"Business Leaders of Today are Not Capitalists"

John Kay says that the term "capitalism" is misleading in modern economies:

Let’s talk about the market economy, by John Kay, Commentary, Financial Times: ...Karl Marx never used the word capitalism. But after the publication of Das Kapital, the term came to describe the system of business organization which had made the industrial revolution possible. By the mid-19th century ... individuals or ... a small group of active partners ... built and owned both the factories and plants in which the new working class was employed... The economic and political power of business leaders derived from their ownership of capital and the control that ownership gave them over the means of production and exchange.

The political and economic environment in which Marx wrote was a brief interlude in economic history. ... Legislation passed in Marx’s time permitted the establishment of the limited liability company, which made it possible to build businesses with widely dispersed share ownership. ...

So the business leaders of today are not capitalists in the sense in which Arkwright and Rockefeller were capitalists. Modern titans derive their authority and influence from their position in a hierarchy, not their ownership of capital. They have obtained these positions through their skills in organizational politics, in the traditional ways bishops and generals acquired positions in an ecclesiastical or military hierarchy. ...

People do not know who owns their work tools because the answer does not matter. If your boss pushes you around, exploits you or appropriates your surplus value, the reasons have nothing to do with the ownership of capital..., ownership of the means of production and exchange matters very little.

Sloppy language leads to sloppy thinking. By continuing to use the 19th-century term capitalism for an economic system that has evolved into something altogether different, we are liable to misunderstand the sources of strength of the market economy and the role capital plays within it.

This is an important point, and it relates directly to the claim by many that inequality is needed in capitalist economies as an engine of growth. I think small businesses still operate in something resembling old fashioned capitalism -- owners putting their own resources at risk to open a new business -- but big business is another story (and in some cases, such as the finncial industry, too big too fail considerations reduce risk considerably for high level executives making arguments that this type of risks motivates innovation, etc. hard to swallow).