Is capitalism constitutional? Throughout our history it has been generally, although not universally accepted as such. The principles of Laissez faire economics, or free market capitalism have coexisted simultaneously both within and outside of a constitution that does not endorses or rejects it, let alone mentions it or define it. The United States Constitution is purposefully vague, a document intentionally open to debate and interpretation. That being said, the question is whether capitalism is implied by a Constitution which does not mention it?

The same Constitution which does not mention any economic system also does not contain the word democracy or any derivative of the word and makes no such references to political parties. Yet all of these institutions have evolved under this document. Whilst the Framers initially distrusted direct democracy and political factions organized as parties, they were all beneficiaries, exemplars and advocates of the capitalist system as we know it.

Thus the democratic process involving political parties was intentionally excluded as it was then unacceptable, but mention of capitalism was excluded from the document for opposite reasoning, as it was taken for granted as universally accepted.

Is capitalism democratic? In a country such as our own, any poor kid whose talent matches his ambition and work ethic may grow up to be President of the United States or CEO of their own Fortune 500 Company. As none of our public or private sector offices are hereditary, they are meritocratic if not entirely democratic. Capitalism, in the broadest sense of the word, pertaining to the multiplication of profits, has certainly existed in aristocratic societies since the dawn of civilization. But the constitutionality of privatized capitalism in question is laissez faire or free market capitalism.

THE WEALTH OF NATIONS

A historical background is necessary for understanding the evolution of our geopolitical economy both past and present. Conveniently, our Declaration of Independence was penned in the same year as the publication of Adam Smith’s Wealth of Nations. Appropriately, the principles of this book were eagerly adopted by our upstart nation and gradually embraced by the mother country. Our statuses as world leaders have resulted on the imposition of a global free market economy.

In this treatise, considered the masterpiece of neoclassic economics, Adams proposes an alternative to the prevailing mercantilist economic system. Mercantilism measured a nation’s monetary value in gold and silver rather than labor. It demanded that a nation’s economy be dominated a central government which imported more than it exported in order to secure an abundance of bullion. Competition was limited between sovereignties with comparatively little competition amongst individuals within those sovereignties.

In the Wealth of Nations, Adams Smith asserts that government should play a minimalist role in global economics, “the invisible hand” and proposes the revolutionary idea that competition between individual self interests better stimulates the national economy. The same principles of individualism and competitiveness in a free market exist within the popular elections of a free government. Therefore such a system flourishes best under a free government and solidified Britain’s dominance over France and ultimately our dominance over Britain.

A dogmatic interpretation of Smith’s system is not always most practical. For example, Smith relished the revolutionary idea that “the invisible hand” government should finance no public works, which would come from private charity. This was more practical in maritime Britain than in continental America. As Britain’s island economy main avenue of commercial transportation was the sea, the main vehicle of transportation was ships which could be entirely funded by private interests. The rail-roads and later highways which linked the Atlantic and Pacific ends of our continent, by contrast could only be financed by taxation, requiring a more activist role of government.

Critics of contemporary capitalism also stress that Smith abhorred the institution known as the corporation. Our Founding Fathers were all beneficiaries and exemplars of contemporaneous capitalism, in which the corporation, which is the combination of companies in similar sectors merged to reduced upstart competition, was minimal. Adam Smith was as opposed to private monopolies as he was public monopolies such as Virginia Company, Massachusetts Bay and British East Indian companies.

Monopolistic institutions, weather public or private destroy the competitive and individualistic elements of a capitalism which is compatible with free government. It is detrimental to the principles of upward mobility and contradictory of the principles of equal opportunity. Yet only the invisible hand of government has the power to break up monopolies and restore completion. The question is does our government grant this system of economics?

COMMERCE CLAUSE

While our Constitution is silent about what system of economics is legally permitted, it is not silent about the subject of economics at large. Article I, Section 8, Clause 3, known as the Commerce Clause states that The Congress shall have the Power To Regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. The Commerce Clause predates our Constitution and was featured in the Articles of Confederation, which governed the colonies from 1781 until the ratification of the Constitution in 1788.

A Confederation is weaker breed of national government than the Federal Union which succeeded it. A Confederation’s central government has only the duties of defense and foreign policy and no such power to regulate the economy. During the colonial era, each colony had stronger economic ties to London than each other and struggled to conduct interstate commerce peaceably during the period of Confederation. Foreign trade was guided by London, but in the absence of a capital city or federal government, foreign trade was clumsy and profits were marginalized.

A completely free market, as existed amongst the states during the Confederation period parallels an anarchic government. As our Constitution provides us with a limited government, limits on businesses privileges to operate outside of or above the law which contradictory the principles of republican government become necessary. The golden mean between unlimited government and anarchy is mirrored by our government’s right to regulate in times of economic downturn. As a corollary it is bad politics for them to regulate when the markets are taking care of themselves.

Our country has experienced repetitive cycles of heavy and lax government regulation of our economy. Fixing a damaged economy was not considered a governmental responsibility in the 19th century. Most presidents were onlookers of bear markets, bull markets, recessions and depressions until the Progressive era. The Panic of 1907 was the last time in which private bankers would have more power than government regulators during economic crises. The Federal Reserve System was established in 1913 for such repeat of events.

SEPERATION OF POWERS

In the interest of preserving a limited government, our Framers adhered to the principle of separation of powers in the interest of preventing any one individual or institution from wielding too much power. Thus we have a horizontal separation of powers pertaining to the branches performing differing functions, those being the legislative [the power to create laws,] the executive [the power to enforce laws] and the judiciary [the power to interpret laws.]

Accompanying this is the vertical separation of powers; federal, state and local inside of which the horizontals exist as guaranteed in Article IV Section IV which states “The United States shall guarantee to every State in this Union a Republican Form of Government, and shall protect each of them against Invasion; and on Application of the Legislature, or of the Executive [when the Legislature cannot be convened] against domestic violence.”

The 9th and 10th Amendments from the Bill of Rights added to the Constitution on December, 15th 1791 further solidify that principle ordained in the original Constitution of 1788. Amendment IX states: “The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.” Amendment X states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States respectively, or to the people.”

What does this have to do with capitalism? In the absence of concretely endorsing it in any preceding articles or ensuing amendments, our Constitution implies a system of economics which allows entrepreneurial individuals to put their ideas into actions by starting their own businesses without the permission from the government. Capitalist without capital may attain the necessary capital to begin such an enterprise through private banks operating outside of the governments thumb.

A government with the constitutional provision to “facilitate” commerce implies, by definition that the government is the macro manger rather than the micromanager of the national economy. The separation of powers not only limits the functions of a branch of government but keeps an arm’s length difference between Wall St. and Washington. Most experts agree that government cannot manage the economy as efficiently as private enterprises. In the words of Milton Friedman “if the federal government ran the Sahara Desert, there’d be no sand left in 5 years.”

The principle of separation of powers between business and government is paralleled by the establishment clause of the 1st Amendment which states “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof;…” The establishment clause mirrors Article I, Section 9, Clause 5 [originally clause 6 before the passing of the 16th Amendment rendered the original 4th clause null and void] which states “No preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another; nor shall Vessels bound to, or from, one State, be obliged to enter, clear or pay Duties in another.”

Just as religiosity flourishes peaceably without government interference, so too does business. Just as lack of religiosity or belief in a conventional God, is constitutionally protected, so too is lack of belief in capitalism or even representative government. Ironically, many people such as filmmaker Michael Moore have capitalize off of popular resent towards capitalism as we will read later! Alternative 3rd part movements have had plenty of success at the levels of local government as well.

Our 2 party system, not originally ordained by the Constitution has nonetheless contributed to our web of checks and balances. Thomas Jefferson, the father of the party system was not a Framer of the Constitution which does not mention it, as he was serving as French foreign minister during the Constitutional Convention. Upon his return, he recognized the inherent flaw of all branches in the Federal government being officered by Federalists, believers in strong central government.

Jefferson’s organization of the original Republican Party in 1791 [not to be confused with the permanent party which survives to this day of the same name formed in Ripon, Wisconsin in 1854] gave us a system of political parties which rendered transformed our oligarchic Republic into the Democratic Republican form of government we know today. Historically, the conservative parties [Federalist, Whig and Republican] have been more capitalistic whilst the liberal parties [original Republican, Democratic] have stood for a capitalism restrained by governmental checks and balances.

A FREE MARKET FOR FREE PEOPLE

“Commercial shackles are generally unjust, impolitic and unwise”- James Madison
The principles of a free market economy are completely compatible with the principles of free government, including but not limited to free speech and the entirety of the first amendment as we will later read. A nation founded upon one’s right to disagree and debate in the political arena extends to the business market. The principles of free speech are conducive not only of the written and spoken word but of prices set by owners of a product.

Just as a person who owns their own conscience has the right to speak their own words, a person who owns a product has the right to name their own prices. The customer has the similar right to negotiate or tell them to go to hell and if they think they can sell a better product for a better price, they can start their own business. But a government has no constitutional mandate to set price limits on private sector commodities.

In spite of this, our government has initiated both minimum wage laws and war time price controls on commodities such as oil and steel to reduce war profiteering by the private sector to the public detriment. The constitution neither empowers nor prohibits them to do so, but capitalism unchecked by some government regulations has no place in a government of checks and balances. Does our government have the right or responsibility to do so during peacetime recessions?

In the words of Oliver Wendell Holmes “the most stringent laws of free speech would not protect someone from shouting fire in a crowded theatre.” Our government has and will precipitate and instigate incidents to enable them with the excuse to do so. As capitalism is protected by a government of checks and balances, it must also check and balance that government. The equilibrium between the two is best realized when a single party does not monopolize all of the branches of the federal government.

The freedom of the press, which is a private enterprise, is indicative of the freedoms of other forms of business. The free press was established to give the little man a voice against big government and eventually, big business, yet the mainstream media has acted duplicitously in this regard, defending or attacking government and business leaders according to their partisan biases. Free press, like other free enterprises has been suspended as a wartime measure on more than one occasion.

The right to assemble and petition the government can be translated into the private sector. When a citizen or group of citizens thinks they can manage a company in a sector better than “the majors” they may organize an opposition business to give them a run for their money. It is unlikely though not impossible to do so without the assistance of trust busters to marginalize the majors, ingenuity of thought and originality of methods are essential ingredients in doing so.

TRANSLATION OF ADDITIONAL AMMENDMENTS IN CAPITALIST CONTEXT

Inasmuch as the Bill of Rights establishes a vague outline of Republican government, it also protects that form of government from contradictory forms of government. The First Amendment prohibits the totalitarian/ authoritarian government in general at large in which the individual is subordinate to the state. Individualism is the essential ingredient of a free market society, where the role of government is that of the servant and not the master.

Specifically, the establishment clause which opens that amendment prohibits a specific breed of totalitarian government, the theocratic state in which all inhabitants are subject to the same religion. Historically, civilizations had been dominated by two upper classes, the landowners and the priests until the rise of the bourgeoisie in very modern times. In aristocratic societies, the merchant class composed perhaps 2% of the populace and exerted economic though not political influence until meritocratic governments replaces hereditary governments.

The 2nd Amendment “A well regulated militia, being necessary to the security of a free State, the right of the people to keep and bear Arms shall not be infringed” prohibits the police state, which many of the authoritarian governments of Europe employed both in their aristocratic form and in their conversion to Communist and Fascist governments. The right of the people to protect themselves from the government which protects them from criminals translates to their government’s responsibility to protect their rights to provide for themselves rather than reducing them to a perpetual state of receivership as in a socialist government, where gun control is law.

The 3rd Amendment “No Soldier, shall, in time of peace be quartered in any house, without consent of the Owner, nor in time of war, but in a manner to be prescribed by law” prohibits the military state such as that which existed in Prussia. The Founding Fathers so distrusted standing armies that they did not establish one until state militias proved incompetent during the war of 1812. They still managed to establish a standing army without fully compromising the principle of separation of powers by placing the military under civilian control.

Our military has both protected and advanced our capitalist system. As necessity is the mother of all invention, war necessitates the need for technological and medical advances. The so called military industrial complex consists of civilian corporations aiding the war effort through innovations second to none. Our defense spending may exceed all other nations combined, but the alternative would be an expense of casualties, which has been reduced by such spending. This military industrial complex has spread our system of capitalism to enslaved peoples.

The 4th Amendment, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath of affirmation, and particularly describing the place to be searched, and the person or things to be seized” clearly implies the principles of privacy necessary for a private sector economy. In the absence of any criminal activities, the government has no constitutional mandate to poke their nose in the activities of businesses.

The 18th Amendment, pertaining to prohibition and eventually repealed by section I of the 21st Amendment is in instance of government intrusion by illegalizing a previously legal market. This amendments failure to stop the inevitable market of alcohol backfired and gave the rising criminal element of society the money they lacked to buy political influence. So what of other illicit intoxicants, which were illegalized before widespread use? Or legal pharmaceutical drugs, which total one fifth of our economy and are now threatened by socialization?

THE RELATIVE MERITS OF CAPTIALISM AND SOCIALISM

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”- Thomas Jefferson

There is a common misconception that none of the Founding Fathers had any socialist leanings whatsoever. Benjamin Franklin’s writings mention the idea of contractual obligations provided for the governed by the government. Characteristically, he entertains that idea without definitively embracing it. Furthermore, these writings are not featured in the constitution. Socialism was less taboo in France and we all knew how their Revolution evolved- from anarchy to monarchy, repeat.

But this well traveled polymath who was as familiar with the Patriots of ’76 in Philadelphia as he was with Adam Smith and his French Pysiocrat colleagues and Britain, as he was the French enlightenment philosphes [many of whom were socialist] said more definitively:

“I think the best way of doing good to the poor is not making them easy in poverty, but leading or driving them out of it. In my youth I traveled much. I observed in different countries that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And on the contrary, the less was done for them the more they did for themselves and became richer.”- Benjamin Franklin

While capitalism is implied in constitution, the opposite runs true for any hint of socialist doctrine. What is socialism? No word incites the opinionated quite like S-word in post-Cold War America. In other 1st world country socialism is an accepted way of life, but socialism; in name if not necessary practice has always been taboo in America since the principle of “he who shall not work shall not eat” was established in Jamestown.

By the author’s definition, socialism is government monopoly cloaked in equality. All socialist dictators have masked their hidden agendas with populist pretensions. Socialism, true to its nomenclature of political correctness rather than factual corrections defines itself as “a certain scientific solution to social and economic problems.” Yet by definition the scientific method does not accept as fact that which has not been proven, and thus so far socialism has always resulted in permanent unemployment rather than the cycles of prosperity as in a capitalist country.

The controversy of capitalism has increased with time in our country. Questioning capitalism is of course most common during economic recessions and depressions. Most recently, Michael Moore states in his film “Capitalism: A Love Affair” argues that capitalism is unconstitutional and undemocratic before declaring himself a socialist without defining the term. This is indicative of the very nature of socialism, relative to its geopolitical area and subject to the arbitrary whims of its dictators who observe and respect no constitutional obstacles to their agendas.

Democratic socialism is an oxymoron. The argument that capitalism is undemocratic renders some merit in that capitalism is the unequal distribution of wealth. But as socialism is the equal distribution of poverty, the argument must continue. Socialism cannot compete with capitalism in terms of equal opportunity or socioeconomic upper mobility. In a democracy, a poor kid may become president by virtue of talent and work ethic. In a capitalist society, the same kid may start his own fortune 500 company by the same means.

Thus while socialism is perhaps more egalitarian as capitalism, it is not as meritocratic and therefore not as democratic. In its purest form, which is the invisible hand of Adam Smith, the free market does not care if its participants are black or white, Jew or Gentile, man or woman; talent and ambition are the decisive factors. Detractors of the capitalist system smear it as racist and sexist, in the absence of any real constructive criticism they seek refuge in slander. The only people the capitalist system discriminates against are whining malcontents like Michael Moore.

If we are to believe in the merits of Winston Churchills proclamation that “Democracy is the worst form of government except for the others,” we may, by the same logic argue that capitalism is the worst economic system, except for all the others. Socialism’s pseudo-scientific factoids indicate a form of government every bit as authoritarian and aristocratic as one founded upon false theological factoids.

“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy. Its inherent virtue is the equal share of misery- Winston Churchill