Origins of the Word 'Capitalism'

Free Capitalist (13 January) HERE carries this post:

“What is the history of the term ‘Capitalism’?”

“The use of the term ‘Capitalism’ has a long history. Adam Smith, often referred to as the ‘father of capitalism’ was the first modern proponent of a comprehensive philosophy defending the entire package of basic principles related to individual liberty as an indispensable ingredient to a moral, prosperous, and free society. Smith, a Scottish moral philosopher published his Magnum Opus, “An Inquiry into the Nature and Causes of the Wealth of Nations” in 1776 about the same time the American Founders were declaring their independence from England.

The late eighteenth century is when the ‘philosophy of freedom’ took root for the first time in modern history. The American founders were heavily influenced both directly and indirectly generations of ancient philosophers and very powerfully by their proximate European intellectual predecessors such as Adam Smith, John Locke.

The core of their movement, the American Revolution, and the subsequent, rapid spread of freedom movements across the globe, was fueled by several basic principles be made popular by social, political and religious leaders who had come to a renewed or ‘enlightened’ view concerning the nature of individual man. These new views affected all spheres of human relations and were not restricted by politics, religious, or economic considerations alone.

Politically, the Founders referred to the ideas as ‘Republicanism.’ But, republics were not new on the world stage. What was new about the political achievement of the Founders was that for the first time in modern history it was advocated from a new, moral foundation-made possible by the post-enlightenment view that “all men” were “equal by nature” and that no man or group of men was “rightly entitled” to special moral privilege or consideration. Or, in other words, the longstanding tradition of cultural tyranny across the globe was challenged by a new view of individual man as the measure of all moral social interaction.

No man was required, according to this new view, to live primarily for another-as his slave, servant, serf or subject-being unjustly deprived of life, liberty or property by any other man or group of men claiming some supposed moral authority. This basic worldview was not restricted to use or meaning in the political discussions of the time but affected all elements of man’s relationships with other men and during the period of the American Revolution was often referred to simply as Americanism. The term, however, most consistently, effectively, and regularly used to define the entire body of thought related to this worldview, would later be coined as ‘capitalism.’

In modern society the term ‘Capitalism’ is used imprecisely and inaccurately. Many scholars suggest that the term ‘Capitalism’ and its related term ‘Capitalist,’ was first derived in the English vernacular from a translation of the pejorative term used by Karl Marx in the mid to late nineteenth century to describe the class of men he called the elite “bourgeois” society who owned and controlled “society’s capital resources.”

To students of the Founders, the philosophy of capitalism is the only moral system that guarantees to man his individual liberty, and therefore the only valid political, economic, and social standard for pursing prosperity and peace.”

Comment
I approached this article with a degree of optimism, unfortunately not justified by its content. It gives a distorted and in places inaccurate view of events, most particularly those associated with the origins of the word, capitalism and, to an extent, some characteristics of the foundation and first century of the American republic.

The word ‘Capitalism’ and its related term ‘Capitalist,’ were not “first derived in the English vernacular from a translation of the pejorative term used by Karl Marx” (though he certainly used them pejoratively in his writings).

‘Capitalism’ was a word and a phenomenon neither used by, nor known to, Adam Smith. Capitalism was a wholly late 19th-century experience. The Oxford English Dictionary (Vol II, p 863) locates its first usage in English in 1854 by William Makepeace Thackeray in his novel, The Newcomes.

Karl Marx published, in German, Das Kapital, in 1867 and subsequent translations introduced the word ‘capitalism’ to his readers some years later (Moscow's 'Marxist' editors during the Soviet era ‘interpolated’ the new word of capitalism into his works as if Marx himself had written it).

While Marx may have read Thackeray, it is unlikely that Thackeray read Marx in time to include the word, capitalism, thirteen years earlier in his novel.

Of the word ‘capitalist’, this was first used in English in 1792, by Arthur Young (Travels in France) and it was used by Turgot (in French) in his ‘Reflections on the Formation and the Distribution of Riches’ LXIII-IV, 1770.

If Adam Smith is ‘known’ as the ‘father of capitalism’, it is 20th-century accolade of which he knew nothing, nor, to be accurate, deserved. This is an example of projecting modern notions onto the past.

Technically “the American Founders were declaring their independence” from Britain, not England. Since the 1707 Act of Union between Scotland and ‘England and Wales’, the political entity of ‘England’ had ceased to exist and, as Scotland and England were already a single kingdom from the ascension of King James VI of Scotland to the English throne (he became King James I of the united kingdom) in 1604, which established the political entity of the ‘United Kingdom of Great Britain’.

I am loath to tread on the toes of sensitive patriots, but I think these sentences should be recast:

“What was new about the political achievement of the Founders was that for the first time in modern history it was advocated from a new, moral foundation-made possible by the post-enlightenment view that “all men” were “equal by nature” and that no man or group of men was “rightly entitled” to special moral privilege or consideration.”

and

“No man was required, according to this new view, to live primarily for another-as his slave, servant, serf or subject-being unjustly deprived of life, liberty or property by any other man or group of men claiming some supposed moral authority.”

If these statements are correct (I don’t think they are) there were some glaring deficiencies in their application in the new republic, which deficiencies lasted upt to the 'war between the states', and effectively operated in great measure up to the 1960s. I trust I do not need to elaborate…

Finally, Adam Smith did not write about ‘capitalism’ because it did not yet exist. The Wealth Of Nations is not an economics textbook.

It is a critique of the political economy of UK State power and its close relationships, through legislators and those who influenced them, with the new ‘order, of ‘merchants and manufacturers’, whose policies severely compromised the possibilities of the ‘commercial society’, which Smith wrote eloquently about.

Primarily this arose from their proclivity for state-sponsored monopolies, legal local monopolies in the Guilds, international monopolies from their Royal Charters (including in the British colonies of North America), in their chartered trading companies (of which the East India Company was the prime, and most disgraceful, example), their prejudiced policies arising from ‘jealousy of trade’, wars for trivial ends and domestic legislation, such as the Statute of Apprentices, the Settlement Acts, and one-sided laws against ‘combinations’.

If Adam Smith’s Wealth Of Nations was his magnum opus I am particularly impressed with his Moral Sentiments), it is one that is appreciated from its modern reputation and not from reading it in context.

And while I may sympathise broadly with the idea of a ‘free capitalism’, as opposed the state-capitalism and Big Government, I think the Free Capitalist Blog has some ways to go before it tops my daily reading list.

Adam Smith Influenced Post-1783 US Land Law reform

David Brin, ‘scientist and bestselling author’, writes the Contrary Brin Blog, HERE: and on 29 December he posted:

“Truth & Reconciliation Addendum: How radical might it all get?”

“Time for a historical factoid. At around the time of the 1775 uprising that sparked the American Revolution, vast sections (up to half) of the colonies of Georgia, New York, Pennsylvania, and Maryland were owned by individual families under charters granted by the British crown. The great landlords were mostly royal cronies - personal friends of the king - who never even visited their vast new fiefs. (Such cronyism was cited by Adam Smith as the great destroyer of free markets, rather than socialism, which he considered a much less worrisme threat.)

How did that earlier generation of Founders solve the problem? Certainly seizure of some Tory assets had a great deal to do with the breakup of those grossly unfair, unearned estates -- and such things might happen again, if the People must rise up against a new feudalism. Still, mass confiscation is a bludgeon, at-best unreliable. Often, it only leads to a new class of meddling masters, even worse than those who came before.

Fortunately the main rebalancing technique that was used, just after the revolution was far gentler and less socialistic. Across the 1780s and 1790s, many states passed laws against “primogeniture"... the automatic inheritance of all real property and titles by the eldest son.

That was it. Simple. But it sufficed.

Recall that primogeniture had been a strong tradition, that let aristocratic wealth and power remain concentrated in a few families. Hence, for a generation, American society (through consensus political action) stepped in to severely limit a landowner's right to decide which of his children would receive what. Instead, for a while, the law demanded equal distribution among all offspring.”

Comment
David Brin’s ‘factoid’, er, isn’t.

Adam Smith wrote about the political economy of colonies in Wealth Of Nations (WN IV.vii.b), which David Brin may wish to read to correct the false impression that it was the genius of the first generation of the Revolution to have discovered the means by which the newly independent colonies altered the economic history of the new states. It was certainly their political savvy which made the difference between the former British colonies and their South American counterparts, and became increasingly obvious within a few generations.

The Revolution’s leaders and many of their luminaries, right across the political structure of the new state, became familiar with Wealth Of Nations, for many years imported from Britain before an American edition was published (the Library of the US Congress holds George Washington's signed copy).

In Wealth Of Nations, many American readers no doubt turned to Chapter vii of Book IV: ‘Of Colonies’, and Part 2: ‘Causes of Prosperity of new Colonies’, where he discusses the failings of the Spanish, Portuguese, and French administrations (and has a disquisition of the early Greek colonies of antiquity), within which they would find the following:

“But there are no colonies of which the progress has been more rapid than that of the English in North America.

Plenty of good land, and liberty to manage their own affairs their own way, seem to be the two great causes of the prosperity of all new colonies.

In the plenty of good land the English colonies of North America, though no doubt very abundantly provided, are however inferior to those of the Spaniards and Portugueze, and not superior to some of those possessed by the French before the late war. But the political institutions of the English colonies have been more favourable to the improvement and cultivation of this land than those of any of the other three nations.

First, the engrossing of uncultivated land, though it has by no means been prevented altogether, has been more restrained in the English colonies than in any other. The colony law which imposes upon every proprietor the obligation of improving and cultivating, within a limited time, a certain proportion of his lands, and which in case of failure, declares those neglected lands grantable to any other person, though it has not, perhaps, been very strictly executed, has, however, had some effect.

Secondly, in Pennsylvania there is no right of primogeniture, and lands, like movables, are divided equally among all the children of the family. In three of the provinces of New England the oldest has only a double share, as in the Mosaical law. Though in those provinces, therefore, too great a quantity of land should sometimes be engrossed by a particular individual, it is likely, in the course of a generation or two, to be sufficiently divided again. In the other English colonies, indeed, the right of primogeniture takes place, as in the law of England. But in all the English colonies the tenure of the*39 lands, which are all held by free socage, facilitates alienation, and the grantee of any extensive tract of land generally finds it for his interest to alienate, as fast as he can, the greater part of it, reserving only a small quit-rent. In the Spanish and Portugueze colonies, what is called the right of Majorazzo takes place in the succession of all those great estates to which any title of honour is annexed. Such estates go all to one person, and are in effect entailed and unalienable. The French colonies, indeed, are subject to the custom of Paris, which, in the inheritance of land, is much more favourable to the younger children than the law of England. But in the French colonies, if any part of an estate, held by the noble tenure of chivalry and homage, is alienated, it is, for a limited time, subject to the right of redemption, either by the heir of the superior or by the heir of the family; and all the largest estates of the country are held by such noble tenures, which necessarily embarrass alienation. But in a new colony a great uncultivated estate is likely to be much more speedily divided by alienation than by succession. The plenty and cheapness of good land, it has already been observed, are the principal causes of the rapid prosperity of new colonies. The engrossing of land, in effect, destroys this plenty and cheapness. The engrossing of uncultivated land, besides, is the greatest obstruction to its improvement. But the labour that is employed in the improvement and cultivation of land affords the greatest and most valuable produce to the society. The produce of labour, in this case, pays not only its own wages, and the profit of the stock which employs it, but the rent of the land too upon which it is employed. The labour of the English colonists, therefore, being more employed in the improvement and cultivation of land, is likely to afford a greater and more valuable produce than that of any of the other three nations, which, by the engrossing of land, is more or less diverted towards other employments.” [WN IV.ii.16-19: pp 572-73]

Primogeniture was a regular target of Adam Smith’s in his writings and lectures. Britain was dominated by the ancient law of primogeniture and it was pernicious for all the reasons stated by David Brin.

However, typically, the law of primogeniture was made even more onerous by the legal device known as ‘entail’, which locked the entire estate into a non-divisible whole: no part could be inherited or sold separately; the whole estate could only be purchased subject to the entail applying in perpetuity.

The entail device was even more pernicious.

An inheritor, for example, finding himself (it was always male, of course) in need of funds to invest and improve his landed estate, assuming he was so inclined, or course, or he just wanted the money his prodigal life-style, could not dispose of parts of the estate; he had to sell, or pledge, the whole estate. This system prevented the development of a yeoman class of farmers on the one hand, and ensured the steady decline of landed estates inherited by persons uninterested in agricultural improvement.

No Revolutionary politician was unaware of the problems caused by primogeniture and entails. That some states had legislated before 1776 under British administration to reform primogeniture and entail laws was an excellent example to the rest post-independence. Adam Smith provided the political economy of the benefits of these moves.

I think David Brin, and others (many of them in the US media who seem to believe that history began only after 1783), should at least acknowledge that British thinking from the likes of Adam Smith, played a not insignificant role in the deliberations of the post-Revolution leaders and those who influenced them.

David also seems in his post (follow the link) to think that Adam Smith was aware of ‘socialism’ as an alternative to private ownership. He wasn’t. That was an issue in the 19th century, not the 18th.

The alternative to the commercial societies of the 18th century, guided by mercantile political economy and that it entailed, was Adam Smith’s version of commercial society, as outlined in Wealth Of Nations, absent monopolies, protectionism, jealousies of trade, special interests and their client legislators and those who influenced them, colonies, and wars for the trivial ends of princes and their governments. Smith had no views of ‘socialism’; it was not agenda in his day.

Whether he would have been a member of the Democratic Party is pure conjecture – about as relevant as whether he would have supported the New York Giants, or Manchester United…