Capitalism vs. the Market

Gus DiZerega has a long post Capitalism vs. the Market which lays out a point that I've been semiconscious of myself for some time.

Virtually everyone in America today, regardless of whether they call themselves libertarians, classical liberals, conservatives, moderates, liberals, progressives, or socialists, equate markets and capitalism. Usually the terms are used virtually interchangeably. At most, some libertarians distinguish between “capitalism” and a “free market” that has never existed. They are deeply, fatally wrong. Market economies and capitalism are crucially different from one another, but not because the market is a utopian goal. We encounter it every day. So long as the distinction between the two is missed or misunderstood, our efforts to solve many of our most intractable problems will be for naught.

I tend to refer to “market capitalism” in order to point to how these are distinct arrangements that are linked together, but I've never tried to write systematically about what that relationship is. DiZerega lays it out:

Under capitalism the market has freed itself from human society to become an independent ecosystem of its own to which the rest of the human world must now adapt. Participants must adapt to the market. Property rights are selected not by their impact on human life but by their capacity to be bought and sold. The market has become an independent force rather than a subordinate component of civil society.

He tells the story a little differently than I would; a lot of what he describes as “capitalism” I would describe as “market capitalism”, the thing that emerges in the overlap of these two related systems. But that and a few quibbles aside, I'm glad he wrote about this at length so I don't have to.

He also has a sequel, Capitalism vs. the Market II: re-integrating markets into civil society.