Omar Bennett
The U.S. Constitution and its economic foundations have been a subject of debate, with questions arising over whether it demands capitalism as the country's economic system. The Constitution's role in shaping economic policies and its impact on the rise of capitalism in the U.S. are key aspects of this discussion. The document's interpretation and its influence on addressing oligarchical dangers and class domination are also part of the conversation. While some scholars argue that the American Revolution's long-term consequences led to the development of capitalism, others explore the constraints on capital and the challenges posed by oligarchical politics. The Constitution's impact on trade, production modes, and the protection of the capitalist elite and slave owners further complicate the discussion.
| Characteristics | Values |
|---|---|
| Capitalism is a system that benefits all | Mises refuted claims that capitalism leads to exploitation and depression |
| Exploitation is not inherent to capitalism | Exploitation is inherent to socialism because individuals do not live for their own sake |
| Capitalism is based on social harmony through the pursuit of self-interest | Wealth is created in the most efficient manner possible, raising the standard of living and increasing economic opportunities |
| A capitalist is anyone who lives solely by their own effort and respects the rights of others | The best symbol of a capitalist is a trader |
| The American Revolution was a bourgeois revolution | The long-term consequences of the revolution led to the development of capitalism as the dominant mode of production |
| The US Constitution was created to support market forces and balance competing political and economic interests | The foundation of the government was the protection of private property |
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What You'll Learn
- The American Revolution and its ties to capitalism
- The Convention and the creation of the US Constitution
- The role of the individual in a capitalist society
- The relationship between democracy, freedom, and capitalism
- The defence of capitalism by economists and philosophers (including critiques of socialism)
The American Revolution and its ties to capitalism
One notable aspect of the American Revolution's ties to capitalism is the role of merchant capital. Unlike the industrial capital that characterized 19th-century Manchester and London, the American Revolution was driven by merchant capital, which structured labor and life before the widespread emergence of waged work. This highlights the complex and uneven nature of capitalist development, where different forms of capital accumulation played a role.
The American Revolution was also influenced by the global apparatus of extraction and accumulation, with indigenous and enslaved people playing significant roles. The revolution has been described as a "bourgeois revolution," where the dominant ideology aligned with bourgeois ideals, and the state formation processes accelerated capitalist development. This development of capitalism was shaped by class conflicts and the struggle between different social relations of production, state form, and capitalism.
Additionally, the American Industrial Revolution, which converged with the technological revolution, was fueled by a deep faith in economic individualism and unrestrained competition. This period saw the division of labor and the emergence of assembly lines, increasing production efficiency. The Industrial Revolution also involved economic espionage, with individuals like Samuel Slater bringing British textile manufacturing secrets to America, further driving industrial growth.
The post-Civil War period also witnessed a significant expansion of capitalism in the American West. Investors from the East, such as Boston financiers, directed their wealth toward railroads, mines, and other enterprises in the rapidly growing region. This transformation integrated the West more fully into the national economy and contributed to the profound economic changes that occurred in the United States between the end of the Civil War and the early 20th century.
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The Convention and the creation of the US Constitution
The US Constitution was created during a period of uncertainty, just a few years after the Revolutionary War. James Madison, Alexander Hamilton, and George Washington feared that their young country was on the brink of collapse. America's first constitution, the Articles of Confederation, had given the Confederation Congress the power to make rules and request funds from the states, but it lacked enforcement powers, the ability to regulate commerce, or print money. The states' disputes over territory, war pensions, taxation, and trade threatened to tear the country apart.
Hamilton helped convince Congress to organize a Grand Convention of state delegates to revise the Articles of Confederation. The Constitutional Convention assembled in Philadelphia in May 1787, with General George Washington elected unanimously as its president. The windows of the State House were shuttered, and guards kept the curious at bay so that the delegates could speak freely.
Madison, a strong nationalist, had prepared a proposal in advance, which became known as the Virginia Plan. It called for a supreme national government and was a radical departure from the Articles of Confederation. It lacked a system of checks and balances, which would become central to the US Constitution. The Virginia and Pennsylvania delegates formed a predominant coalition within the convention, and their plan became the starting point for the convention's discussions.
The convention debated various proposals, including Paterson's "union of the States merely federal," which was rejected. The delegates recognized a major flaw with the Articles of Confederation: any constitutional amendment required the unanimous approval of the states. They endorsed the need for a different way of amending the Constitution but did not vote on specifics. They also discussed how the completed Constitution would become law, with some arguing for ratification by state legislatures and others suggesting ratification by the people through specially called state conventions.
After three months of heated debate, a Committee of Detail was appointed to put the decisions in writing. A Committee of Style and Arrangement then condensed the articles into a final form. On September 17, 1787, 38 delegates signed the Constitution, with one delegate signing on behalf of an absent colleague, bringing the total to 39 signatures. The delegates had created a powerful central government, representing a compromise between different interests and views.
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The role of the individual in a capitalist society
Capitalism is an economic system where capital goods, such as factories, mines, and railroads, are privately owned and controlled by individuals or businesses. The essential feature of capitalism is the motive to make a profit. In a capitalist economy, the means of production, such as land, labour, and capital, are privately controlled and deployed to maximize profit and efficiency.
In a capitalist society, the role of the individual is multifaceted. Individuals can be business owners, investors, or workers. Business owners, or capitalists, own the means of production, such as factories and machines, and have the freedom to enter and exit markets. They make economic decisions based on their interests, with the primary goal of maximizing profit. Entrepreneurs, or individuals starting and managing businesses, play a crucial role in driving innovation, creating jobs, and contributing to economic growth.
Investors, on the other hand, provide capital to businesses and seek to generate returns on their investments. They play a vital role in funding new ventures, expanding existing businesses, and facilitating economic growth.
Workers, or the labouring class, are individuals who sell their labour to businesses in exchange for wages. They contribute their skills, knowledge, and efforts to produce goods and services. While workers may have limited ownership rights to the property, equipment, or finished goods, they have the freedom to choose their employment and leave their jobs for better opportunities or pay.
In a capitalist society, individuals also play a role as consumers. They have the freedom to choose what to consume, where to work, and how to invest their money. This freedom of choice can drive competition and improve overall welfare.
Additionally, individuals in a capitalist society have certain rights and protections. Private property rights are a fundamental aspect of capitalism, and individuals have the right to own and transfer property without government interference. Contracts, fair dealing, and tort law facilitate and enforce these private property rights. However, it is important to note that capitalism can lead to inequalities, and individuals may face challenges such as income disparities, limited social safety nets, and negative externalities like pollution.
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The relationship between democracy, freedom, and capitalism
Some argue that capitalism and absolute democracy are incompatible because capitalism is based on individual rights and freedoms, which could be voted away in an unlimited majority rule system. In other words, if the majority's will is allowed to dominate without regard for the rights of the minority, capitalism cannot exist. This is where the role of a constitution comes in—to limit the power of the majority and protect the rights of individuals, thus enabling a balance between democracy and capitalism.
The American Revolution, for instance, has been dubbed a "bourgeois revolution" by some scholars, who argue that it accelerated capitalist development due to its alignment with bourgeois ideals. The revolution led to the creation of a new type of state, one that enforced legal claims on landed property. This perspective suggests that the revolution's long-term consequences facilitated the emergence of capitalism as the dominant mode of production.
Additionally, the founding of the United States was influenced by the belief that capitalism benefits everyone. Notable defenders of capitalism, such as Mises, refuted accusations of exploitation and depression, claiming that capitalism inherently serves the economic self-interests of all individuals, including non-capitalists. This belief is based on the idea that by pursuing their economic self-interest, individuals simultaneously benefit the economic interests of others, creating wealth and opportunities for all.
However, it is important to acknowledge that the historical context of the time, particularly regarding slavery, complicates the relationship between democracy, freedom, and capitalism. At the time of the Convention, slavery in the Northern states was being phased out, while it persisted as a form of large-scale capitalism in the South, where the commodities produced were dependent on the labor power of the enslaved.
In conclusion, the relationship between democracy, freedom, and capitalism is multifaceted and highly debated. While some argue that capitalism protects individual rights and benefits society as a whole, others point to historical complexities and the potential incompatibility of absolute democracy and capitalism.
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The defence of capitalism by economists and philosophers (including critiques of socialism)
Capitalism has been defended by many economists and philosophers, who also critique socialism. Deirdre McCloskey, an economist, argues that our economic system should be called "technological and institutional betterment at a frenetic pace, tested by unforced exchange among all the parties involved". She also refers to it as "fantastically successful liberalism, in the old European sense, applied to trade and politics, as it was applied also to science and music and painting and literature".
Many defenders of capitalism point to the improvement in the quality of life of humans over the last two centuries. They argue that in the two centuries after 1800, the goods and services available to the average person in Sweden or Taiwan rose by a factor of 30 or 100. This improvement in the quality of life has been attributed to the power of economic freedom, and the Bourgeois Revaluation, which led to a business-respecting civilization.
Some critics of socialism argue that it is unfeasible because information cannot be aggregated by a central body to formulate a plan for an entire economy, resulting in distorted or absent price signals. This is known as the economic calculation problem. According to the Austrian School economist Ludwig von Mises, an economic system that does not use money, financial calculation, and market pricing would be unable to effectively value capital goods and coordinate production. Socialism, therefore, lacks the necessary information to perform economic calculations in the first place.
Other critics of socialism argue that equality erodes individual diversities and that establishing an equal society would require strong coercion. Critics also point to the mass killings under communist regimes as an indictment of socialism.
Defenders of capitalism also argue that as capitalist economies tend towards higher levels of inequality, many people who previously supported mild reform of capitalist economies might now need to endorse more radical socialist institutional proposals.
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Frequently asked questions
Capitalism is a social and economic system where individuals are free to pursue their economic self-interest, creating wealth in an efficient manner, raising the standard of living and increasing economic opportunities for everyone.
The US Constitution was created to support market forces and balance competing political and economic interests. The attendees of the Constitutional Convention were "elite" and their goal was to build a government that could support a transition to capitalism.
Capitalism has been argued to be a system that benefits all. Defenders of capitalism, like Mises, refute claims that it leads to exploitation and depressions. Capitalism, they argue, upholds individual rights and allows individuals to act free of government regulation, which ultimately serves the economic interests of all, including non-capitalists.
Contrary to popular belief, capitalism is not a system that exploits people for the benefit of a small minority of wealthy individuals. In fact, it is argued that socialism is more exploitative due to the state's monopoly on labor and production, which removes economic incentives to provide more than the minimum for workers.
