The Two Faces of Capitalism

The counterculture may know more about capitalism than they think they know.


The decline of American capitalism is perhaps the dominant concern of libertarians and conservatives. This concern has many names: saving "capitalism," "the system," our "market economy," "the American way of life." When people bent on this concern get together, they rarely question what it is they are trying to save; they just know.

Despite the apparent consensus, there is good reason to believe that people who consider themselves allies do not begin to agree on what it is they want to save. Their most fundamental disagreement is over the nature of capitalism itself. Without resolving the conflict, the "pro-capitalist demonstration" (such as it is) will remain confused and incoherent. Moreover, understanding the terms of the conflict may open possibilities for new alliances and for recruiting new advocates.

The confusion becomes obvious in contrasting the attitudes of the business community with those of the counterculture. Leaders of big business condemn the intrusions of big government—except where the intrusions affect them; and then, more often than not, they argue that "special circumstances" make government regulation a matter of high national interest. The counterculture, on the other hand, attacks "the system" and capitalism on behalf of "the people," demanding government intervention of all kinds, while often themselves engaging in one of the purest forms of market capitalism left in our society: the production and exchange, in an almost perfectly free market, of goods and services valued by the counterculture, including handcrafted items, natural and organic food products, day care services, and classes in various forms of consciousness raising. It is interesting, of course, that in all the State socialist systems the counterculture admires, most of these activities would be outlawed and the counterculture condemned as parasites.

Understanding these anomalies must begin with the fact that for at least a century and a half the word capitalism has been used to describe two entirely different things. On the one hand it is taken to mean the social system identified with Western industrial (bourgeois) society, while on the other it describes an economic and political process in which people of greatly diverse views—some identifying with bourgeois society and some opposing it—are left free to exchange what they value, with relatively little interference by government. Despite great differences between these two concepts of capitalism both theoretically and increasingly in outward appearance, the word is used by almost everyone without appreciation for the vastly different meanings it conveys.


In the former view of capitalism, the word is taken to refer to the social systems of most Western countries since the Industrial Revolution: what Joseph Schumpeter called the civilization of capitalism. The precise associations depend, of course, on the observer. If he likes the system, he will think of freedom, prosperity, hard work, self-discipline, the Puritan Ethic, opportunities for upward mobility. If not, he will think of status seekers, class obsessions, mass commercialism, pollution, loss of "quality" in life, and persistent inequality.

The social vision of capitalism is preemptive; it governs most perceptions of capitalism's nature, and it dominates the terms of public discussion—for fundamental and obvious reasons. When people use the word capitalism, they evoke an image of what people are doing and thinking and valuing; and while this includes the value of freedom, it does so only as one value among many.

Historically, money and money making have been widely thought to be intrinsically important to capitalism. The reason for the association is no mystery: the word capitalism itself comes from capital, which suggests money; "capitalists," therefore, are those whose purpose is to make money. The emphasis on money even appears when we ask what sort of freedom is central to capitalism. The answer is the freedom to contract, which to most people means: the freedom to make money.

The importance of money is a central perception of the social view of capitalism; and money is also important in producing the enormous social consequences, both positive and negative, emphasized by both advocates and critics. These include both prosperity and (a new form of) class conflict; both freedom and "mass commercialism."

Even those who emphasize freedom as capitalism's dominant value often unwittingly yield to the social vision. While libertarians do emphasize freedom, many of them have a very clear idea of how that freedom should be used and how it should not. The result is often akin either to Ayn Rand's "morality of selfishness"—fiercely individualistic, rational, self-seeking—or to the libertinism of some on the left. In either event, libertarians' tendency toward strong opposition to self-sacrifice, to public spirit, and often to religion reinforces the social view of capitalism as inherently materialistic.

The historical background clarifies the modern debate on the social view. Thus, the battlelines tend to be drawn by perceptions of motive—of why people are doing what they are doing. Those who support the civilization of capitalism do so for reasons having vaguely to do with the Protestant Ethic and hard work and the middle-class achievement ethic. In broadest terms, they support the core values of American society—of bourgeois society. On the other hand, opposition is generally felt toward the motives, values, and life style that opponents perceive in the middle class; and these objections underlie their opposition to capitalism. Opponents see materialism everywhere they look, and they attack the system of free exchange for the corruption of motive, while appealing to the "higher idealism" of social systems that seek goals loftier than the accumulation of material riches and class distinctions.

This attack makes people in the business world uneasy, and they usually respond with Chamber of Commerce slogans about how "profit is not a dirty word." There is great and pathetic irony in such responses, which only show how ill-equipped business persons are to defend capitalism. In fact, most conservative businessmen do not begin to be as materialistic as the intellectuals who attack them, but they often believe caricatures about themselves. (Those who doubt my claim about intellectuals are referred to the writings of Mr. T. Wolfe.)

Although defenders of capitalism as a social system tend to emphasize virtue (hard work, self-discipline) and order rather than freedom, its opponents do invoke individual freedom, though of an unusual kind. Opponents defend their right to be free from the civilization of capitalism—to be free from the core values of American society, including the middle-class achievement ethic as well as traditional religious and moral values associated with the "American way of life." Opponents, rightly or wrongly, see capitalism as enjoining those values on people who want to avoid them, who want to avoid bourgeois mores and culture.

The tensions expressed in opponents' attacks on what they might call the "life-style imperialism" of capitalism—or really, of bourgeois society—are captured perfectly in the descriptive phrase "free enterprise." In its social context capitalism, it is true, stands for freedom; but not only freedom: the civilization of capitalism emphasizes free "enterprise"—and opponents thus begin to wonder, perhaps correctly, if "enterprise" has not replaced freedom as the dominant concern of the advocates of capitalism.


All of this—life styles, motives, life goals and ideals, and so on—has very little to do with the other concept of capitalism, pursued by most libertarians. Beyond its social and psychological setting, the second sense of capitalism conspicuously avoids judgments of the social system associated with Western industrial society. Rather, it defends the idealism of an economic and political system that permits individuals freely to choose what they wish to value, free from government coercion. The idealism of this second view is manifest precisely in its unwillingness to judge the social conditions that result from it or the motives of the people in it: the idealism lies in the hope that people left free will choose the good.

It is important to understand that the libertarian commitment to capitalism as freedom is idealized, perhaps to extremes. For as noted, many libertarians actually import into their advocacy of freedom a strong commitment to life styles and moral values, thereby compromising their "value-free" advocacy of freedom.

There is a point at which the two senses of capitalism run together. But although it is possible to support a free-exchange economic system without embracing the civilization of capitalism (as many libertarians do), almost all defenders of the social system (mostly businessmen) also pay at least lip service (though often no more than that) to the free market.

The major critics of capitalism have concentrated their fire on capitalism as a social system; and since they control the terms of debate through their control of mass media, the social context of capitalism—including social attitudes, the role of the middle class, the problems of status, equality, and "alienation," and the "quality of life"—defines today, as it has for a century and a half, the terms of debate over capitalism as an economic and social system. To most critics, advocates of capitalism are engaged in defending—or must defend, whether they like it or not—the civilization of capitalism; and that means they must defend the obsessive, materialistic motives that critics see everywhere in bourgeois culture. This burden is relieved very little by recitations of capitalism's very considerable achievements. It is a major burden to be overcome by those concerned about freedom, especially by many libertarians, who in their passion to defend the process of free exchange care nothing as libertarians about the civilization of capitalism.

In concentrating on the civilization of capitalism rather than on individual freedom, the public debate unfortunately avoids contact with capitalism's incredible idealism—which is built on the contrast between the civilization of capitalism as it is (or as critics see it), and the hope, with people left free to choose what they want to value, of what it might be. This idealism lies not in the social context but in its commitment to freedom—in the other concept of capitalism—which until now has played little part in most people's perceptions of capitalism's essential nature. Until now, the social context has governed public perceptions, which explains both business support and counterculture opposition.

The great challenge facing those who wish to arrest the decline of capitalism is to restore to the "capitalist ideal" the possibility and prospect of virtue and of commitment to the good life. An economic system of free exchange is one that leaves people in it free to exchange whatever they individually choose to value, material or nonmaterial. Those proponents who bind capitalism to man's lowest instincts and aspirations—and even celebrate that use of freedom—only encourage the myth that capitalism is intrinsically materialistic and thereby collaborate in its demise.

Freedom of exchange and freedom to choose—indeed, by its nature, freedom itself—encompass the whole range of human possibilities and potentialities, the highest values as well as the lowest. The overwhelming idealism in liberal capitalism lies, not in appeal to lower values, but in aspiration to higher ones. It lies in the possibility that a purely capitalist society, based on individual exchange of values freely chosen, could one day become a community dedicated to virtue and idealism.

A. Lawrence Chickering is the executive director of the Institute for Contemporary Studies, a San Francisco think tank. A graduate of Yale Law School, he worked for National Review and then for the California Office of Economic Opportunity before helping to found ICS in 1975.