The Ideology of

Capitalism and
the Ideology of
Liberalism
Liberal democracies were built on a very
different set of ideas than those propounded by
modern-day conservatism.
By John MacBeath Watkins
I live in a sort of society generally referred to as liberal democracy, which features private property and
democratically elected representative government. It is based on a set of ideas known as classical
liberalism. That set of ideas is now challenged by a radical ideology that I will describe here.
John ocke is generally considered the father of liberalism. !is Two Treatises of Government
was published in the late "#$$s, well before the invention of capitalism. !is influence can be seen in
the %eclaration of Independence& whereas ocke maintained that we are born with property, in that we
own our lives and cannot sell, or 'alienate' them, the %eclaration says that, among its self evident
truths is 'life, liberty and the pursuit of happiness.' (retty much what ocke said.
Jean)Baptiste *olbert was writing at about the same time as ocke, and articulated the +rench
version of mercantilism. Most writers on economics between ",$$ and "-,$ were what we would now
call mercantilists.
+rom Wikipedia.
The /ustrian lawyer and scholar (hilipp Wilhelm von !ornick, in his Austria Over All, If She
Only Will of "#01, detailed a nine)point program of what he deemed effective national
economy, which sums up the tenets of mercantilism comprehensively.2-3
That every inch of a country4s soil be utili5ed for agriculture, mining or manufacturing.
That all raw materials found in a country be used in domestic manufacture, since finished
goods have a higher value than raw materials.
That a large, working population be encouraged.
That all e6port of gold and silver be prohibited and all domestic money be kept in
circulation.
That all imports of foreign goods be discouraged as much as possible.
That where certain imports are indispensable they be obtained at first hand, in e6change for
other domestic goods instead of gold and silver.
That as much as possible, imports be confined to raw materials that can be finished 2in the
home country3.
That opportunities be constantly sought for selling a country4s surplus manufactures to
foreigners, so far as necessary, for gold and silver.
That no importation be allowed if such goods are sufficiently and suitably supplied at home.
Mercantilism has, of course, never completely disappeared. The above sounds very much like
the current policies of *hina. But as a dominant intellectual paradigm, the challenge to mercantilism
began, coincidentally, at about the time of our nation4s founding.
"--#, in addition to being the date of the %eclaration of Independence, was the year /dam
7mith4s The Wealth of Nations was published. Its impact was not immediate, and mercantilism
continued to be the dominant paradigm for national policy. The intellectual challenge to mercantilism
of course preceded the shift to a free)trade paradigm. +or e6ample, The Economist, a maga5ine
devoted to the repeal of 8ngland4s corn laws, was started in "019, and the tariffs imposed by those laws
were repealed in "01#. The word 'capitalism' was first used in its modern sense about "0,$.
7tudents of history will recall that the *ommunist Manifesto was published in "010. /bout the
time capitalism was becoming the dominant economic paradigm, its most important criti:ue had
arrived.
*apitalism was an economic system, not a system of governance, so the ideology of /merica
and 8ngland continued to be liberalism. *ommunism came as a full package, or at least the form of it
that came to dominate a number of countries did. While the countries that practiced capitalism were
ideologically liberal, Mar6 defined capitalism as an ideology. It is perhaps coincidental that at about
the time the volumes of *apital were coming out that capitalism began to become an ideology.
/n ideology is a set of ideas that gives one a comprehensive world view. The founding fathers,
if they thought much about economics, tended to be mercantilists. The /merican 7ystem, championed
by /le6ander !amilton, !enry *lay, John ;uincy /dams and others, was distinctly mercantilist,
including high tariffs which, in addition to encouraging domestic manufacture of things that would
otherwise be imported, were to finance improvements such as roads and canals that would make
possible the development of the untapped resources of <orth /merica. They had no problem with
public e6penditures on pro=ects like the 8rie *anal, because there was no :uestion in their minds that
government could create useful goods that contributed to the well)being of the commonwealth.
The ideology of capitalism claims that the capitalists are the creators of wealth. In the >ilded
/ge ?a term invented by Mark Twain and *harles %udley Warner in "0-9@ railroad and steel magnates,
lumber barons and financiers possessed far greater wealth than the landowners and merchants who
made up the bulk of the founding fathers. The morality of such unprecedented concentrations of
wealth re:uired =ustification, and it came in the guise of science.
William >raham 7umner, a cousin of *harles %arwin, came up with a philosophy of 'social
biology,' later referred to as social %arwinism, which claimed that social differences reflected different
levels of 'fitness' to survive, that in fact this was nature4s cruel but necessary working out of who
should get the rewards in life.
/ biologist might have pointed out to him the classic observation that 'the rich get richer and
the poor get children,' which means those who devote themselves to gathering wealth are less likely to
pass on their genes than those who devote themselves to family, so natural selection seemed to be
working the other way. But not all intellectuals serve the function of discovering truth. Many serve the
function of =ustifying what those passing out the honors in society wish to see =ustified. This seems to
have been the difference between %arwin and his cousin.
7ocial %arwinism seemed to say that the rich should be rich, because, after all, they were the
fittest. Jay >ould, the railroad robber baron, hired strikebreakers in "00#, saying 'I can hire $ne)half of
the working class to kill the other half.' *ould such a cynical thought occur to a man who did not see
himself as a better sort of creatureA
7umner, in his book What the Social Classes Owe Each Other, argued that assistance to the poor
harmed them, by weakening their ability to survive in society. Therefore, not only did the rich deserve
to be rich, their disinclination to help the poor was =ustified as well.
>ould made his infamous statement about the working class in the middle of the ong
%epression, a period of slow growth and deflation that started with the panic of "0-9 and ended in
"0B#. The ong %epression did a great deal to delegitimi5e social %arwinism, because defining most
people as 'unfit' because they have failed to prosper in a desperately bad economy turns out not to be
persuasive to most people.
The failure of laisse5)faire capitalism to perform well, first in the ong %epression, later in the
>reat %epression, undermined the ideology of capitalism. Its resurgence re:uired an outside threat and
a long period of prosperity.
The outside threat was again *ommunism, in the post)WWI world. /mericans defined
themselves in contrasts to the >odless *ommunists. (resident %wight 8isenhower allowed Billy
>raham to convince him to get bapti5ed and to get *ongress to make 'in >od we trust' an official
motto of the C.7. government. /t about the same time, >od was added to the (ledge of /llegiance. In
addition, while liberalism had assumed the e6istence of private property, the *old War put this in stark
contrast to the assumptions of *ommunism, making this distinction more important.
<ew %eal politics still had some life to it, but the coalition of the <ew %eal was broken up by
the introduction of civil rights legislation by (resident yndon Johnson. Johnson is supposed to have
said that in passing that legislation, he had lost the 7outh for the %emocratic (arty for a generation. /s
it happens, he was wrong. The realignment of the parties was rapid at first, as 7outhern %emocrats
defected to the Depublican (arty, but it was not until a black %emocrat, Barak Ebama, was elected
president that the realignment was completed. Two years after he was elected, most of the remaining
7outhern %emocrats in *ongress were defeated.
/merica now has a political party that is conservative from top to bottom, unlike the coalitions
of an earlier age. With that development has come a conservative ideology that combines social
conservatism, religiosity, nativism, nationalism, and a capitalist ideology that seems straight out of the
>ilded /ge.
7enator Mike ee ?D)CT@ has argued that child labor laws are unconstitutional. 7en. Jon Fyle
?D)/G@ has argued that unemployment insurance keeps people from looking for =obs 'because people
are being paid even though they4re not working.'
/ couple years ago, then Depublican <ational *ommittee *hairman Michael 7teele said, '<ot
in the history of mankind has the government ever created =obs.'
The +ounding +athers would have found this a peculiar notion. /rticle " section eight of the
*onstitution specifically authori5es *ongress 'to establish post offices and post roads.' It was well
understood that building a post road enabled no only communication necessary for commerce, but
commerce itself, since anyone could use the road. Indeed, as mercantilists, they would have considered
the role of the state in encouraging and regulating commerce essential to the development of the
commonwealth.
7teele was articulating a view widely held on the right, and disseminated by such spokesmen
for the conservative movement as Dush imbaugh. It reflects an ideology that is, in the end, opposed
to most of academic economics and alien to the principles of the nation4s founders. iberalism, the
movement they were a part of, was about how we should be governed. +or ocke, property was a
starting place for describing the proper way to organi5e society. +rom the need to defend our property
?which includes our lives@ we get the need for the social contract. The social contract makes society
and government possible. But the new ideology of capitalism seems to say that only property
relationships outside of government are legitimate, which is a very different thing.
*onsider this passage from the Second Treatise of Government.
7ec. 0B. Where)ever therefore any number of men are so united into one society, as to :uit every
one his e6ecutive power of the law of nature, and to resign it to the public, there and there only
is a political, or civil society. /nd this is done, where)ever any number of men, in the state of
nature, enter into society to make one people, one body politic, under one supreme government&
or else when any one =oins himself to, and incorporates with any government already made. for
hereby he authori5es the society, or which is all one, the legislative thereof, to make laws for
him, as the public good of the society shall re:uire& to the e6ecution whereof, his own assistance
?as to his own decrees@ is due. /nd this puts men out of a state of nature into that of a common)
wealth, by setting up a =udge on earth, with authority to determine all the controversies, and
redress the in=uries that may happen to any member of the commonwealth& which =udge is the
legislative, or magistrates appointed by it. /nd where)ever there are any number of men,
however associated, that have no such decisive power to appeal to, there they are still in the
state of nature.
I suspect this notion of a commonwealth would be considered suspect by the advocates of the
ideology of capitalism. They prefer the vision of the state of nature, and the survival of the fittest,
defined by the state of one4s bank balance. ocke4s writing, tremendously influential for men such as
Jefferson, who wrote the %eclaration of Independence, said that in forming a social contract we become
something larger. Thus, the motto that still appears on our :uarters and on the >reat 7eal of the Cnited
7tates, 8 pluribus unum, 'out of many, one.'
The newer ideology of capitalism is skeptical of this old)fashioned notion, preferring a more
individualist approach. !ow this will changed liberal democracy, the form of society in which we live,
remains to be seen. It has certainly become distinctly different from the classical liberalism from which
is has developed.