Michael Novak writes in The National Review, Democratic Capitalism  The prospering of free societies depends on certain moral and cultural practices. Sept 24, 2013


For instance, more than a hundred nations of the world have discovered by experience during the past 60 years that a dynamic economy is better for the poor — for hundreds of millions of the poor, as in China and India — than either of the alternatives. Those alternatives are traditional agrarian economies and socialist economies. And at the dynamic center of the best economy for the poor are habits of the heart and mind and, to give them steady support, new institutions.

The particular habits of the dynamic economy are enterprise, invention, discovery, intelligent organization, and hard intellectual (and physical) work. The institutionsthat nourish such virtues include: the rule of law, private corporations (especially small ones, which create most of the jobs in the economy), open and competitive markets, rights of association, rights to an inexpensive and easy incorporation in law of new businesses, respect for private property, including patent and copyright laws to protect original ideas and compositions, and tax codes favorable to good habits that bear practical fruits.

These crucial points explain the reason why the dynamic economy that raises up the poor is called capitalism. Why? Because that word derives from the Latincaput (head), the seat of ideas and invention and discovery. Capitalism is the mind-centered system. It assists economic creativity at every turn. Under agrarian systems, wealth is counted by capita – heads of cattle, horses, sheep, goats. Under capitalist systems, it is counted by the royalties accruing from ownership in ideas, discoveries, inventions.

Notably, for example, capitalism depends on laws recognizing patents and copyrights for new inventions and works of the mind. These laws make works of the creative mind more valuable than land. Thus does the agrarian society pass into the capitalist society.

In sum, markets do not make capitalism. Private property does not make capitalism. Both of these features are as old as biblical times. They mark the traditional economy, the economy of stasis, in which the vast majority of the people are poor and have little or no way to better their condition. These are societies in which the poor have for centuries had little upward mobility.