Capitalism vs market economy: the never-ending debate

Capitalism or market economy: two sides of the same coin

No, they are not synonyms. Capitalism, as a system of private ownership of the means of production, has been confused for centuries with the market economy, which is a mechanism for allocating resources. The spark was lit by a reference to professor Jesús Huerta de Soto, who argues that no country today is capitalist, but rather social democracy. From there, an ideological war broke out on all fronts: from the definition of capitalism to the legitimacy of the state.

What is capitalism really?

The discussion starts with two irreconcilable visions. On the one hand, those who defend capitalism as a free market system without interference, where private property is sacred and the state should limit itself to protecting rights. On the other, those who see it as a zero-sum game: «they force you to live as they want you to live. If you don't accept living that way, the system expels you and all that's left is to starve». In between, a third way reminds us that neither real socialism nor pure neoliberalism has ever been applied anywhere. «Sweden in the 60s-70s was the closest thing to a social utopia», but even there there was a step back.

The trap of terms: market economy as a euphemism

A recurring thread is the accusation that «market economy» is a whitewash of capitalism. Those who defend the free market reply that genuine capitalism, Adam Smith's, has not existed since the early 20th century: «genuine capitalism has not existed in the US since the first part of the 20th century». State intervention, bank bailouts and fractional reserve banking denature the system. That is why, they argue, «what we have is mercantilism, not capitalism». Banking is singled out as the great distorter: demand deposits should cost money, not pay it.

Deregulation or law of the jungle?

The sharpest point of friction is regulation. Critics point out that deregulation led to the mad cow disaster or the financial crisis: «when there is no rule, it's the law of the strongest». Free market defenders respond with historical examples: «the more you regulate the labor market, the more unemployment you create in the long run». The discussion drifts toward the monopoly on violence and the role of the state. Some see anarcho-capitalism as the only way out, although they admit it is «a nice theory» with no practical application.

The conversation, which went on for months, ended abruptly in April 2010, when the financial crisis had already changed the rules of the game. Fifteen years later, the debate remains open, and the question of whether capitalism has a solution is still unanswered. It will probably never be closed, but the arguments from then resonate today with more force.

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