2.1.1 The provenance of a misleading term

The use of the term “capitalism” dates to the early nineteenth century. The notion of capitalism as an economic system grounded on capital investments traces to that period in both French and English. The OED traces the first use in English to 1833 in the Standard, and offers the following comparisons:

Compare French capitalisme possession of capital (1753), economic system based on capital investment (1842), German Kapitalismus possession of capital (1787 or earlier), economic system (K. Marx 1863 or earlier).158

Of course, the term “capitalist,” with a “t,” had an earlier provenance, also related to the term “capital,” which itself was in usage in the thirteenth and fourteenth centuries. Its etymology (“capitalist”) traces to the “French capitaliste (noun) person subject to a capital tax (in the Netherlands) (1678), investor (mid 18th cent.), (adjective) of or relating to capital (1755 in an early use of uncertain precise meaning), engaged in investing capital (1832), that advocates capitalism (1869), itself after Dutch capitalist (noun) person subject to a capital tax (1621), rich person (1683), advocate of capitalism (late 19th cent.).”159 Along these lines, in English, the term “capitalist” was used beginning in 1774, referring to the Dutch wealthy subject and to “capitation”; and its date stamp in English has to be compared with the “German Capitalist investor, moneylender (1673 with reference to the Netherlands), rich person (1687), advocate of capitalism (now Kapitalist), Italian capitalista investor (1769, rare in early use).”160

For its more political economic meaning, though, we must turn to the early to mid-nineteenth century and, for the most part, to the socialist critics of capitalism. This is ironic, since it is in this usage of the term that “capitalism” became reified and naturalized—as if “capital,” as a thing, functions economically, when in fact it is nothing but a set of crystalized government rules of economic redistribution. Capitalism, in other words, and tragically, was turned into a naturalized object by its critics.

But so-called capitalism is not primarily about the object “capital.” Rather, it is about government privileging returns on investments with more favorable tax rates, government protecting capital investors by bailing them out during financial crises, and government encouraging and underwriting the stock markets.

In this sense, capitalism is really about the state’s control over the redistribution of proprietary interests. It is a form of dirigisme that favors individuals who privately hold capital as property—it is not just a regime of private property.

Capitalism, as an economic regime, is the product of government and elite control of the mechanisms of redistribution: bailouts during crises that allow managers to enrich themselves during good times, without making reserves or taking risk into account, because they are bailed out during bad times; rules of capital accumulation that make it easy for those with wealth to hoard more than others and pass it on to their heirs; wide-ranging actions (from judicial decisions to intelligence gathering shared with top officials to selective club admission) that give those with capital the knowledge and ability to capitalize on their wealth. By bailing out during crises, especially, the government allows capital holders to pillage in good times and get rescued in bad.

One of the greatest problems with retaining the term “capitalism” is that it suggests that “capital” and private enterprise have certain laws surrounding them; that they function naturally in certain ways. Even Marx naturalized capital too much—not paying sufficient attention to the political dimension of bailouts and handouts. This was facilitated by the very nomenclature of “capitalism.”

This type of economic regime should no longer be called “capitalist,” but rather a term that has government and elite control and redistribution at its heart. It is closer to the “state capitalism” that we attribute to China; but again, the term “capitalism” in “state capitalism” is a red herring. All the terms that quickly come to mind are lacking: corporate welfarism does not afford enough attention to the centrality of this welfare system, as if welfare is just something in addition, when in fact it is the whole system; cronyism gets at the corruption of it all and its elitism, but is too demeaning; profiteering, like the pirates of past, captures something about booty and stolen profit, and has an interesting relationship to state sanction and complicity, but the relationship to the state is backwards because it was the pirates who were more in charge and only later licensed.

I would propose instead that we call it “tournament dirigisme” to capture both the element of state control (dirigisme) and the way in which the state distributes the spoils. In the United States, we live in an economic system of “tournament dirigisme” that is all about extraction of wealth and redistribution to the wealthiest—the whitest and most privileged.

The metaphor of extraction is important, as Saskia Sassen has emphasized.161 Our tournament dirigisme seeks to extract wealth from the enterprise. The capital investors have one guiding interest: to extract a profit. They are not really concerned about growth and equity, nor about other persons affiliated with the enterprise. They want a good return on their investment. The metaphor here is gold mining or mining more generally. Our tournament dirigisme is an extractive process that seeks to extract capital as wealth and leave behind the detritus. Like an old mine, it then abandons the space of extraction. It does not care. All it wants is the profit.

There is, of course, a spectrum of extraction. At the most extreme end, there are vulture capitalists who buy failing enterprises because they are worth more sold as assets than they are as ongoing enterprises. That is pure extraction. Investors like T. Boone Pickens or Carl Icahn, who used to be referred to as takeover artists or corporate raiders, often took the strategy of buying companies literally to extract capital—more capital than they paid—by breaking up the company and selling its assets. But even in less extreme forms, extraction is at the heart of the enterprise: to mine a higher return on investment than others, or than the market, by treating and working others to the bone. Otherwise, there is no comparative enrichment.

Marx’s critique of capitalist modes of production focused so much on labor and the exploitation of workers that it did not sufficiently account for the central role of the state in directing distributions in favor of capital holders. Marx too had a fetish for capital, for surplus-value, for the commodity that is our labor. He replicated that objectification and turned it into the idea of a regime of “capitalism.” “It is often said,” as Foucault reminds us in his lectures on the Birth of Biopolitics, “that there is no theory of power in Marx, that the theory of the state is inadequate, and that it really is time to produce it.”162 Perhaps Marx did not need one at that time. Perhaps he had sufficient work to do to understand the political economy of industrial production. But we certainly do today because so-called “capitalism” is nothing more than dirigisme now.

The problem, in any event, traces further back. Adam Smith set out to analyze the economic wellbeing of a nation or of society as a whole—the wealth of a nation; but he developed instead a magical theory in which economic development and the division of labor ultimately benefited the workers, even the lowest on the social order. For Smith, the wealth of nations lifted every boat. Marx was right to call this “bourgeois economics.” And while Marx took an opposing viewpoint—that of the factory worker or tradesman—he may well have focused too much on labor, as Max Horkheimer, Axel Honneth and others demonstrate. In this, Marx too gave too much autonomy to capital.

Neither Smith nor Marx, paradoxically, paid sufficient attention to the state. With the New Deal, but certainly with the bailouts of the Great Recession of 2008 and the COVID-19 pandemic, we live in a more transparent age in which we can see the central and key role of the state.