Was the US Founded on Capitalism?

A friend recently indicated that he thought that the US was founded as a

“Capitalist Country”. As nice as it sounds to say this, it is not an accurate
statement based on my understanding of history.

This statement has some basis in fact, but actually is more of a statement of
historical conditions that existed at our country’s founding rather than on
political concepts that guided our founders. In their rebellion against the
tyranny of Great Britain, and then later, as they wrote a constitution to govern
our new nation, they were thinking more along the lines of political liberty and
independence, not free enterprise. However, by creating a government with limited
powers for the first time in human history, they inadvertently created the
conditions under which a free enterprise system could develop, the extent of which
had never before been seen.

What is capitalism? In my view, “Capitalism” or “free enterprise” is what

naturally happens when ever people are free to voluntarily pursue trade and
commerce in the absence of government interference. Just as darkness is the
absence of light, capitalism is what happens in the absence of coercion, driven by
human needs and ingenuity. And, since there are varying levels of coercion in any
society, there are varying levels of capitalism. It is not really an “ism” at all,
in the sense of being a school of thought or philosophy. It is fundamental to a
free human nature. This is true even though there are various schools of thought
that argue for or against the virtues of “capitalism” and / or free enterprise.
The very meaning of “capitalism” itself is in dispute. (Look it up on Wikipedia
and see for your self).

Purely free enterprise has never really existed (even in the US) because from the
beginning of mankind’s existence there has always been someone who could take
goods they did not gather or produce themselves from others by use of force. (IE:
dominant ape eats first). Early clans of humans were led by the strongest members
until overthrown by younger stronger leaders. This evolved into the idea of
chiefs, and then kings and emperors. (I am over simplifying this evolution for the
sake of brevity, but this is basically what happened). As tribes discovered
agriculture and became civilizations, the government as an institution grew out of
this power so as to organize and manage (some would say steal or redistribute) the
surplus wealth that grew out of the resulting specialization of labor that defines
civilization, and channel it to the powerful elite.

The idea that government derives it’s legitimacy from the will of the people and
should be limited in its powers is an eighteenth century enlightenment idea, with
roots in Greek and Roman democracy. Prior this revelation, the highest concept of
government was the “Divine Right of Kings”, reflecting the role of religion as a
proponent and arm of the state. The idea of government by the permission of the
people, reflected in the concept of government of, for and by the people is a
defining concept of the US and is why we are exceptional in this world. The US is
the first and only country founded on an idea: that of government of, for and by
the people.

Elements of free enterprise and modern capitalism could be found in all

civilizations of course, but as a concept it was not defined or understood as
anything more than ordinary commerce and trade. And it was always subject to the
whim of a powerful elite.

Prior to industrialization, and at the time of our country’s founding, the primary
form of commerce was mercantilism, in which the state protected domestic merchants
and industry thru a system of monopolies and protective tariffs. Some free
enterprise certainly existed, due to the fact that commerce and trade between
individuals was taxed but otherwise not regulated, but major commercial activity
and trade between nations and states was regulated and controlled to varying
extent by government laws and actions for the benefit of an elite group. One of
the grievances the American colonists had with Great Britain was that Britain did
not allow them to freely trade with other countries and powers. The second major
grievance was the imposition of taxes on the colonies by parliament with out
representation. Thus, while one might argue that the American Revolution had its
roots in a rebellion against mercantilism, this was not the case. The colonists
simply wanted to be free to pursue their own form of mercantilism that favored
Americans instead of the British. (See: Wikipedia: Mercantilism)

The modern concept of Capitalism did not even exist in the eighteenth century,
when the ideals upon which the US was founded were developed, though the concepts
of liberal capitalism had their roots in ideas from that period, in particular
from Adam Smith and others. Prior to the nineteenth century, the term merely
referred to the ownership of wealth that could be used to produce goods. The
initial usage of the term capitalism in its modern sense has been attributed to
Louis Blanc in 1850 and Pierre-Joseph Proudhon in 1861. Marx and Engels referred
to the capitalistic system (kapitalistisches System) and to the capitalist mode of
production (kapitalistische Produktionsform) in Das Kapital (1867). The use of the
word "capitalism" in reference to an economic system appears twice in Volume I of
Das Kapital, p. 124 (German edition), and in Theories of Surplus Value, tome II,
p. 493 (German edition). Marx did not extensively use the term. Thus, it would
appear that term “capitalism” is a concept used to distinguish the new industrial
economic conditions that originated in nineteenth century England. Karl Polanyi
argued that capitalism did not emerge until the progressive commoditization of
land, money, and labor culminating in the establishment of a generalized labor
market in Britain in the 1830s. For Polanyi, "the extension of the market to the
elements of industry - land, labor and money - was the inevitable consequence of
the introduction of the factory system in a commercial society." See Wikipedia:
Capitalism

The original 13 states all had laws on the books that regulated commerce, a form
of mercantilism. Freedom was understood as the right to live free of coercion and
intimidation. It was unbridled mercantilism and tariffs between states that led to
the constitutional convention that wrote the U.S. Constitution. By stating in its
preamble that one purpose of the union was to promote the general welfare, and by
providing Congress with the power to regulate interstate commerce, the new
constitution recognized that the regulation of commerce was necessary to preserve
the commonwealth, protect the interests of the people and to provide a means for
the enforcement of contracts (rule of law). The first ten amendments to the
constitution were added in order to protect the natural human rights that defined
freedom and had motivated much of the American Revolution. There intent was to
limit the power of the new government to infringe on these freedoms. Since it was
the norm, government regulation of commerce was considered normal, but free
commerce flourished because the conflicts and perceived inequities that grew out
of the industrial revolution and increasing urbanization had not yet developed.
This was a result of the natural condition of a relatively un-coerced people, not
by design or plan.

As the US developed and became an industrialized country, achieving a higher

standard of living than Europe by the end of the nineteenth century, conflicts
between urban and rural interests and between labor and management, together will
abuses by some industries and businesses led to calls for more and more regulation
of the economy in the stated, if not real interest of promoting the common
welfare. The interstate commerce clause was used to justify this expanding
intervention, and the courts have upheld this expansion as constitutional,
(rightly or wrongly). Thus, the US has always had a mixed economy and the battle
continues. Throughout our history, people have argued for and against this
expansion, and unfortunately, the trend has always been toward more intervention,
briefly interrupted by President Reagan and his administration. This is because
our congressman can get away with demanding protection money (campaign
contributions) from their constituents to promote legislation in favor of one
group over another. Ina sense, we are moving back toward a type of mercantilism.

So, in my opinion, it is not really correct to say the US was founded as a

“Capitalist Nation”. The free enterprise system that we have enjoyed due to a
historical low level of government interference in our affairs is not inherent in
our constitution. This is because it was not fully understood as fundamental to
political freedom at the time of our founding. Only after the development of a
modern industrial economy and its enemy, collectivism, has this mistake become
better known, yet still disputed by the collectivists. Had the founding fathers
anticipated the enormous expansion of government regulation into the private
sector that has happened over the course of our history, at the insistence of the
people themselves, perhaps there would have been an economic version of the First
Amendment. I imagine it would be something like this:

Congress shall make no law respecting any establishment of commerce, or

interfering with the free exercise thereof.

Maybe it is time to push for such an amendment. What a revolution that would be!

This is my two cents. What's yours?