Introduction
The question of what capitalism is has become harder to answer because the term carries too many analytical burdens. In liberal economics, capitalism is usually presented as a system of private ownership, voluntary exchange, competitive markets and capital accumulation. In radical critiques, it is often treated as a historical machinery of exploitation, colonial extraction and inequality. Both accounts identify something real, yet both are incomplete when treated as total definitions. The first explains the internal mechanics of market coordination but often underplays inherited structures of power. The second exposes historical violence but can reduce capitalism to its origins. This disagreement is best treated as a definitional problem rather than an ideological one.
This article’s contribution is not simply to add institutions to the list of things capitalism involves. Pistor (2019) has already shown that capital is legally coded, and Strange (1996) has already shown that power increasingly operates through structures rather than direct command. What is missing from either account on its own is a mechanism that links legal coding, infrastructural power and the newer dynamics of intangible and platform value capture. This article supplies that mechanism, which it calls conversion, and argues that conversion, not exchange or law in isolation, is the appropriate unit of analysis for capitalism as a system.
The Conventional Definition and Its Blind Spot
The classical understanding of capitalism has strong explanatory value. Smith (1776) treated commercial exchange as a mechanism through which individual pursuit could generate wider social wealth. Ricardo (1817) explained capitalist growth through distribution, accumulation and comparative advantage, while Hayek (1944) later argued that prices coordinate dispersed knowledge more effectively than central planning. North (1990) added an institutional dimension by showing that property rights, contract enforcement and predictable rules reduce uncertainty. In this tradition, capitalism is an institutionalised form of coordination that allows investment, specialisation and exchange to occur beyond immediate personal trust.
The weakness lies in the level of analysis. The conventional definition often treats institutions as background conditions that enable capitalism, not as constitutive features of capitalism itself. If capitalism is merely market exchange, it becomes difficult to explain why similar productive effort produces different capacities for wealth accumulation across regions. Acemoglu and Robinson (2012) rightly emphasise inclusive institutions, yet their nation centred framework, built primarily around domestic property rights and political inclusion, has less to say about transnational asymmetries in finance, intellectual property, standards and reserve currency systems that now shape accumulation across borders rather than within a single state. The harder question is not whether markets allocate resources, but who possesses the institutional power to convert market activity into durable wealth.
Historical Architecture and Institutional Persistence
Historical critiques of capitalism remain necessary because markets did not globalise in an empty world. Williams (1944) connected Atlantic slavery to British industrial development, while Wallerstein (1974) argued that capitalism emerged through a world system divided between core and peripheral economies. Arrighi (1994) extended this argument by tracing capitalism through cycles of accumulation organised around changing centres of commercial and financial power. Polanyi (1944) challenged the naturalisation of markets by arguing that market society was politically constructed. These arguments unsettle the clean distinction between capitalism and older forms of imperial privilege.
Yet the claim must be handled carefully. Capitalism should not be reduced to colonialism. Colonialism was one historically significant pathway through which global capitalist institutions expanded, but capitalism has also adapted across democratic, authoritarian, liberal and developmental states. Pierson’s (2004) theory of path dependence helps explain the issue: institutions may outlive the political systems that created them because legal rules, financial habits, trade routes and standards continue to structure later choices. Formal empire may end while institutional routes of value movement remain. The central question, then, is not whether capitalism replaced mercantilism, but whether it inherited, transformed and repurposed mercantilist infrastructures of accumulation.
Capitalism as Institutional Ecology
A stronger definition must treat capitalism as an ecology rather than a single mechanism. Markets require law, finance, trust, standards, knowledge systems and political legitimacy. Ostrom (1990) showed that economic coordination cannot be reduced to a simple choice between state and market, because institutions vary in how they structure incentives and collective outcomes. Pistor (2019) pushes further by showing that capital is legally coded: assets become capital when law gives them priority, durability, convertibility and protection. Capital is therefore not merely a thing that exists before institutions act on it; it is partly produced by institutional recognition.
This ecological view shifts attention from production to conversion. A society may produce commodities, services or labour, yet lose much of the final value if it lacks control over intellectual property, branding, finance or distribution platforms. Gereffi (2018) and Dallas, Ponte and Sturgeon (2019) show that global value chains are not flat networks of exchange but contain governance structures that decide who captures value at different points. The World Bank (2020) similarly notes that participation in global value chains can support development, but the benefits depend on upgrading, capability formation and institutional conditions; market entry alone does not guarantee value retention. The World Trade Organization, Asian Development Bank, Institute of Developing Economies and Research Institute for Global Value Chains (2023) report reinforces this, showing that firms and countries positioned at input supply stages of a chain typically capture a small share of final value compared with those controlling design, branding or distribution.
Value Capture in a Global Chain: A Worked Example
The mechanism of conversion is easiest to see in a single chain. In cocoa, West African producers, principally Côte d’Ivoire and Ghana, grow and export the great majority of the world’s raw beans, yet capture only a small fraction of the final retail value of chocolate. The gap does not arise from a shortage of production capability. It arises at the points where value is converted: grading and quality standards set by buyers, financing terms available to smallholders versus processors, trademark and branding rights held by manufacturers, and retail placement controlled by supermarket chains in consuming countries. Each of these is an institutional device, not a natural feature of the product. A cooperative that grows excellent cocoa but cannot access affordable trade finance, register a recognised brand, or negotiate favourable grading terms will convert the same physical output into markedly less durable wealth than a firm positioned downstream at any of these conversion points. This is precisely the distinction the conventional definition of capitalism obscures: it registers the exchange of cocoa for money as the capitalist transaction, when the decisive capitalist act, in the sense that matters for who accumulates wealth, occurs earlier, in the institutional architecture that determines how much of that exchange each party is entitled to retain.
Intangible Assets, Platforms, and the New Form of Value
The rise of intangible assets makes this argument harder to ignore. Haskel and Westlake (2018) argue that modern capitalism increasingly depends on software, brands, organisational knowledge and data rather than only on land, factories and machinery; their account is most persuasive as a description of firms in advanced economies with mature capital markets, and translates less directly to contexts where intangible assets cannot easily be financed or legally enforced. WIPO and Luiss Business School (2025) report that intangible investment has grown far faster than tangible investment since 2008. This changes the meaning of ownership, because intangible assets are scalable and legally protected, and reward firms and jurisdictions with strong legal, technical and financial systems.
Digital platforms intensify the same pattern. Srnicek (2017) describes platforms as infrastructures that mediate interactions while extracting and organising data. Zuboff (2019) argues that behavioural data has become a new basis of prediction and commercial power, although her thesis is stronger when read as a critique of data extraction than as a complete theory of capitalism. UNCTAD (2021) warns that cross border data flows raise development questions because the ability to collect, process and monetise data is unevenly distributed. In platform capitalism, value arises from access, visibility, ranking and informational asymmetry, not from production alone, which confirms the need to define capitalism through institutional value conversion rather than exchange alone.
Post Sovereignty and Systemic Coordination
A post sovereignty perspective does not mean that states have disappeared. States remain central to taxation, security, welfare, law and industrial policy. However, they no longer contain capitalism in any simple sense. Global finance, credit ratings, digital platforms, technical standards, intellectual property regimes and reserve currency systems coordinate economic life across borders. Strange (1996) described this as structural power: the capacity to shape the frameworks within which others act. That insight is now more persuasive because authority often operates through infrastructures rather than direct rule.
The international role of the US dollar illustrates this. Bertaut, von Beschwitz and Curcuru (2025) show that the dollar remains central across reserves, transactions, banking and debt markets, giving the global economy a monetary hierarchy that affects borrowing costs, crisis exposure and financial credibility. A firm, state or worker may participate in global exchange, but the value of that participation depends on the institutional architecture through which claims are denominated, financed, insured and recognised.
A Post Sovereignty Definition of Capitalism
Capitalism may therefore be defined as a historically evolving institutional system for recognising, coordinating, converting, protecting and reproducing value through market exchange, operating within legal, financial, technological and symbolic architectures that shape the distribution of opportunity, legitimacy and accumulated wealth. This preserves the role of markets without mistaking markets for the whole system, and recognises historical inheritance without reducing capitalism to colonial history.
A definition framed this broadly invites an obvious objection: if capitalism is whatever institutional system recognises and converts value, does the term still discriminate anything, or does it simply relabel all organised economic life as capitalist? The answer is that conversion, as used here, requires three features together, not institutions in general: value must be alienable from its original producer, convertible across legal and financial forms, and enforceable independently of the personal relationship between the parties. Subsistence production, informal reciprocal exchange, and centrally planned allocation without tradable claims each lack at least one of these features, and so fall outside the definition even though they involve institutions of their own. The definition therefore excludes as much as it includes, which is what gives it analytical purchase rather than infinite elasticity.
Implications for Development and Political Economy
The value conversion framework changes how development should be analysed. Policy cannot focus only on liberalisation, entrepreneurship or increased production. Mazzucato (2018) argues that public institutions actively shape markets rather than merely correct market failures. Rodrik (2011) similarly warns against treating market openness as a substitute for institutional strategy. Development, on this account, requires legal capacity, technological learning, financial depth, industrial upgrading, data governance and participation in standard setting, since these are the points at which produced value is either retained or lost, as the cocoa example above illustrates at firm level and the WTO et al. (2023) findings confirm at chain level.
This also has philosophical significance. Capitalism is not simply an economic system beside law, politics and culture; it is a mode of organising value through them. Law decides what can be owned. Finance decides what can be scaled. Standards decide what can enter markets. Platforms decide what can be seen. Sovereignty still matters, but it increasingly operates inside broader systems of coordination. The sharper question for the twenty first century is therefore not whether capitalism is good or bad in the abstract, but which institutional architectures allow market activity to become broadly retained wealth, and which turn productive effort into externally captured accumulation.
Conclusion
Capitalism has been defined at the wrong level when it is treated only as private property, voluntary exchange, and competitive markets. These features remain important, but they do not exhaust the system. Markets describe a mechanism of exchange. Institutions describe the architecture that makes exchange durable, recognised and convertible. History explains how that architecture emerged, while systems analysis explains why it can persist after formal political regimes change. A post sovereignty theory of capitalism refuses two weak positions: that capitalism is a neutral market order untouched by history, and that it is nothing more than colonial domination under another name.
The stronger claim is that capitalism is a historically layered system of institutional value conversion, distinguished from other economic arrangements by the specific requirement that value be alienable, convertible and impersonally enforceable. It creates, recognises, protects and reproduces value through markets, but always inside legal, financial, technological and symbolic structures. This does not settle capitalism’s moral status; it makes the argument more precise. The task is not merely to defend or reject capitalism, but to examine the institutional systems through which value becomes wealth, wealth becomes power, and power reshapes the conditions of future value.
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ABOUT THE AUTHOR
Oluwatobi Opekanmi Alaka is a Nigerian UK-based writer, business philosopher, and independent researcher whose work focuses on political philosophy, governance, business ethics, and African development. He is the founder of Post-Sovereignty Theory, a framework that rethinks democratic legitimacy, institutional design, and economic systems through the concepts of co-authorship and moral agency. He holds a postgraduate degree from De Montfort University, United Kingdom, and serves as the Chief Executive Officer of Tobros Security & Facilities Management. His research explores post-sovereignty democracy, capitalism, decolonial governance, and institutional reform. Through his writing and scholarship, he seeks to contribute to global conversations on ethical governance, sustainable development, and the future of political and economic thought.
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