PostHeaderIcon On Capitalism

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The United States of America has long been considered a Capitalist nation. That is to say, the primary nature of our national economy is (or was) based (to some degree) on Capitalism. OK – fine. But, in saying this, what are we actually saying (or implying)? To begin with, what is Capitalism?

The generalized classic definition, this one taken from Dictionary.com, says:

cap·i·tal·ism
an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth.

We are also told that Capitalism means Free Markets and/or Free Enterprise and/or laissez-faire (which is a fancy way to say “free from government regulation or interference”). Whatever terminology you prefer, the operative words to remember are private and free. By implication, a Capitalist system can only flourish within a system of government that accommodates private property and freedom of individual action.

There is another, slightly different point of view, taken from CAPITALISM.org (which I prefer) and which says:

What is Capitalism?

a social system based on the principle of individual rights. Politically, it is the system of laissez-faire (freedom). Legally it is a system of objective laws (rule of law as opposed to rule of man). Economically, when such freedom is applied to the sphere of production its’ result is the free-market.

Historically, Capitalism has created more wealth for more people than any other economic system in human history. Indeed, it made the USA what it once was – and did so in a fraction of the time historically required for a nation/state to achieve greatness. Yet, despite all its positive attributes and demonstrated success, many people have been taught to hate the very notion of Capitalism. Why is that? The reasons are many and varied. Let us discuss just a few of the more significant:

  • Capitalism is immoral.
    • This notion is based on several different misunderstandings which are often promoted by unscrupulous politicians who try to achieve and hold elected office by inciting what is called “class warfare” or “wealth envy”. The notion is based on the observable fact that the capitalist system does not yield equal results. Sadly, many people merely accept this without looking deeper to find out why. The conclusion most easily reached (lacking a deeper understanding) is that those who receive the greatest rewards from the system do so at the expense of those who receive lesser (or no) rewards from the system. This notion is derived from the mistaken belief that the net wealth of a nation/state is “zero sum” (a fixed amount). If one believes this lie, then it must naturally follow that an increase in wealth for one much mean a decrease in wealth for others. The truth is that the net wealth of a nation/state is quite dynamic – that is, it can increase or decrease over time. This means that the increase (or decrease) in the wealth for one is most probably has no relation to the increase (or decrease) of wealth for others. I often illustrate this with 3 simple facts: Fact 1: Bill Gates is a multi-billionaire; Fact 2: Troy Robinson is of relatively modest means; Fact 3: There is absolutely no relationship between Facts 1 and 2.
    • Unfortunately, the notion of capitalistic immorality is made more believable by the so-called “crony-capitalism” that has become so common in the industrial world. (“Crony-capitalism” being an alliance between corrupt business people and corrupt politicians where the power of government and/or monies from the public treasury are used to benefit the “crony-capitalists” who, in turn, funnel part of the resulting gains back to the corrupt politicians to help them retain their power and/or pad their wallets.)
    • While so-called “crony-capitalism” is indeed corrupt and immoral, it is NOT a form of true Capitalism. Indeed, (again, taken from CAPITALISM.org), the famous Objectivist philosopher Ayn Rand offers this counter argument:

      “The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve ‘the common good.’ It is true that capitalism does—if that catch-phrase has any meaning—but this is merely a secondary consequence. The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is: justice.”

    • It is important to remember that “crony-capitalism” does not result from some inherent corruption in the business community. Instead, it is the natural and inevitable consequence of too much of the wealth of a nation/state being funneled through the coffers of government. And, it naturally follows that, the greater the percent of wealth controlled by government (as opposed to the private sector), the greater the lure of “crony-capitalism”. In a word, the larger the government, the greater its corrupting influence.
  • Capitalism is based on greed.
    • There is an element of truth to this notion in that Capitalism is largely based on self-interest. However, so long as it is based on “enlightened self-interest”, this is a positive thing. (The notion of “enlightened self-interest” is based on the understanding that the best way to get what I want is to help others get what they want in the process. Indeed, “enlightened self-interest” is the motivating force that has driven most human advancement.)
    • Contrast this with simple greed which drives people to try to take whatever they want without any regard to the effect this has on others, and sometimes, to themselves. This is the approach of the ‘thug” and the “bully”.
  • Capitalism only benefits the wealthy.
    • This is a very easy conclusion to assume because of the simple fact that successful capitalists tend to become wealthy. However, on closer examination, it is almost always the case the capitalism created the wealthy – that those wealthy capitalists we observe did not start out that way.
    • The good news here is that, if capitalism creates wealth, therefore the wealthy, it can do so for any and all of us who are willing to participate. However, capitalism is not a form of magic in that it does not relieve one from the requirements of learning, effort, responsibility, risk taking and a willingness to experience failure on the road toward success.
  • Unregulated Capitalism leads to economic chaos.
    • Again, there is an element of truth to this claim in that capitalism often utilizes what is called “creative destruction”. (This is the condition that exists when a new approach or innovation causes an established approach to become obsolete, causing a temporary loss or dislocation to those invested in the established approach. A famous example is the advent of automobiles causing many businesses formed around the horse-drawn buggy to fail – especially that of buggy-whip making.) However, the process of “creative destruction” is inherent in technological progress and, usually, all concerned are made better off over time. Does anyone really wish our streets were still piled up with horse “exhaust”?
  • Last, but best, Capitalism is essentially unfair.
    • “Unfair” is a mantra of the progressive movement. Yet, the progressives offer us no real definition or explanation of “unfair”. How is it determined? What are its parameters? The best I can determine, “unfair” means unequal outcomes from individual to individual with no thought to the underlying actions (or lack of actions) that caused those outcomes. Using this explanation, it is “unfair” for a highly educated individual who works many hours per day to enjoy a higher income or better lifestyle than an individual who refuses to become educated and avoids work like it was some manner of disease. If this is the case, then “fairness” can only exist in some magic world where results are completely divorced from effort. That is not the world we currently inhabit.
    • As observed above, a capitalist system does not yield equal results. But, is this an inherent defect in the capitalist system or might it reflect more on the participants in that system? I contend it is the latter. There are several participant attributes that are absolute requirements for success in a capitalist system. Among them are: The simple ambition for success; a willingness to learn; a willingness to take risks; a willingness to endure some failure on the way toward ultimate success; a willingness to work hard; and, most of all, a willingness to take responsibility for your own outcomes. Lacking any of these, one must expect lesser rewards than those obtained by those who exercise all these attributes.
    • It is true that a few among us simply lack the requisite abilities to prosper in a free market – for any number of reasons – and that a benevolent society has some self-interested responsibility to help care for them. However, in any society, there are far more who simply – for any number of reasons – prefer to exist off the efforts of their betters (the “takers” vs the “makers”).
    • The main issue currently threatening to destroy this once-great nation is this: What obligation (if any) do the productive (the “makers”) have toward those who choose to behave irresponsibly (the “takers”)? My own answer is emphatically NONE. To think and behave differently, especially out of some confused sense of altruism, is to lay the foundation for your own destruction. All animals can be taught to take (and to expect) handouts. But always at the expense of their own freedom, indeed, at the expense of their very ability to exist in a free condition. How can it possibly be moral to offer a human being such a choice? Of course, the progressives will fall back on the tried and true lament “what about the children?” My response is that, of the children unfortunate enough to be born into the “taker” environment, most of those worth saving will save themselves. The remainder, if they survive, will mature into yet another generation of ‘takers”.

    Then, there are those who seriously think that those who are most successful in the capitalist system want everything for themselves – that they want their fellow citizens to be destitute.

    Think seriously about this for a moment… is there any manner of capitalist enterprise that does not depend on clients or customers in order to flourish? I can’t think of any. So, if, as a capitalist, I want to satisfy my “greed” (enlightened self-interest) by supplying others with what they want in return for them giving me what I want, are my prospects not much better in an environment of general prosperity? If my fellow citizens are destitute (that is, if they have nothing to trade with me), am I not bound for eventual failure and destitution myself?

    For several generations now, America, especially through its “education” system, has intentionally practiced a process called “dumbing down”. As a result, America is on the brink of collapse because too few of its citizens understand its Constitution, the principles of its government and, most especially, the nature of its economics. Yet, there are manifold sources online and at the pubic libraries for informing ourselves, despite the failure of our education system. One place to start is at: http://money.howstuffworks.com/capitalism.htm. Another is at: http://www.fee.org/library/detail/economics-in-one-lesson-pdf-doc-audio

    Think about it.

    Troy L Robinson

    3 Responses to “On Capitalism”

    • daedalus says:

      Troy, as I have noted before, “greed” has negative connotations because it implies that the greedy person is seeking the un-earned and usually in a manner that requires fraud or force. It is not enlightened self interest. A self interested person, taking a long range view, would not want to destroy the opportunity to benefit himself by behaviour alienating himself from future wealth creating opportunities. Wanting to keep ones earned wealth is not “greed.” Wanting to gain wealth through force or fraud is greed. Both capitalists and collectivists can be greedy, but collectivist systems are greedy by their very nature. Laissez faire capitalism is a moral economic system by its nature. To each what he earns, from each what he willingly offers.

      • Troy says:

        Dae,
        Of course you are correct. However, what you and I call “enlightened self-interest” the progressives call “greed”. That is why I used the wording I did — in hopes that any who have heretofore been duped by misuse of language could possibly see the point. In the progressive world, the collective “owns” everything, not the individual who earned and/or produced it. No matter how much your talent, your effort or your contribution, in the end, you “deserve” no more than the others who had no part in the creation of the wealth in question. Ergo, wanting to keep something that belongs to the collective, regardless of your part in its creation, must be “greed”. While this strikes me as uber stupid, a growing number of our people believe it. BTW, I wonder how much my “share” of the Gates and Buffet fortunes would work out to be?

        Thanks for responding.

        Troy

    • daedalus says:

      If one accepts the thought that “greed” is actively attempting to acquire the unearned, the collectivists are monsters of “greed.” As an aside gambling is not greed. The gambler is “playing the odds.” He is attempting to earn a payment by investing in a probabilistic endeavor. He may or may not be stupid, but he is paying for a shot at a return. Somewhat like buying insurance.

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