The best definition of capitalism is given by philosopher Ayn Rand:
“Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned. The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.”
Rand’s description highlights the key aspects of capitalism on several different levels.
Ethically, the moral base of capitalism is the principle that the individual has an inalienable right to their life, i.e., as a sovereign being.
Politically, capitalism is a social system based on the principle of individual rights, i.e., freedom (from the initiation of physical force). It is to banish the initiation of physical force (and its corollary fraud) from all relationships that governments are instituted.
Objective control highlights the essential characteristic of capitalism’s legal system. Legally, capitalism is a legal system of objectively defined laws based on individual rights, i.e., the rule of law (legislation) as opposed to the “rule of man” (regulation). Under such a legal system one is free to act so long as one does not violate the rights of others, i.e., the government is not a regulator (dictator) but a referee.
Economically, when such freedom under a “rule of law” is applied to the sphere of production and trade, its result is the free-market. Under capitalism, there is a separation of economics and state, just like there is a separation of religion and state. A free-market is entirely dependent on a specific ethical, political, and legal foundation; without that foundation, it is only free in name.
The goal of this site is to elaborate on the nature of this foundation and then to answer the errors behind the popular arguments against capitalism. When one does examine them one will find that the source of the error is the influence of one’s philosophy.