Category: Economics, Finance, and Political Economy

https://www.quora.com/What-is-the-relationship-between-liberty-and-capitalism/answer/Curt-Doolittle?share=ae621cfcWHAT IS THE RELATIONSHIP BETWEEN LIBERTY AND CAPITALISM.

um…. you know. Pick one or the other and don’t conflate them.

**Sovereignty** in fact exists or it does not. One has sufficient force in himself or his reciprocally insured allies to prevent his subjugation or not.

**Liberty** is given by permission of the Sovereign, and refers to those who are self sufficient but whose rights can be imposed upon. Although liberty originally referred to the right of a people to preserve local law and custom in their own matters, and is therefore a political grant from the sovereigns, we tend to conflate it with Freedom.

**Freedom** is given by permission of someone or some people capable of depriving you of it, and refers to those who might have been candidates for slavery, but have earned their freedom by some means, or at least, not lost it by other means. The common libertarian advocacy of a cuneiform term, says literally ‘return to the mother’, which means that one’s required service to the ruler for the term has been fulfilled.

**Capitalism** refers to the use of contract, money, prices, and accounts, the elimination of rents on territorial resources, by its allocation to individuals, along with the distribution to individuals of discretion on the use of one’s physical energy, time, and possessions obtained by voluntary exchange. In other words, the voluntary organization of production, distribution, and trade using incentives made possible by individual calculation of the most beneficial options available to him. What is usually lost in this discourse is that the individualization of property prohibits local rents, allowing the centralization of rents that we consider taxation, and that this centralization of rents is one of the primary causes of the reduction of opportunity and transaction costs that makes a voluntarily organized economy possible at the expense of those who would live parasitically of the local collection of rents. In other words, capitalism converts subservience to ‘mafia’ at various local scales which impede production, to subservience to a single central ‘mafia’ in exchange for eliminating those rents that impeded production.

**Liberty AND Capitalism**

1. Therefore the relationship between **capitalism** and **liberty** is, precisely, that the sovereign will not interfere in the voluntary organization of production other than to create it in the first place, resolve conflicts as they arise by demand for reciprocity of obligation and rights in the contracts between parties, and to prevent the externalization of costs to the commons or the privatization of commons in the course of private transactions.

2. However the problem of the degree of taxation (commission), the maximum calculation of which is the favorite hobby of economists, is not answered by this question. Nor is the use of those taxes (commissions), to produce commons within or without of the private economy.

3. Therefore we **colloquially** use the term ‘**capitalism**’, to refer to the policy bias in favor of minimum taxation, competition, and interference in the market, and we use social democracy or the more pejorative ‘socialism’ to refer to the policy bias in favor of maximum taxation, egalitarianism, and interference in the market for the production of goods, services and information. The central conflcit being that the state does not insure the risk of capital and its losses but takes income regardless of that risk and those losses. And on the other hand, the combination of scale, wealth (capital), and credit, is such a more powerful competitive advantage that those with mere labor can compete with or even seek to participate in.

4. Therefore liberty and capitalism can only exist when political questions are decidable because costs and returns are calculable, because coincidences of want are marginal, and consequences are perceivable. (Yeah, I know but once you read that a few times you’ll get it, and its important.)

The net of this is that unless you possess sovereignty the best you can possess is liberty, and both liberty and property exist only as matters of degree in the balance between the impossibility of pure capitalism except between powerful states, and the impossibility of pure communism except within the family. And instead the useful point of demarcation between more capitalism less capitalism and least capitalism, depending upon whether we are in a mode of territorial or economic expansion requiring private risk(capitalism), a mode of relative calm requiring the production of commons (mixed economy), or at war (nationalized and centralized economy).