Reading some of the comments on this post of mine highlights a sad fact - that pro and anti-capitalists often misunderstand each other. I suspect there are at least five misunderstandings:
1. What is capitalism? Some pro-capitalists, particularly in the US, have a habit of identifying capitalism with markets. Intelligent anti-capitalists find this very irritating. Tim, though, gets it right:
There's rather a large difference between "capitalism" and "free markets"...Capitalism defines a system of ownership, markets a method of exchange.
This matters enormously. Markets are essential in any form of society, and have existed pretty much throughout history. But capitalism, in the sense of outside limited liability ownership of firms from which workers are excluded, is a relatively new thing.
And it's not just Marxists who stress that existing ownership structures are changeable for the better. Douglass North won a Nobel prize for showing how they change in response to economic incentives. And Hayek wrote this:
The institutions of property, as they exist at present, are hardly perfect...There is...no reason to suppose that the particular forms [property] has assumed in the contemporary world are final. Traditional concepts of property rights have in recent times been recognized as a modifiable and very complex bundle whose most effective combinations have not yet been discovered in all areas. (The Fatal Conceit, p35-6)
2. Why have workers in developed countries become so much better off since the industrial revolution? Is it because ownership structures have permitted fast growth? And if so, will they continue to do so? Or is it because markets have become freer and deeper, and that it's markets that contribute most to growth?
Answering this is almost impossible, because we haven't had a free market non-capitalist society to act as a control. But there is some evidence - not proof - that more equal societies can grow faster.
3. When anti-capitalists claim that capitalism impoverishes people, what do they mean? Both sides interpret impoverishment widely - to include well-being and moral development as well as wealth - so this isn't the question.
Instead, intelligent anti-capitalists have in mind John Roemer's theory of exploitation (pdf), discussed in this pdf. This claims that workers would be better off if they could withdraw from the capitalist game, taking with them a per capita share of alienable productive assets.
This claim is not a historical one - so defenders of capitalism are attacking a straw man when they show that workers are better off now than in the past. Instead, it's a counterfactual one, where the counterfactual is a non-capitalist society - say, market socialism or mutualism.
4. Why has this counterfactual never really existed? Anti-capitalists blame, variously: the brute power of capitalism; the cognitive biases that produce an ideology that defends the status quo; the folly and corruption of socialist leaders; or the possibility that technology still favours capitalist ownership.
Pro-capitalists, though, respond to this in the way Will Wilkinson responds to Steven Marglin's desire for meaningful yet inclusive communities; maybe there's another reason why these counterfactuals don't actually exist.
5. What role do such counterfactuals play? It's easy to caricature anti-capitalists as fanatics who want to tear down capitalism and replace with - well, something ill-defined but infeasible.
But perhaps the counterfactual serves a different role. It acts as one pole in a form of reflective equilibrium thinking. In considering aspects of capitalism, we can ask: is there a (theoretical) alternative? And why doesn't it exist? Oscillating our thoughts between capitalism and alternatives can then at least shed light on capitalist organization.
My problem, though, is that many on both the left and right are unable or unwilling to see the debate in these terms. I wonder why.