Question:
I see capital as a tool and capitalism could better be called toolism. Tools (capital) make us more productive. However, tools cost money. If one saves money to buy a tool, it will take much time. However, if one can get the tool first and then use the increased production from the tool, one could pay it off much more quickly. This is far more efficient than slowly saving using the less efficient productivity one has without the tool.This is the essence of capitalism. One can borrow to acquire the tool or one can act collectively, such as a farmer’s cooperative (selling shares would be a more advanced form of collective action). This seems so basic to me. Why is capitalism not explained this way?
Answer:
Terminology is a tricky subject. It is not right or wrong in any absolute sense, it is only useful or not. So, if you want to use “toolism” to describe what you see around you, and find it helpful, I would say “more power to you.” But it may be helpful to elaborate a bit on why economists use the term “capitalism."
Let’s start by unpacking the example you give. Tools are indeed useful in increasing production, but for the tool to exist in the first place, someone has to produce it. And that means devoting effort to producing the tool rather than producing something that can be consumed today. They do it because they expect to be able to increase their consumption in the future by more than the amount they give up today. But their ability to do this depends on a system of property rights that enables them to produce the tool (what economists would call capital equipment) and then profit from it by using it in production, selling it to someone else or leasing it out to users.
There have been oceans of ink spilled in disputes about how to define “capitalism,” but roughly speaking capitalism describes the system in which owners of capital (which includes tools, as well as structures, intellectual property or other produced assets) to profit from their ownership. For a more extended discussion of capitalism I encourage you to read the recently published book Capitalism and its Critics by John Cassidy. One conclusion from this book is that capitalism is not one thing. Rather it has evolved over time.
Ricardo, Marx, and some other 19th century thinkers believed in a labor theory of value, in which the value of produced goods reflected the value of the labor employed in making them. In this view, returns earned by owners of land and capital are a form of theft, unjustly taken from the producers of value. Modern economics, on the other hand, adopts a broader view and argues that the value of each input (and hence its appropriate payment) is its marginal contribution to the value of production. Further, and somewhat more tenuously, many economists would argue that the returns to these inputs in a market economy are roughly equated to their marginal contributions. But we have now wandered far afield of your original question.
So, yes, tools are an important factor in our modern economy. But not the only one involved in production. Capitalism, which is seen as underpinning a market-based economy describes something broader than you seem to be thinking about. So, by all means continue using the concept of “toolism”, but I don’t think it is quite the same thing that most users of the term “capitalism” understand it to be.
