What is Capitalism

Conversations with people have revealed to me that the average American feels some degree of hostility towards capitalism. When asked what capitalism is however, most people give me some vague and unclear answer like “exploiting people”.  This lack of lucidity is what lead me to write an article on its definition.

The average person sees a plethora of corruption around them, many of them performed by corporations. As time progress, they eventually believe corporate corruption is a natural byproduct of capitalism. You cannot blame them for assuming such false causality. When you are caught under an avalanche of corruption, it is hard to track cause and effect. You end up blaming up the wrong things. Although the average person may be mistaken regarding the source of corruption, their anger is well justified. They have indeed been exploited!

Now that we’ve briefly analyzed present day conditions, let’s get into the main question. What is capitalism? Capitalism is an economic system in which production is managed privately by individuals. It’s counterpart, socialism, is an economic system in which production is managed by the state. You can see Google as a prime example as capitalism, and your local post office as a prime example of socialism.

It is not just production that differs in these two economic systems. They also differ in regards to ownership. In a capitalist system, property is owned by the individual- what you work for belongs to you. In socialism, property is owned by the state- this means whatever you produce is not owned by you... but belongs to the public. There is no such thing as private ownership in a socialist system, meditate upon that.

Now that you know the difference between socialism and capitalism, is one good and the other bad? The short answer is no- it all depends on the culture! Some cultures have a very collective mentality, and for such groups, a socialist system might work if they are pressures in place to ensure member contribution.

On the other hand, there are cultures that are very individualistic. In such groups, members take pride in being unique. Communism would spell disaster in this environment. Wants and demands vary too much for such cultures, so a centrally planned system would not work. They are much better off adopting a system of production that allows private entrepreneurship and individual ownership.

Regardless whether a system is socialist or capitalist however, both are susceptible to corruption. A socialist system can easily become a state dictatorship. While a capitalist system can transform into an oligarchy. It is not the economic system that should draw our attention, but laws that protect humans from abuse by either the state or corporations. I will save this discussion for another article. In the meantime, stop vilifying capitalism :)

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Do noble business

James AllanWealthComment