Objectivist philosopher Ayn Rand famously said that “Capitalism is a moral ideal and the only system consistent with human nature” This statement, however, opens up a can of worms surrounding the meaning of capitalism. Is It a system of ruthless exploitation and commodification where profit-driven motives lead to inequality and hardship? Or is it a platform for entrepreneurship, deferred gratification, and hard work that fuels progress, prosperity, and better conditions of life?
While Universities often debate capitalism ideologically — as self-respecting critical thinkers must consider multiple perspectives —certain views are often excluded from this debate, jeopardising and biasing the training of future politicians and policymakers. In the spirit of correction, let's engage with tqo major theories that challenge conventional views on capitalism: Karl Polanyi’s ‘Double Movement’ theory and Jean Bechler’s exploration of capitalism’s transformative power in his work ‘Origins of Capitalism”. Both explain the system's impact on cultural, political, and social life. But how do their interpretations differ, and why are they still relevant?
In The Great Transformation, Karl Polanyi describes capitalism as a system locked in a constant struggle between two opposing forces: liberal capitalism and social protection. Liberal capitalism, driven by relentless market expansion, converts labour, land, and money into commodities, which Polanyi saw as inherently exploitative and socially disruptive. He argued that the state must step in to protect society from unchecked market greed, acting as a safeguard for the lower classes, curbing inequality, and maintaining stability. For Polanyi, capitalism’s expansion was akin to a pandemic, fueled by rapacity, and resulted in grim consequences, requiring strong state intervention to prevent its harmful excesses on people’s lives. His ideas imply policies defending regulatory frameworks to safeguard labour, essential resources, and social stability from being purely commodified.
His primary ideological opponents were the Classical Economists, especially their support for a "laissez-faire" state that allowed markets to operate with minimal central authority. Yet, Polanyi overlooks the transformative benefits of market liberalisation, including an improved quality of life and reductions in absolute poverty in the Western world. This economic freedom sparked an entrepreneurial spirit and reduced government intervention, making the West a model of development and setting the stage for the Industrial Revolution. By removing barriers to scientific and technological advancement, investors were empowered to deploy capital in ways that drove progress and prosperity.
However, he also overlooks that as nation-states embraced democracy, mercantilism and imperialism shaped an evolving market system where jobs, services, and even basic needs were commodified. Rather than protecting citizens from market forces, Polanyi’s envisioned ‘state’ actually profited from them, collecting revenue through taxation—a pervasive market logic beyond what he theorised. This enabled governments to reap the benefits of capitalist innovation while curbing individual entrepreneurship, adding to broader economic challenges. In his critique, Polanyi condemns laissez-faire economics but misses its role in limiting the state’s ability to exploit the market through heavy-handed interventions. He doesn’t fully account for the state’s position as a ‘beneficiary’ of free-market dynamics.
From this perspective, the critique isn’t of capitalism itself but rather of state capitalism—a modern-day Leviathan disguised as a protector, offering services “for free” while quietly consolidating control. This system operates in the state’s favour and prioritises the collective, often at the expense of individual autonomy and entrepreneurship. Polanyi’s ‘double movement theory’ critiques capitalism’s social and structural impacts but stops short of grasping what capitalism fundamentally is.
In The Origins of Freedom (1975), Jean Bechler interprets capitalism as an economic system grounded in entrepreneurship and ancient trade practices dating back to 2000 BC. Through an anthropological lens, Bechler emphasises the role of merchants, traders, and entrepreneurs as foundational agents of globalisation, fostering cross-cultural connections and managing international relationships through commerce. This view aligns with Ayn Rand’s assertion, “When goods don’t cross borders, soldiers will,” underscoring capitalism’s power to promote global cooperation and peace. Economic interdependence—such as that between China and the U.S.—stabilises forces, decreasing the likelihood of interstate conflict. Beyond international politics, the benefits of global trade are felt domestically; for instance, coffee lovers don’t need to own Colombian land to enjoy an Americano at Pret for under three pounds. Such conveniences are possible through intricate supply chains and entrepreneurial coordination, delivering products once unimaginable in accessibility.
Bechler’s perspective on capitalism highlights individual creativity, social coordination, and growth—elements often constrained by state intervention. Contrasting Karl Polanyi, who emphasises capitalism’s social costs and supports state regulation, Bechler champions capitalism as a platform for entrepreneurship, innovation, and progress. His interpretation showcases how laissez-faire principles have historically enhanced living standards, often curtailed by state control which is compelling as it sidesteps Polanyi’s “polylogism”—a view that reduces societal dynamics to class struggle—and offers a more nuanced, individual-centred analysis grounded in methodological individualism. He implies a laissez-faire approach with policies that minimise government intervention, prioritising individual autonomy, entrepreneurial freedom, and open markets.
While often mislabeled as “neoliberalism,” this perspective is generally sidelined in academia, which might contribute to students’ preference for state-regulatory solutions over complex market dynamics rooted in individual agency. Bechler’s insights, along with those from the Austrian school, provide a clearer understanding of capitalism's true nature, though this, of course, opens up another can of worms with specific policy implications...