Capitalism: Its Origins and Evolution as a System of Governance

Capitalism, as defined in this book, is an indirect, three-level system of governance for economic relationships (i.e., economic, administrative, and political). Whereas economic markets can coordinate supply and demand within an existing system thanks to the invisible hand of the pricing mechanism, capitalism must have the administrative capability to regulate the behavior of economic actors within those markets and the political capability to redesign their institutions; regulation and the design of market frameworks require the visible hand and coercive powers of a political authority. This three-level structure closely parallels that of all organized team sports. The play on the field is like the markets of capitalism, and the actions of the players are regulated by referees who enforce a set of rules created and promulgated by a political authority that enjoys an anti-trust immunity. Capitalism is not a natural system and it did not emerge or spread by an unguided process like biological evolution; it has only existed since the liberation of the markets for land, labor, and capital, i.e., the end of feudalism. Its spread is a story of the politics of hostile takeovers and/or liberation. Capitalist evolution requires the continuing transformation of its three levels of governance.