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Capitalism vs. Free Enterprise: Are They Different and Why Does It Matter?

Although many are mystified by his mysterious moniker, Mel Carriere is a San Diego mailman who writes about the mail, among other things.

Adam Smith's "The Wealth of Nations" has been misquoted more than the Bible in a disingenuous effort to promote the principles of capitalism.

Adam Smith's "The Wealth of Nations" has been misquoted more than the Bible in a disingenuous effort to promote the principles of capitalism.

Business as Usual

The 2016 US presidential election cycle was brutally wearying. What started out with a spark of hope degenerated into politics as usual, an all too typical situation in which American voters were faced with the issue of choosing between the lesser of two evils—a choice between candidates we think will do the least damage, rather than the most good. My father scolded me when I told him I would probably stay home on election day. "Why should I vote?" I asked him, "when I really don't like either one of them?" He really couldn't give me an answer, other than the old, tired, yaddah yaddah yaddah of you have to exercise your rights that Americans are force-fed like castor oil from a young age.

Other than free trade agreements, certainly a passionate topic for me and also one in which both candidates were ostensibly in accord, what I observed about the 2016 election is that deep-seated economic issues were largely avoided. No one talked about the big picture of the American economic structure. Instead, they quibbled about fringe details, like two physicians arguing over how to treat symptoms because they didn't understand the root cause of the illness.

I conclude that this fundamental flaw in our economic system, the washed-out bridge that threatens to derail the gains in prosperity made by the middle class over the last century, boils down to the definition of free enterprise vs. capitalism. Americans have been cleverly duped to believe the two terms mean the same thing. Because of this, we have been willing to surrender our economic rights to villains in suits that don't care if this country degenerates into third-world status, as long as their silk pockets are lined.

Maybe communism seemed like a good idea at the time, but it has resulted in untold human misery.

Maybe communism seemed like a good idea at the time, but it has resulted in untold human misery.

If You Go Carrying Pictures of Chairman Mao . . .

This is not a plea to turn America into a so-called socialist workers paradise. History should teach us that these pie in the sky utopias didn't quite work out in the Soviet Union, Eastern Europe, Cuba, and North Korea, and communism has only appeared to succeed in China and Vietnam because the ruling parties there have pretty much compromised their hardcore socialist ideals and permitted free enterprise.

If modern-day Marxists are not disillusioned by the historical outcome of those failed economies, one need only look at the present-day situation in Venezuela to see how radical socialism is misbehaving. From the 1950s until the 1980s, Venezuelans enjoyed the highest standard of living in Latin America, a prosperity admittedly propped up by high oil prices, a commodity of which the country is a major exporter.

Under Hugo Chavez's successor Nicolás Maduro, however, the economy has reached crisis level, unable to feed itself and burdened by inflation approaching triple digits. Maduro loves to blame the "fascists" in the west for Venezuela topping the global "misery" index, but even though economic isolation might play a role in the country's woes, this Latin America dictator should also point the finger at the man in the mirror, because his property expropriations and overall mismanagement have led to widespread capital flight.

Reagan certainly seemed like a swell guy, but the stuff that trickled down from him ain't drinkable.

Reagan certainly seemed like a swell guy, but the stuff that trickled down from him ain't drinkable.

Terms and Conditions

In other words, while Venezuela may have been victimized by global capitalism, it doesn't mean free enterprise is to blame. I knew a church deacon who once preached that you shouldn't throw the baby out with the bath water, and this is exactly what the Venezuelan government has done by declaring war on private property.

This finally leads us to our central issue, being the difference between free enterprise and capitalism, and how understanding this difference is essential to the long term prosperity of the US economy.

The concept of Free Enterprise essentially entails a free market, one in which private individuals have their property protected and have a right to the economic benefits produced by their mind and labor. Free enterprise implies a level economic playing field in which all players enjoy equal rights and privileges.

In contrast, the term capitalism denotes a system in which a wealthy investor class is shown favoritism by the government, often at the expense of other classes. The economic playing field here lists dangerously, like the deck of the Titanic. In the current form of American capitalism, stockholders of major corporations are the driving consideration in economic decisions, often to the detriment of small businesses and working people.

To a large extent, capitalism functions outside the principles of free enterprise altogether. Whereas the success of free enterprise depends upon the forces of supply and demand operating in an open market that is unobstructed by government intervention, the beneficiaries of a capitalist system thrive upon government patronage in the form of:

. . . limited liability laws, subsidies, government contracts, loans, guarantees, bailouts, purchases of goods, price controls, regulatory privilege, grants of monopolies, protectionist tariffs and trade policies, bankruptcy laws, military intervention to gain access to international markets and protect foreign investments, regulating or prohibiting organized labor activity, eminent domain, discriminatory taxation, ignoring corporate crimes and countless other forms of state-imposed favors and privileges.

—(Keith Preston, attackthesystem.com)

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Ayn Rand is often quoted by advocates of capitalism, but even she was not a big fan of corporations.

Ayn Rand is often quoted by advocates of capitalism, but even she was not a big fan of corporations.

Free Enterprise Hijacked

Although pure Free Enterprise has never existed in this country or elsewhere, and I am certainly not advocating the libertarian ideal of an open market completely unimpeded by wealth redistribution, taxation, or government intervention, even our watered down open market has led to comparative economic success in America. This relative prosperity, however, is now under threat as free enterprise has become subverted and absorbed by the concept of capitalism. The writings of laissez-faire philosophers like Ayn Rand, together with the rantings of corporate-sponsored talk show hosts, have hijacked our minds into believing that what is good for the capitalist investor class is good for everybody. Beginning with the presidency of Ronald Reagan, the capitalist-fueled "trickle-down" concept has become a bogus religious principle, brainwashing the sheep into believing that corporate success will flow downstream to everyone.

Instead, what we are left with is an economic system that caters to deep-pocketed investors, and leaves workers and small business people marginalized. Investing in corporate stock in and of itself is nt an economic evil, but the growth of the Internet and the advent of day-trading has created a market in which a quick buck is favored over steady, long term profitability. In fact, mere profitability is no longer good enough. Corporate CEOs, evaluated on the "what have you done for me lately" principle, are sent packing if profits do not exceed last year's, or even last quarter's. This obsessive greed for immediate returns results in layoffs, store closures, and relocation of factories and facilities to foreign countries, all at the expense of the American worker.

And what about Mom and Pop running the corner store on Main Street, USA? How are they to compete with the economies of scale brought about by rapid-fire, megabillion dollar corporate mergers that always receive rubber-stamp approval from federal agencies that were created to promote competition, not eliminate it? The privately owned convenience store has been bulldozed by the 7-11s, Lupita's tiny taco shop cannot keep pace with the quick and cheap dollar menu across the street at Taco Bell, and Ma and Pa's drugstore, if such a quaint entity still exists, can't go mano a mano with the insatiable beast about to be created by the Walgreens/Rite Aid merger.

Rush makes a lot of noise in defense of capitalism, but is that really the way things ought to be, and should we light candles?

Rush makes a lot of noise in defense of capitalism, but is that really the way things ought to be, and should we light candles?

The Way Things Ought to Be, Really?

Although free market ideals deem it good and proper to negotiate the price of means of production such as factories, machinery, and natural resources, the philosophical domination of capitalism has created an atmosphere where it is considered heresy allow the major means of production, this being labor, to negotiate its own price, in the form of wages. The meek acceptance of working people that we shouldn't be treated in the same manner as a lump of coal or a gallon of fuel oil, has caused Union membership in this country to plummet from one third of all workers in 1964, to one tenth today.

A truly free market permits workers to negotiate their own wage rate, and the only successful method to do so is through the power of Union collective bargaining. Yet the insidious, cancerous growth of the philosophy of capitalism at the expense of free enterprise has resulted in a situation where a large portion of the working class has come to view Unions as corrupt and evil. Does Union leadership sometimes engage in corrupt and evil practices—most certainly. People in powerful positions everywhere, including corporate boards and legislatures, are subject to the temptations of corruption.

Remember, however, that Union members literally fought and died in so that working people could enjoy a higher standard of living, and not accepting this is the biggest mass delusion since Hitler hypnotized Germany. Once again, as that wise deacon said, we shouldn't throw the baby out with the bathwater. Just because there have been incidents of corruption in a certain institution doesn't mean that we should do away with the institution altogether, especially since Unions have benefited every working person in this country, Union members and otherwise.

What is the unfortunate outcome for workers that have freely and eagerly swallowed the capitalist Kool-Aid by allowing Unions to be trampled underfoot? Between 1972 and 2012, real, inflation adjusted wages in this country plummeted by 14% (Kenneth Thomas, Business Insider, 2013), and continue to plunge as the swelling amoeba of capitalism swallows up the withered, desiccated shell of free enterprise.

Howard Zinn takes his anti-American sentiments to wearying extremes, but his anti-corporate message rings true.

Howard Zinn takes his anti-American sentiments to wearying extremes, but his anti-corporate message rings true.

Joined at the Hip, or Separated at Birth?

I am a writer struggling to scrape up a few shekels blogging on the Internet, and this makes me a passionate, devoted advocate of free enterprise. Let's not be hypocrites about it—every human being inhabiting this planet is dedicated to the proposition that they should be paid for what they do. Even the loudest, most dogmatic leftist blogger among us will happily deposit that Google Adsense payment into the bank account when it rolls in. Writers are businessmen whether they like it or not, and I don't see too many of them redistributing their earnings among the poor.

Is this a bad thing—absolutely not! A man or a woman has to make a living, after all. Therefore, we live our lives according to the dictates of the free market, going about our business with the idea that we will trade the product of our hands and intellects for a fair return. This is free enterprise in a nutshell, and every American participates in it enthusiastically, from the eight year old with a lemonade stand to the 80-year-old grandmother knitting quilts for sale.

Capitalism, on the other hand, more often than not operates contrary to this principle of fair play. The fat cat capitalists use economic clout to subvert local and foreign governments. They pay off politicians to promote wars in distant lands that kill our children. They manipulate the bought and paid for media to be the propaganda machine for principles that are contrary to our health and prosperity.

So don't stir the two powders, capitalism and free enterprise, into your morning coffee together. The resulting mixture may taste sweet, but it is ultimately deadly.

Are You Down With Capitalism?

This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.

Questions & Answers

Question: Are there instances where individuals do ask or negotiate for higher pay?

Answer: Most government positions, including my own, employ collective bargaining. Most government workers are paid on a set scale, based on seniority.

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