any meaning—but this is merely a secondary consequence. The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is: justice.” — AYN RAND

EXPLORE THE ETHICS OF CAPITALISM >

2. Individualism regards the individual (not the collective) as a sovereign being

Individualism is not opposed to one living in society as a trader; it is opposed to one living as a slave.

“Individualism regards man—every man—as an independent, sovereign entity who possesses an inalienable right to his own life, a right derived from his nature as a rational being. Individualism holds that a civilized society, or any form of association, cooperation or peaceful coexistence among men, can be achieved only on the basis of the recognition of individual rights—and that a group, as such, has no rights other than the individual rights of its members.” — AYN RAND

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3. The trader principle is the basis of all moral relationships

Individualism is based on the principle of trading value for value for mutual benefit (as opposed to coercion and compulsion.)

“The principle of trade is the only rational ethical principle for all human relationships, personal and social, private and public, spiritual and material. It is the principle of justice.” — AYN RAND

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4. Freedom is the absence of physical coercion

In a political context, freedom does not mean “freedom” from want, need, and the laws of reality.

“Since knowledge, thinking, and rational action are properties of the individual, since the choice to exercise his rational faculty or not depends on the individual, man’s survival requires that those who think be free of the interference of those who don’t. Since men are neither omniscient nor infallible, they must be free to agree or disagree, to cooperate or to pursue their own independent course, each according to his own rational judgment. Freedom is the fundamental requirement of man’s mind.” — AYN RAND

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5. Individual rights define one’s freedom of action in a social context

All rights are rights to freedom of action: the right to those actions necessary to rationally support one’s life — so long as one does not violate the equal rights of others.

“‘Rights’ are a moral concept—the concept that provides a logical transition from the principles guiding an individual’s actions to the principles guiding his relationship with others—the concept that preserves and protects individual morality in a social context—the link between the moral code of a man and the legal code of a society, between ethics and politics. Individual rights are the means of subordinating society to moral law.” — AYN RAND

EXPLORE THE CONCEPT INDIVIDUAL RIGHTS >

6. The initiation of physical force is the only way to violate rights

The individual can only be stopped from acting rationally by the initiation of physical force (including fraud).

“It is only by means of physical force that one man can deprive another of his life, or enslave him, or rob him, or prevent him from pursuing his own goals, or compel him to act against his own rational judgment. The precondition of a civilized society is the barring of physical force from social relationships—thus establishing the principle that if men wish to deal with one another, they may do so only by means of reason: by discussion, persuasion and voluntary, uncoerced agreement.” — AYN RAND

LEARN WHY THE INITIATION OF PHYSICAL FORCE IS EVIL >

7. Government’s purpose is to protect individual rights

Government’s job is to ban the initiation of physical force from all relationships, making all relationships voluntary.

“The only proper purpose of a government is to protect man’s rights, which means: to protect him from physical violence. A proper government is only a policeman, acting as an agent of man’s self-defense, and, as such, may resort to force only against those who start the use of force.” — AYN RAND

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8. Government actions are regulated so that individual rights can be protected

Capitalism is based on a rule of objective law founded on the principle of individual rights, as opposed to a “rule of men.”

“All laws must be objective (and objectively justifiable): men must know clearly, and in advance of taking an action, what the law forbids them to do (and why), what constitutes a crime and what penalty they will incur if they commit it.” — AYN RAND

EXPLORE THE CONCEPT OF OBJECTIVE LAW >

9. A free-market is an economic system based on individual rights

A free-market bans physical force, fraud, and coercion from all economic relationships, resulting in voluntary cooperation between buyers and sellers (trade), and peaceful competition between buyers and between sellers.

“In a free economy, where no man or group of men can use physical coercion against anyone, economic power can be achieved only by voluntary means: by the voluntary choice and agreement of all those who participate in the process of production and trade. In a free market, all prices, wages, and profits are determined—not by the arbitrary whim of the rich or of the poor, not by anyone’s “greed” or by anyone’s need—but by the law of supply and demand. The mechanism of a free market reflects and sums up all the economic choices and decisions made by all the participants. Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment.” — AYN RAND

AN INTRODUCTION TO THE SCIENCE OF ECONOMICS >

10. Capitalism is the system of progress; statism is the system of plunder

The alleged failures of capitalism are actually caused by the success of statism.

“A statist is a man who believes that some men have the right to force, coerce, enslave, rob, and murder others. To be put into practice, this belief has to be implemented by the political doctrine that the government—the state—has the right to initiate the use of physical force against its citizens. How often force is to be used, against whom, to what extent, for what purpose and for whose benefit, are irrelevant questions. The basic principle and the ultimate results of all statist doctrines are the same: dictatorship and destruction. The rest is only a matter of time.” — AYN RAND

LEARN OF CAPITALISM’S HISTORY OF PROGRESS >

INTELLECTUAL AMMUNITION

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1. Capitalism Tour

Discover the foundations of capitalism by taking the Capitalism Tour.

2. Capitalism FAQ

Intellectually “chew” the ideas brought up in the tour by browsing the Capitalism FAQ.

3. Capitalism Magazine

Capitalism Magazine features commentary on political, economic and cultural issues from a pro-capitalist perspective.

One of the most revolutionary and powerful works on capitalism—and on politics—that has ever been published.”—Barron’s magazine

 

Capitalism: The Unknown Ideal by Ayn Rand

"No politico-economic system in history has ever proved its value so eloquently or has benefited mankind so greatly as capitalism—and none has ever been attacked so savagely, viciously, and blindly. The flood of misinformation, misrepresentation, distortion, and outright falsehood about capitalism is such that the young people of today have no idea (and virtually no way of discovering any idea) of its actual nature."

"...By their silence—by their evasion of the clash between capitalism and altruism—it is capitalism's alleged champions who are responsible for the fact that capitalism is being destroyed without a hearing, without a trial, without any public knowledge of its principles, its nature, its history, or its moral meaning. It is being destroyed in the manner of a nightmare lynching—as if a blind, despair-crazed mob were burning a straw man, not knowing that the grotesquely deformed bundle of straw is hiding the living body of the ideal."

"The method of capitalism's destruction rests on never letting the world discover what it is that is being destroyed—on never allowing it to be identified within the hearing of the young."

"The purpose of this book is to Identify it."

-- AYN RAND (from the Introduction)

Capitalism: The Unknown Ideal by Ayn Rand

Order the book Capitalism: The Unknown Ideal by Ayn Rand

Read or listen to an excerpt: What is Capitalism? (ARI Campus)

Much of the Capitalism FAQ is based on Ayn Rand’s philosophy Objectivism. For Ayn Rand’s views in her own words the reader is recommended to read her works — especially her revolutionary series of essays in Capitalism: The Unknown Ideal. Please feel free to contact us with thoughts, corrections and suggestions.