For some time I have been unhappy with the term ‘capitalism’ that is used to describe the form of economic organization that is so robustly ascendant. I prefer the term ‘free market’ to describe the workings of the United States and much of the rest of the world. Now, I don’t mean to descend too deeply into the pedantic world of precise word usage that is featured so prominently in academic writing. Capitalism is a prettier term than free market. My problem is that capitalism describes something different from what we have now.

The term capitalism was inspired by Karl Marx’s description of how investments flowed to the most worthy activities for wealth creation. Most of us remember Marx as a deeply flawed social philosopher—which he was—but his description of capital flows remains a clear and elegant description of the deployment of financial capital. In some ways, what Marx observed was an economic system that had replaced feudalism in Europe. I call it a system because its participants were few, mostly landed aristocracy, with a plainly understood set of rules. What we have today is quite different.

Over the past hundred years and increasingly since the end of the Second World War, what the developed world (and much of the developing world) has experienced is a supplanting of this system of capital with a system that isn’t really a system. What we have now are markets; the difference is not subtle. Human beings intentionally craft systems. Markets spring spontaneously from the interaction of people looking towards their economic interests. The degree to which they are free varies with time and place, but the past 50 years have largely seen a movement towards more, not less freedom.

Of course there were free markets in the past, and the flow of capital still helps drive economic activity, but today much wealth creation is not derived from capital investment, and perversely now most households (in the U.S. at least) are capitalists in the Marxian sense.

In Marx’s time, European gentry lived on inherited land and deployed their wealth as capitalists. Truly wealthy entrepreneurs were rare, and no one was well off simply from the fruits of their labor. Today is quite different.

Of the top 25 richest Americans listed by Forbes, 16 are unambiguously entrepreneurs whose wealth was accrued in their lifetimes. Of the remainder, only three have not had a direct hand in the gritty details of growing a business. But, it is at the local level that the change is more apparent. I personally know no one, save retirees, who live on their accrued capital. Even those who have inherited some money still work. It is the physician, lawyer or local entrepreneur that has replaced the country squire as the local aristocracy.

The term capitalism fails most in describing the modern world in that it implies elitist economic interests. Today about 8 in 10 households will own stocks and bonds through their retirement funds.  We live in a free market economy today, in part because we are all capitalists now.