ActivismEconomyGovernmentMilitarySocial IssuesUS PoliticsWorld Politics

Capitalism vs. Free Enterprise - Are They Different And Why Does It Matter?

Updated on October 27, 2016
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. | Source

Business as Usual

The 2016 US Presidential election cycle has been brutally wearying. What started out with a spark of hope has degenerated into politics as usual, an all too typical situation in which American voters are faced with the issue of choosing between the lesser of two evils, a choice between candidates we think will do less damage, rather than the most good. Just yesterday my father scolded me when I told him I probably will 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 are ostensibly in accord, what I have observed about this election is that deep seated economic issues have been largely avoided. No one is talking about the big picture of the American economic structure. Instead, they quibble about fringe details, like two physicians arguing over how to treat symptoms because they don'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. | Source

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 hard core 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 Nicolas 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 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. | Source

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)."

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. | Source

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? | Source

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 have 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. | Source

Are You Down with Capitalism?

Is capitalism a fair, equitable, and ultimately successful economic system that guarantees prosperity for all?

See results

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.

Comments

    0 of 8192 characters used
    Post Comment

    • Jodah profile image

      John Hansen 8 months ago from Queensland Australia

      What a wonderful piece of writing here, Mel. What you say is true for many countries, not just the USA. I agree with every word and I hope thousands read this (meaning I hope you have a much bigger audience than me outside HubPages.) great work.

    • Duane Townsend profile image

      Duane Townsend 8 months ago from Detroit

      Well done Mel...we disagree on some things here, but not enough to make a fuss about.

      This was a good read.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Thank you Duane, I am glad you enjoyed it and we could find some common ground.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Thank you Jodah. Although this article might get views in the hundreds, I doubt it will approach even a thousand, but even one mind alerted to the kind of insidious practices I am talking about here is a victory. I appreciate you dropping in.

    • billybuc profile image

      Bill Holland 8 months ago from Olympia, WA

      Right to the heart of the matter. What I want, Mel, is a level playing field when it comes to making money, for the big and the small alike. Like that will ever happen!!!!

    • profile image

      Old Poolman 8 months ago

      Well done Mel, as always. You opened a can of "Controversy" that should keep this going for a long time with comments both for and against.

      I was particularly interested in your comments regarding Labor Unions. The question I have is did the people destroy the Labor Unions or did the Unions destroy themselves? There was a time when Labor Unions were absolutely essential for the good of the workers. But with growth, their demands, and some of their rules, became impossible for many business's to meet and still stay in business. These added costs had to be passed on to the consumer for the business to survive the demands of the Unions so we all paid more for products.

      When Unions had really good apprenticeship programs, it was a blessing for many business operations such as construction companies. When they needed an experienced electrician, plumber, carpenter, or others, all they had to do was call the Union Hall and get them. When that phase of the construction was completed they just told the worker to go back to the hall. It really was a win/win for all concerned.

      It was when Unions branched out into representing relatively unskilled labor such as retail clerks, restaurant workers, etc., that things started going awry.

      But that was not the message you were delivering in this hub so I am getting way of topic. For that I apologize sir.

    • Ericdierker profile image

      Eric Dierker 8 months ago from Spring Valley, CA. U.S.A.

      Are you kidding Lupita's is one of my faves.

      I have spent a lot of time in Vietnam country. Since about '99. My friends look at me crossways when I tell them we won the war there. The Vietnamese are some of the fiercest capitalists I have ever met. It just is peculiar that nowadays we think wars are still won and lost on battlefields.

      Truth is they are won or lost on the change a man spends locally.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      It will never be level Bill but we can try to minimize the tilt. Thanks for reading!

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      All comments are welcome here, Mike, no need to apologize.

      Your point is well taken. My son belongs to a union that basically skims money off his check, and for five years he basically made minimum wage after the union took its cut. Those unions exist to serve themselves. My union, on the other hand, gets me a living wage.

      Part of the decline of unionism in America now is that as soon as workers unionize, the government allows their jobs to be shipped off to some banana republic for a dollar an hour. It's not like the businesses were not profitable with union workers, it's that the stockholders expect obscene profits.

      Thanks for dropping in, buddy. Comment on any topic you like, baseball, whatever. It's all good.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      I would much rather dine at Lupita's, Eric. I was up until four in the morning the other night trying to get the Taco Bell dollar menu out of my system. Whatever that s*** I mean stuff is, it ain't real food! But it sure do look good on TV.

      Funny how we're BFFs with the Vietnamese now. The almighty dollar goes a long way toward mending fences. I appreciate the Sprung Valley weighing in with a great comment.

    • Venkatachari M profile image

      Venkatachari M 8 months ago from Hyderabad, India

      Wow! Very much intellectual article. You are both emotional and logical in presenting your points. I agree fully with you. Even though the capitalist economy is treated as a free economy, it does not mean that it is entirely regulated by supply and demand interactions. There is always the force of monopoly which dictates the market conditions and forces the common man to bear the brunt of heavy prices that suck their blood. The political parties enjoy huge donations from these capitalists and so always favor them when they get elected and run the governments.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Very well said Venkatachari. Our economy is not free enterprise, as we would like to call it, but although we blame the socialist elements on the left for this, the threat is really coming from the capitalists on the right. Thanks for dropping by.

    • Larry Rankin profile image

      Larry Rankin 8 months ago from Oklahoma

      The playing field will never be level. When you start with a lot, you have a better chance to succeed. When you start with little, you have almost no chance to succeed.

      I don't mind some folks having an easier path than others, but those starting out should get the help and not the other way around.

      Great read Mel!

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      In order to get government assistance in this country Larry you have to be a billionaire to begin with. If you are a billionaire NFL owner the government will gladly subsidize your new stadium. If you are a billionaire oil company executive the government will gladly invade Iraq for you. But forget it if you are some poor slob asking for food stamps. That is anti-American. Thanks for reading, buddy.

    • Dana Tate profile image

      Dana Tate 8 months ago from LOS ANGELES

      I was all set to vote for Hillary and then my uncle came over and chastised me for it. In His opinion Trump, is the man for the job. He likes what Trump has to say about forcing illegal immigrants to become legal, bringing jobs back, but I have heard all that before and the immigrants are still here and jobs are leaving and not coming back. His opinion of Hillary, or Democrats in general is that they enable the poor and he likes the Republican way of thinking, which is, to teach people to fend for themselves and not depend on a shrinking government. It sounds good, unfortunately, I've heard that before too. He kindly suggested that if I won't vote for Trump, Don't Vote at all! Unlike your wise father who at least told you to exercise your right, after all its the American Way. The problem with all this Mel, is that I still have no idea who to vote for Devil number 1. Or, Devil number 2

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Dana, we should do our voting like that old Monty Hall show Let's Make a Deal. We'll put one devil behind door #1 and the second devil behind door #2, and you just randomly pick a door without knowing which devil is behind it. Or maybe I'll just flip a coin on election day. Thanks for dropping in!

    • Larry Rankin profile image

      Larry Rankin 8 months ago from Oklahoma

      That's what I was saying, lol.

      Like this thing with the pipeline protests in Dakota. The government isn't coming in to offer unbiased supervision. It's a hired militia to taze, punch, kick, and pepper spray the people who don't matter to appease the wealthy few that do.

      Regardless of whether the pipeline should be there or not, the majority say no and the wealthy white majority says yes. Democracy fails! Eve if you say Democracy isn't about right and wrong, it still fails!!!

    • Larry Rankin profile image

      Larry Rankin 8 months ago from Oklahoma

      Btw, I think the Dakota pipeline is wrong. Just wanted to point out that right and wrong doesn't factor into things. Only money and the side it is on matters.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Larry, I just heard a report on the pipeline on my way home. If NPR is finally reporting it, you know some hijinx is going on that can't be ignored. They have shut down access to reporters now, what does that mean? Meanwhile, meanwhile, Obama magnanimously ignores the crisis so he can give pro-Hilary stump speeches. Once again Native Americans get forced off their land. Nothing's changed.

    • BlossomSB profile image

      Bronwen Scott-Branagan 8 months ago from Victoria, Australia

      In the 'old days' unions were desperately necessary to help workers, but for a while now, it has seemed just the opposite. Great information and good write.

    • Blond Logic profile image

      Mary Wickison 8 months ago from Brazil

      Having lived abroad most of my adult life, I see the US differently. When I lived there I bought in to all the dogma that if you worked hard you'd thrive.

      With this election, the pipeline and the suffering so many Americans are experiencing I think it is a wake up call for them. The US is a broken society.

      When I tell people here in Brazil that there are people on the streets in the US with signs saying, "Will work for food", they are amazed. They think all Americans and Europeans are rich.

      The Reagan/Thatcher era where it was claimed, "Everything works out through capitalism" is flawed.

      This was a very interesting and thought provoking read, well done.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Blossom, I think they are more necessary now than ever, because wages have really eroded in this country, even as the economy supposedly "rebounds." Another factor with Union decline is that there are no unionized factory jobs any more, they have all been outsourced to foreign shores. This trend must be reversed, and hopefully whichever candidate wins will live up to the platform to put an end to free trade agreements. I actually trust Trump more than Hilary on that one, but won't vote for either. Thanks for reading.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Thank you Blond Logic, very nice to hear from you. Maybe comparatively speaking we are better off than other countries, but we are rapidly descending into third world status and something has to be done.

      I too grew up in the Reagan/Thatcher era, when Ronald Reagan's gentle smile sort of hypnotized into really believing that the bounty of capitalism would trickle down to us all. It has taken a while, but I think that thirty years after Reagan we are experiencing the repercussions of the ideological trends that he popularized. We can't just blame the Republicans either. Bill Clinton and Barack Obama's economic policies pretty much echoed their Republican counterparts.

      Thanks for reading!

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Thank you Blond Logic, very nice to hear from you. Maybe comparatively speaking we are better off than other countries, but we are rapidly descending into third world status and something has to be done.

      I too grew up in the Reagan/Thatcher era, when Ronald Reagan's gentle smile sort of hypnotized into really believing that the bounty of capitalism would trickle down to us all. It has taken a while, but I think that thirty years after Reagan we are experiencing the repercussions of the ideological trends that he popularized. We can't just blame the Republicans either. Bill Clinton and Barack Obama's economic policies pretty much echoed their Republican counterparts.

      Thanks for reading!

    • profile image

      suzettenaples 8 months ago

      A very interesting and insightful article. I did not know the difference between capitalism and the free market concept. Your explanation is a good one and easy to understand.

    • profile image

      Pat Mills 8 months ago from East Chicago, Indiana

      I can hardly wait for the election campaign to be done myself. This is one between the lesser of two evils. I don't think the corporations who do so well and get their way with politicians will ever be satisfied with the profits they make - it's always about making more. The minimum wage would be much higher if wage earners got the same sort of increases the bosses gave themselves. Both major parties share the blame, as they align themselves with people who can help them and their closest friends. My city's former mayor, who died this week, misspent hundreds of millions, but only had hundreds of thousands to repay. Free enterprise needs regulation, instead of CEOs arrogantly defending the huge salaries they make, and I could never earn in an eternity. The middle class is vital, and needs a true champion, but I doubt any politician will ever make the playing field level for all Americans.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Thank you Suzette. The concept of capitalism, as promoted by our leaders, attempts to be wolf in sheep's clothing, so it is important to understand the differences. Thanks for reading.

    • Mel Carriere profile image
      Author

      Mel Carriere 8 months ago from San Diego California

      Well said, Mills, sad but true. I forgot the part about how corporate board members who vote themselves enormous golden parachutes are the same ones who protest any microscopic minimum wage hike. I appreciate your very astute comment.

    • lawrence01 profile image

      Lawrence Hebb 7 months ago from Hamilton, New Zealand

      Mel

      Some politicians are paying attention. Over in my home country Theresa May has 'big business' gunning for her because she's told them that they haven't been 'looking after the little guy' and that has to change!

      A 'level playing field' would be nice, we can hope!

      Lawrence

      By the way, I just looked through the comments, Thatcher believed in the Free market but not necessarily capitalism as you put it here.

    • Mel Carriere profile image
      Author

      Mel Carriere 7 months ago from San Diego California

      That's interesting Lawrence, because Thatcher is always vilified by the left. But then again, there aren't a lot of open minds over there.

      I'll have to look up Theresa May. She sounds intriguing. I guess my Yankee arrogance keeps me out of the loop of Kiwi politics. Thanks for reading, my friend.

    • lawrence01 profile image

      Lawrence Hebb 7 months ago from Hamilton, New Zealand

      Mel

      Thatcher is vilified, she was when in power, but she was a 'shopkeepers' daughter who never forgot her roots. I heard one of her aides recently said she never did a thing because of 'political expediency' she did them because she thought them right!

      May is the new British Prime minister. Thatcher opened the door to 'Globalism' but she was more interested in motivating the average person in the street to 'reach for the stars '

      Blessings

      Lawrence

    Click to Rate This Article