When I say ‘capitalism,’ I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism — with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.”
— AYN RAND
What is capitalism?
Capitalism (from the Latin word capta, meaning “head”) is a social system based on the recognition of individual rights that unleashes the power of the human mind.
Capitalism is the social system of the Enlightenment, founded on a philosophy based on reason, egoism, and freedom. Central to a proper concept of capitalism is reverence for the power of reason and the human mind. It is this power that allows us to harness the power of the atom for energy, build planes and rocketships to travel the skies and stars, and innovate technology to increase the quantity and improve the quality of our lives.
The term capitalism is used here not just in the narrower economic sense (a free-market), but in the broader political sense (a free society). This is because capitalism is not just an economic system that can be grafted onto any political structure, but is an integrated social system that depends on a specific non-contradictory ethical, political, legal, economic, and cultural foundation.
Capitalism is based on the moral philosophy of rational self-interest (egoism): a code of morality based on what a rational being requires to achieve one’s own happiness living on earth.
Such a moral code is part of a philosophy that in Ayn Rand’s words holds up “the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute.”
Individualism does not mean living a “rugged life” on a desert island or as a “lone wolf” in the wilderness, but like its antithesis, collectivism, specifies the nature of the relationship of the individual to the rest of society.
Where collectivism holds that the life of the individual is only justified in service to the group; individualism regards the individual not as a slave, but as a sovereign being (as an end in oneself and not a means to the ends of others) that owns their own life.
Politically, to rationally pursue one’s own self-interest requires one thing from others: freedom from coercion.
Capitalism regards the individual as a sovereign being with an inalienable right to take the actions necessary to support one’s life, so long as one respects the equal freedom of others to do the same.
Capitalism operates according to objective laws in both form (a republican government with a separation of powers and a written constitution to limit those powers) and function (government’s function is to protect individual rights by banning the initiation of physical force and fraud).
Freedom protected by objective law, applied to the sphere of production, association, and trade, results in a free-market in material — and spiritual — values.
In such a division of labor society, one pursues one’s own self-interest by specializing in the production of goods, ideas, and services for mutually beneficial trade with others.
Peace, Progress & Prosperity
Culturally, this freedom in the economic and personal sphere leads to innovation in the arts, technology, and sciences.
This leads to peace (by banishing force from all relationships leaving voluntary association as the only legal means to deal with others), progress (by unleashing the power of the rational mind, the source of all progress), prosperity (by unleashing the ability to create more wealth with less time, work, and resources).
To learn more about the fundamental nature of capitalism, take the Capitalism Tour.
What is a capitalist?
A capitalist is an advocate of laissez-faire capitalism, regardless of how rich or poor they are.
Within the specialized domain of economics, a person who owns a business is recognized as a capitalist, regardless of whether one advocates capitalism politically or not. As an illustration, factory-owner Friedrich Engels is regarded economically as a capitalist, though politically — as co-author of The Communist Manifesto — Engels is a communist. Similarly, philosopher Ayn Rand is regarded economically as a novelist, though politically, Rand is a self-described “radical for capitalism.”
Friedrich Engels is a communist, and Ayn Rand is a capitalist, not because of their wealth, but because of their ideas.
To find out if you are a capitalist, take the Capitalism Tour.