Is It Time to Ditch the Word Capitalism? Not so Fast

“Why do you always talk about capitalism and not the market economy? The mere mention of the word capitalism turns so many people off.”

It’s a critical question that I have often been asked. First of all: Yes, it’s true.

For many people, “capitalism” has a bad ring to it, probably all over the world. That is certainly the case in the 14 countries I commissioned Ipsos MORI to conduct a survey into attitudes toward capitalism. The survey proved that support for capitalism rises significantly everywhere if only you avoid mentioning the irritating word itself and frame your questions to describe what capitalism means using other words. This was no surprise; it was exactly what I expected. But what is much more interesting is that in nine out of the 14 surveyed countries, there was no majority in favor of capitalism even when the word was not used in the questions. In most countries, anti-capitalist views elicited more support than pro-capitalist opinions, even when we avoided using the word itself.

But wouldn’t it still be wiser to dispense with the word if it irritates so many people? The economist Deirdre McCloskey, whom I hold in high esteem, suggested years ago that the term “innovism” should be used as an alternative because it better describes what “capitalism” actually means. It has not caught on. It is difficult, almost impossible, to introduce a completely new term into the public discussion. After all, 99.99 percent of people don’t even know what such a new word means.

In some countries, people prefer to speak of a ‘market economy.’ In Germany, you often hear people refer to a ‘social market economy.’ However, the meaning of the term has evolved since it was originally popularized by Ludwig Erhard, the German Minister of Economics at the time (1949-1963). For Erhard, “social market economy” did not mean—as it is interpreted today—a third way between socialism and capitalism. The freer the economy, Erhard was convinced, the more social it would be. At the end of the 1940s, the formula of the ‘social market economy’ primarily served to make a return to the capitalist economic system palatable to Germans, which was by no means a foregone conclusion at the time. After all, the National Socialists had used strong anti-capitalist rhetoric, and ‘social’ aspects were already strongly emphasized in Germany at that time.

In contrast to its modern meaning, Erhard regarded the market economy as such as “social”—irrespective of subsequent redistribution efforts, of which he was skeptical. The more successful the economic policy, the more social policy in the traditional sense would become superfluous.

However, the term “social market economy” has long since been usurped by its opponents. Today, everyone in Germany is (apparently) in favor of the “social market economy.” Even representatives of the anti-capitalist far-left party Die Linke profess to be so. That is why I prefer to speak of capitalism, even if perhaps a term such as “entrepreneurial economy” would better capture the essence of what I mean by “capitalism.”

If a term has negative connotations, there is no point in focusing exclusively on changing the word. On the contrary. Those who avoid a word because they are afraid of criticism are only demonstrating their inner insecurity and weakness. And there is not the slightest reason to feel insecure or weak. Before capitalism came into being, most people in the world lived in extreme poverty – in 1820, the rate was 90 percent. Today, it has fallen below 10 percent. The remarkable thing is that in recent decades, the rate at which poverty is declining has accelerated more than in any previous period of human history. In 1981, the rate was still 42.7 percent; by 2000, it had fallen to 27.8 percent, and by 2021 it was below 10 percent. With such a track record, no supporter of capitalism should feel the need to be ashamed or hide.

Too often I have heard people “defend” capitalism by arguing, “Yes, capitalism is by no means ideal and has so many drawbacks, but the bottom line is that it is still better than other systems.”

Why so defensive?

I’ve had good experiences being offensive as a defender of capitalism. I speak at events all over the world on this topic, and I often wear my “I love Capitalism” T-shirt. Even if there are many young people in the audience who tend to be anti-capitalist, they usually respect the fact that there is someone there who professes his views clearly and doesn’t mince his words. And if the term provokes some people—so much the better: because then the discussion about the benefits of capitalism can start immediately!