First, you've made an assumption about foreign investment in American industry in the 19th century that is false. In fact, it was fairly extensive.

Regardless, the point does not seem to be so much about who is doing the exploiting, but about the exploitation itself.

The theoretical justification for saying this is "natural" (not inevitable, surely) is that productivity increases as capital accumulates. This is what makes increases in workers wages possible, i.e. without increasing output per worker, it's not *possible* for the average "slice" to increase in size. As capital accumulates, the possibility of higher workers' wages becomes a reality (even greedy firms have the *incentive* to pay workers the value of their marginal products, which, if capital has accumulated, has increased. All this is in those books too, look it up!

Ignorance on parade. The Japanese had industrialized well before WW2:

http://en.wikipedia.org/wiki/Meiji_Restoration

http://afe.easia.columbia.edu/japan/japanworkbook/modernhist/meiji.html

The Nazi policies that brought the deaths of millions were motivated by racial / ethnic purity considerations. Is that an inherent property of capitalism? Is it a regularly occurring feature of capitalism? I would not dispute that Nazi Germany's economy was some form of capitalism, but that doesn't establish that it's their economy's capitalism that caused them to commit so much slaughter (cum hoc). If a doctor commits murder do we adopt the generalization "doctors are murderers", though the murder was not committed even under the pretense of practicing medicine?

For communism, however, the massive death being referred to was carried out specifically with the aim of effecting what the practitioners believed to be a communist economic system. The collectivization of agriculture in the Ukraine and China were not merely incidental to the governing powers being communist, but were policies adopted because communists at the time believed that they followed from communist principles.

Quick answer: not nearly as many.

Note: The figures above deal primarily with those of its own citizens communist countries have killed, through policy induced famines and political repression. Although the book does address those killed in communist initiated wars, that isn't the point here. Usually those who follow up with your retort would cite all those who died in all the wars of aggression initiated by capitalist countries in order to draw some kind of equivalency, but it is not equivalent. Let's leave war casualties off the table for both sides.

The issue is perhaps somewhat complicated by one's definition of capitalism, because while those who effected communist policies leading to mass death proudly waved the communist banner, conscious of their ideology, their supposed counterparts (Custer? English landlords?) were not consciously waving some "capitalist" flag. More likely they were motivated by a sense of strong nationalism, or outright robbery, which is not a necessary attribute of a conscious "capitalist" ideology at all (which is much more compatible with liberal internationalism).

Further, by "capitalist" do we mean only modern industrial capitalist countries? Usually bona fide Capitalism is not considered to have begun until some time in the Middle Ages, with the movement away from feudal institutions. If we want to call any market economy capitalist, including, for example, that of ancient Rome, then perhaps we can lay the many deaths brought about by the dysfunctional economic policies of the late emperors at the feet of "capitalism", but this is a stretch and rather nonsensical. Even very primitive tribal cultures often have rudimentary markets--shall they too be labelled capitalistic for the sake of consistency? All the deaths resulting from slavery too are difficult to pin on "capitalism" precisely for this reason. Slavery is an institution that predates capitalism, and has existed under a wide variety of both primitive and more "modern" economic circumstances. It has been practiced in some capitalist countries, but it is certainly not a defining attribute of capitalism or a necessary consequence of it (though a Marxist cynic may disagree, he'd be wrong--and just being spiteful), and was first driven out institutionally in England under an explicitly liberal/capitalist banner (if you don't believe me check the history yourself).

If we're talking about a country that is capitalist in the full sense (an industrialized market economy, i.e. one that has accumulated much capital), what are the episodes during which many died from following a capitalist policy rather than some superior "socialist" (or other) alternative? I'm prepared to accept that there may be such an example, but I doubt it approaches anything close to the massive and tragic waste of life that resulted in the last century's pursuit of communism.

So you're happy to just ignore what the term was supposed to designate by anyone who ever bothered to support it, and base your counterargument on a literal interpretation of the words. How clever! I guess "evolution" must be wrong too, because sometimes things don't "turn out" from what happened before. What a sham!

Fundamental principles of economics are not about money or prices. The idea that it is about that is, in fact, a rather hackneyed misunderstanding, revealing that you're writing from the perspective of someone who's only been splashing around in the shallow end of the economics pool. The basic ideas of scarcity, preference, and opportunity cost are not things that go away under other societal arrangements--they're basic to human existence. Someone who'd actually read deeply into the vast literature of economics piled up over the last two centuries should be embarassed to make such claims about "not even having the courage to analyze or think about the structures and societies in which they find themselves". I would amend your title though. It is true that economics is not a *physical* science, such as chemistry. Those who expect it to be such, with the same methods to be applied, with the same rigorous, predictive results, are engaged in a fools errand. But neither is mathematics a purely physical science, nor logic, nor art. Someone who claimed he had nothing to learn from these areas because they aren't truly "science", according to a narrow view of that word, would simply consign himself to intellectual beggary. (A good thing few are actually consistent about their denunciatory musings.)

Read much? Within the same quote he says "within a few years".

One could argue that a reasonable definition of "free-market" is one that precisely doesn't feature those qualities, i.e. what you describe are characteristics one doesn't associate with "free" in either the negative or positive freedom sense.