Definitions Of Capitalism: Many People Don't Get It

Alexandra Ocasio-Cortez rightly identifies some genuine concerns about capitalism—yes, CEOs can be ruthless, businesses can be exploitative, and corporations may at times resemble dictatorships rather than democracies. But her depiction of capitalism fundamentally misunderstands how successful companies and economies function. Her criticism that capitalism prioritizes profits above all else and disregards human and environmental costs creates a caricature that misses the essence of what has enabled human progress.

She states:

"Capitalism to me is... an ideology of capital. It puts capital—the most important thing is the concentration of capital, and it means that we seek and prioritize profit and the accumulation of money above all else, and we seek it at any human and environmental cost. That is what that means. And to me, that ideology is not sustainable and cannot be redeemed."

Voluntary Exchange and Economic Freedom

Capitalism, at its core, is not an ideology of greed but a system of voluntary cooperation. Milton Friedman famously explained that free markets operate through voluntary exchanges that benefit both parties involved. If one party does not see value, the transaction simply does not occur. This fundamental principle of voluntary exchange—not compulsion—has lifted billions out of poverty worldwide. It is precisely this freedom of choice that incentivizes innovation, rewards creativity, and creates new opportunities.

For many libertarians and free-market Republicans, freedom from government intervention is not exclusively beneficial for wealthy CEOs and business owners. F.A. Hayek, in his influential essay "The Use of Knowledge in Society" (1945), argues convincingly that decentralized decision-making by individuals "on the spot"—workers and local managers—is crucial because only they possess the unique information necessary to make informed decisions. Government intervention inherently lacks the immediacy and precision of local knowledge, inevitably resulting in inefficiency and mistakes. Central planners cannot possibly acquire or process all the nuanced and rapidly changing information from countless local situations. Even if governments could obtain such information, the time taken to deliberate and disseminate decisions would render them obsolete by the time they reached the local level. This essential insight underpins why capitalism raises the standard of living not just for the wealthy, but importantly, for working-class people as well.

The Indispensable Role of Visionary Leaders

AOC argues that wealth comes solely from labor, dismissing CEOs and business leaders as unnecessary parasites. She specifically claims:

"At the end of the day as workers and as people as society we're the ones creating wealth, not a corporate CEO. It's not a CEO that's actually creating billions of dollars a year. It is the millions of workers in this country that's creating billions of dollars of economic productivity a year, and our system should reflect that."

Yet this view is fundamentally flawed. Labor alone, while crucial, cannot generate prosperity without visionary leadership, risk-taking, and strategic direction. Very often, it is the CEO who makes the difference between a company losing money and one thriving and creating significant value.

Let's take some prominent examples: Henry Ford didn't just assemble cars; he revolutionized manufacturing itself, creating an entirely new way to produce that lowered costs dramatically, making automobiles accessible to the masses. Steve Jobs didn’t merely employ laborers to assemble computers; he imagined entirely new products that reshaped human communication and interaction. Jeff Bezos built Amazon by challenging every traditional retail assumption, risking immense capital and personal credibility along the way. These individuals didn't just administer companies; they envisioned futures and willed them into existence through tremendous personal risk and stubborn perseverance.

Consider Fred Smith, founder of FedEx. In the company’s early days, facing imminent collapse and unable to meet payroll, Smith gambled company funds in Las Vegas, literally betting on his vision. He won enough money to keep FedEx afloat, eventually revolutionizing logistics and global commerce. Without such a bold, unconventional decision—a decision no committee would approve—FedEx would have become just another failed startup, remembered by no one.

Visionary leadership is not merely a garnish on successful businesses—it is fundamental. Successful CEOs like Ray Kroc of McDonald's or Sam Walton of Walmart changed not just their companies but entire industries, creating enormous economic value and employment for millions. They made decisions daily that defied conventional wisdom, persisted through repeated setbacks, and took personal risks that most would avoid. Without these relentless leaders, thousands of companies would have never reached their potential, or even survived past their infancy.

Wealth Creation: Not a Zero-Sum Game

It is equally incorrect to portray capitalism as a zero-sum game where wealth accumulation necessarily comes at others' expense. F.A. Hayek argued eloquently that economic success comes from decentralized decision-making and spontaneous order, not from central planning or democratic committees. Market economies generate wealth through innovation, cooperation, and voluntary exchange, making everyone better off in the long run. Wealth in capitalist societies expands precisely because successful companies create entirely new products, services, and markets. Steve Jobs’ Apple didn't seize wealth from someone else; it created entirely new wealth through products that consumers freely chose to buy, making lives richer and more convenient worldwide.

Cronyism: A Distortion of Capitalism

AOC also expresses fears of corporate takeover of government:

"We should be scared right now because corporations have taken over our government. And in my opinion, we should be wary of any entity in which both of those things are combined..."

On this, she has a legitimate concern—though she identifies the wrong culprit. Corporations seeking favors from politicians is indeed a problem, but this phenomenon is better understood as cronyism, not capitalism. Cronyism emerges when the state interferes extensively in markets, picking winners and losers, and incentivizing businesses to lobby for political favors. It is a perversion of capitalism, utilizing intimidation, political influence, and ultimately coercive force—the power of government-backed laws—to secure business advantages and suppress competition.

Cultural Dimensions and Entrepreneurialism

Entrepreneurial culture is not uniformly embraced worldwide. Cultural factors heavily influence a society's acceptance of risk-taking, innovation, and individualism. In Latin America, hierarchical cultures and fear of public failure often inhibit entrepreneurial spirit. Many in high Latin American society view American entrepreneurial boldness as brashness or bad manners. Yet this willingness to risk embarrassment and public scrutiny fuels innovation and economic dynamism.

Embracing Responsible Capitalism

Ultimately, there are several definitions of capitalism and various interpretations, but the debate should focus on nurturing responsible capitalism, encouraging ethical leadership, and promoting genuine competition and innovation.