“Capitalism” and “free enterprise” are not the same thing

“Capitalism” and “free enterprise” are not the same thing

“Capitalism” and “free enterprise” are often equated. They should not be. “Free enterprise” is unfettered economic activity; it occurs where there is a free and open market for the production and barter of goods and services. Entrepreneurs (people who start businesses and take the risks) are the backbone of “free enterprise” systems. “Capitalism,” on the other hand, has two basic definitions.

The first definition elates to so-called “capital goods”.

Those are goods that are used to manufacture other products. A typical capital good would be a machine used on an assembly line.

A “capitalist” can therefore mean a person who buys capital goods and uses them to manufacture other products for a profit. This type of capitalist is usually found in a “free enterprise” system, but he or she does not require a free enterprise system to survive. He or she can exist in almost any type of political or economic system so long as a profit is made. In fact, this type of capitalist often survives best in a closed enterprise system where there is little or no competition.

Governments are capitalists when they own and invest in capital equipment.

The second type of capitalist is the “financial capitalist.”
Financial capitalism is the control of resources through the investment and movement of money. It may or may not involve the purchase of capital goods. A financial capitalist usually invests his money in company stocks and influences the use of resources by determining what enterprises he will invest in.

A financial capitalist may also be a banker who is entitled to create inflatable paper money to lend, and who is able to influence the use of resources by how he lends out his “created out of nothing” money.

The financial capitalist also does not require a free enterprise system to survive and often benefits from monopolies.

As we can see, capitalism is not the same creature as free enterprise, even if they often co-exist. Free enterprise and capitalism frequently come into conflict with one another because capitalism tends to move in the direction of monopoly and free enterprise tends to favor free and open markets accessible to any entrepreneur.

In 1989 and the early 1990’s, Russia and most Eastern European nations voluntarily dismantled communism in their nations to replace it with Western-style democracy.

The Soviet Union was abolished and most of the Soviet republics became independent countries united in a loosely-knit confederation called the “Commonwealth of Independent States.” Private ownership of land and
business was restored to a large extent.

Nevertheless, it is still useful to discuss what the Soviet Union was like under communism to understand how this important Brotherhood faction did so much to perpetuate significant problems within our own lifetime. Furthermore, communism still dominates other nations and continues to inspire revolutionary conflict in the Third World.

The economic system of communist Russia model was an ultra-capitalist one because its industry was even more monopolized, and the nation’s economy was even more dominated, by the same institutions which dominate capitalist nations.

The most significant of those institutions is the Central bank, which operated just like the central banks of Western nations. The major difference was that the socialist central banks had, and still has at the time of this writing, an even more intrusive role in the country’s economic life.

The Soviet Union’s central bank was called the Gosbank. It was both a central bank and commercial bank rolled into one.

As of 1980, the Gosbank had approximately 3,500 branches and 150,000 employees. Major Soviet enterprises, which were all government owned, depended upon the Gosbank for loans to tide them through periods when their outlays were greater than their incomes.

In other words, communist government enterprises in the Soviet Union also operated on a profit-loss basis and they had to borrow money from the Gosbank when they suffered a loss. As in non-communist nations, Soviet enterprises paid interest on the money they borrowed. The only difference was that the Gosbank charged fixed interest rate whereas many Western banks have a fluctuating rate.

The Gosbank was, and still is, a “bank of issue”; i.e., it is empowered to issue money. Gosbank creates money “out of nothing” just as Western banks do. Although the Gosbank was ostensibly under government control in communist Russia, it was in fact a semi-autonomous institution to which Soviet enterprises were, and still are, deeply in debt.

The Gosbank was even more dominant in Soviet financial affairs than are central banks in Western nations because all transactions between Soviet enterprises had to go through the Gosbank.

This allowed the Gosbank to oversee all day-to-day financial transactions involving Soviet enterprises. The Gosbank was also in charge of dispersing wages to all of the workers. It was an enormous bureaucracy which regulated
Soviet economic activity to a remarkable degree.

As we can see, communist Russia was a financial capitalist’s dream. The Marxist idea that everything is owned “collectively” under communism simply meant that a select elite in banking and government had complete authority to direct the use of all exploitable resources in the country.

Soviet workers were paid wages with which they could buy personal goods, but under Soviet law they could not own land, buildings, businesses, or any large industrial equipment. Soviet citizens could sell only “used” or personally-produced items, but they could not hire others for personal profit or engage in middleman activities.

Although there existed limited exceptions to these restrictions and a flourishing black market, Soviet laws nevertheless created an effective monopoly in which Russian workers were highly exploited in a rigid feudalistic system; we need only compare communist Russia to medieval feudalism to appreciate that fact:

As in old European feudalisms, the majority of the Soviet citizens were forced to suffer chronic scarcities of goods and services, and they were told that they had to endure it as a sacrifice for the good of mother Russia.

As in old feudalisms, the Soviet people were effectively “tied to the land” by a rigid bureaucracy which forbade people from moving without government approval. That regulation existed to control the economic and political life of the Soviet Union by deciding where people lived and worked. That was the same motive used to tie people to the land under old feudal lords. This caused the Soviet people to become, to some degree, serfs. Emigration to nations outside of the Iron Curtain was severely restricted which, again, added up to a form of serfdom because the people were anchored to the land on which they were born.

As in old feudalisms, the “elite” of communist Russia were accorded special luxuries and privileges denied by law to the “masses.” In the Russia, such privileges included fancy stores in which only a relative handful were permitted to shop. The “elite” also found it easier to travel outside of the Soviet Union and to send their children abroad to be educated.

The old feudal lords maintained the system by offering a fortified castle into which the serfs could retreat when attacked by marauders or foreign armies. The Russian Socialist system also stayed alive by encouraging xenophobia and by regularly reminding the Russian people about the invasions of Russia by Napoleon and Nazi Germany.

The Soviet state promised its people protection against a frightening and dangerous outside world.

As we can perhaps see, Marxist glorification of the laborer fit the Soviet communist system very well. Because the system put such severe limitations on ownership, the vast majority of people were only valuable as workers and
bureaucrats. Communism is also openly atheist, i.e., it denies the existence of any spiritual reality.

The Soviet communist system thereby satisfied the Custodial intentions expressed in ancient texts of preserving Homo sapiens as a creature of toil whose existence from birth until death shall be one long struggle for physical existence with no access to the spiritual knowledge which might set him free.

From the book “The Gods of Eden”

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