ADSactly Education - On Capitalism
ADSactly Education: On Capitalism
America's abundance was created not by public sacrifices to the common good, but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes. They did not starve the people to pay for America's industrialization. They gave the people better jobs, higher wages, and cheaper goods with every new machine they invented, with every scientific discovery or technological advance -- and thus the whole country was moving forward and profiting, not suffering, every step of the way.
Ayn Rand Capitalism: the Unknown Ideal 1966
Capitalism is, by definition, an economic system that puts ownership of all assets in private hands. How it does this and how well it does so is subject to much debate. I will try to explore some of this here.
History of Capitalism
Capitalism’s roots go back many centuries to the rise of the merchants in civilization. They had the products to sell and made the profit from them which led to hiring workers. Capitalism as a concept dates to the Renaissance when capital was available to the merchants before selling. Capital was used to finance ventures for the merchants and the ‘capital holders’ also shared in the rewards.
Capitalism really started to flourish with the Dutch East India Company and the British East India Company. Little more than state owned capitalism, investors could buy shares of the companies and be rewarded with a percentage of the profits. Both examples relied on the state to expand the markets through colonial expansion. At the time, the prevailing economic theory held that the world’s capital was fixed and only new markets and producers could change the rate of return.
That would change with the Industrial Revolution. Capital funded the machines and raw materials needed, the state provided the roads and places to market, and the population provided a labor pool. Capitalism was born.
Capitalism rose to prominence in the 19th century with the vast expansion of the United States and Canada along with European Colonialism. Markets expanded rapidly, labor pools expanded rapidly and resources were exploited with ruthless precision. It could be argued that the American Civil War marked the watershed for emerging Capitalism. Both armies needed supplies at an astounding rate, American industry (North) and agriculture (South) were taxed beyond their capacities so Europe answered the call. Westward expansion continued in the US and Canada in the search for more resources and farm land. Colonization may have slowed, but the exploitation of the Colonies continued for over 100 years.
The 20th Century dawned with Capitalism in full bloom, and it became the primary economic force on the planet. Even the carnage of WWI served only to expand markets and resources. The first labor shortages due to the size and scope of the armies was mostly alleviated by the importation of workers from the colonies. Only one thing could slow the growth of Capitalism through the first half of the 20th century: The world wide depression of the ‘30s. WWII completely cured that impediment and Capitalism would utterly flourish in the second half of the 20th century. Even the might and depth of the Soviet system fell before the relentless march.
21st Century Capitalism
To date in the 21st Century Capitalism is the uncontested winner and still champion of the economic systems on earth.
There are three components necessary to Capitalism: Capital, Labor and Markets. Capital (money) is necessary to fund any business. A ready labor pool and dedicated workers to make the products or provide the services. A market with money to buy the goods and services.
The State Of Capital (Wealth)
Capital, measured as money, is thriving. Return on investment in the 21st Century is staggering. The money available for investment seems to be near unlimited. How can this be?
The answer is in the condensation of wealth. 5% of the Earth’s population controls 98% of the world’s money. The number of truly wealthy individuals is growing but no where near so fast as the population in general or the growth money. Truly, the rich get richer which leads to more capital to invest in ever more profitable ways.
Much of the truly wealthy Capitalist class of people has so much money to invest that they can diversify their risks and nearly assure growth of their net. They can afford to have losses on a percentage of investment as long as the rest turns a healthy profit.
There is an ever increasing subset of the Capitalist class, the Money people. These are individuals who have no direct input on any form of production, their only path to wealth production is through money manipulation. Some, but not all, Brokers, Traders and Speculators fall into this class. Derivatives traders and Fund Managers are often part of this.
Can Capitalism survive this class? The original definition as quoted at the start of this says that Capital is in control of production and as such provides one third of the requirements of Capitalism. Is Capital as manipulation of money still part of the paradigm? Only time can answer that question.
The State Of Labor
Labor is the second of three legs needed for Capitalism to stand. Depending on who you listen to the labor pool is in good shape or in bad shape. Which is it?
The face and scope of labor in the First World is changing drastically. Automation of manufacturing jobs, while good for the bottom line, costs workers in time, money and prestige. Labor Unions are a mere shadow of their former selves and have seen a drastic decline in membership and political clout. Politicians are much more concerned with monetary clout than having the support of Labor Unions.
Labor today is increasingly part of the service industry. Typically, hourly wage is much lower than manufacturing which leads to a lower standard of living and a higher number of hours worked per worker than before. Competition for the necessarily scare ‘good jobs’ is ferocious and most are forced to live at a lower standard than their parents. It is a vicious cycle developing.
Labor in the developing world is a free for all. There are always way more people in need of employment than there are jobs in the market. Typically that leads to very low wages, no benefits, no protection and no job security. Very good conditions for Capital, not so good for Labor.
Labor as a class of Capitalism is easier to manipulate by the Capitalist class today that it has ever been since the Industrial Revolution. Can Labor as we know it survive? Again, only time will tell.
The State Of The Markets
The third leg of Capitalism is the market for goods and services. By definition, in order for Capitalism to grow the Market needs to expand. That metric is also in flux in today’s world.
The first world is more intensely consumer driven than ever before. Everybody is bombarded with the message that they need more and newer stuff. All day, every day. That compulsive consumerism keeps the market clicking along. The actual number of people in the market might not expand much, but the need for more and better at higher prices at least keeps the capital in the markets expanding.
The developing nations are full of people that want to look and smell and eat like the first world nations. That market is huge and steadily expanding as more and more people have at least some money to spend. That market is fed by Capital in the form of jobs in manufacturing and resource procurement. The more they make, the more they spend. It is that easy.
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The service industry provides a huge amount of the increasing markets necessary to Capitalism. Amazon alone takes in one billion dollars for it’s Prime membership without selling a single product. The fast food industry employs millions to go with the billions served. Throw in the delivery industry and Wal-Mart and you get an idea of the raw size and potential of this market.
This article has asked more questions than it provided answers. The next installment will deal with some specific causes and conditions.
What are your thoughts on the condition of Capitalism? Healthy? Robust? Struggling?
Words and ideas are mine. I used this Wikipedia Page for historical perspective and accuracy.
Authored by: @bigtom13
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Undoubtedly, the system of capitalism is the one that has worked perfectly. And by this I mean all the governments that practice it. The capitalist countries are the ones that have gone the furthest and belong to the first world.
This is the system par excellence. Although it may seem unfair because, although it seems normal, employees are slaves to big business. They work for a rich person, so that he or she becomes even richer... As long as the employees live up to the day.
This may seem unfair, but this is how the system works. Each employee's goal would be to work for that entrepreneur in his or her company alone while he or she is able to pursue a career or start his or her own business. That should be the case, but it is not appropriate. In fact, most people do not understand the system or are compliant.... They just don't think about starting their own business.
One system that has been implemented to make everything equal is socialism. But it's a complete farce. Governments that have tried to implement it have only used it for their own benefit, including corruption. In the end they end up turning that socialism into a communism. I tell you from my own experience since I live in Venezuela.
I personally want to be an entrepreneur and an investor. My ideal is to be my own boss and achieve economic independence. Start my own business and make it grow as much as I can.
As you can see I'm a 100% fan of capitalism hahaha.
Thank you for talking about capitalism and explaining it so well @bigtom13
Greetings to @adsactly and @bigtom13. I look forward to the next article :)
You've had a real good look at the differences between the two systems living in Venezuela, haven't you? Capitalism isn't perfect, by any means. But right now, it seems the most workable solution in the real world. Socialism always starts with such high ideals and almost always devolves into greed and corruption.
Thanks for the kind words and a marvelous comment.
Right buddy.... At least capitalism is the system that has worked best so far.
A greeting :)
Can u guess were am i @adsactly !
@adsactly nice post and useful information about this thing...
yes nice thank you.
all of your posts are educative. good, go on..
Hey there mate. What's up dude ?
Indeed, the post asks more questions than giving answers, however in general I think we can agree that the model of capitalism has unleashed a ton of innovation and energy that led to the high living standards that we know today. The awesome rewards from manufacturing and selling ever improving goods has been a very effective harness in giving entrepreneurs incentive for taking the risks needed to start up businesses. Up until now, we've mostly seen the positive impacts of capitalism and the extreme weaknesses of other systems.
However, I think we can also agree that most things are not black and white, and capitalism has its flaws. While some level of income inequality is needed for capitalism to work, at some point those who have become super wealthy may find that manipulation of politics and crushing potential competition provides greater returns than in trying to produce and sell ever improving products. I think that these greedier aspects of capitalism are its weakness and may come back to bite us and in some ways already has. Worldwide pollution is getting worse, extreme income inequality is rising and at some point we have to ask if these additional prices which lead to additional human suffering are worth paying. I guess so far that fishermen can't pay the right amount of money to clean up the oceans; even though healthy oceans help us all.
But what to do about it? Hard to say but to start with I think healthy conversations that don't degrade into name calling is a start, but in some places even that's hard to do... Or even agreement that these are problems worth addressing...
"extreme income inequality is rising " you are wrong. Money is causing inflation so even having more money is less powerful than it used to be. Since the cost of experiences are going down because the cost of production is going down and the cost of experiences are becoming cheaper. The world has never been a more fair place. Inequality will always rise with the rise of complexity in a society. This is nature and will always work that way. You are also wrong that greed provides greater return. Since it creates chaos and ruins long term growth. So it's bad business.
Really, really good comment. Thank you for it.
I know I asked way more questions than I provided answers. I fear that the inherent greed in the system might alter it significantly. The part I'm really worried about is the capital raised with out a product. Pure money manipulation and speculation. They provide no tangible product, and if a market really goes upside down (Housing in the US 7 years ago) the drain on the capitalized product is stupefying. It is where governance comes into play, and the reaction to it. It is really hard for me to perceive a solid answer to.
Thanks for a marvelous and thoughtful comment. I appreciate it!
Thank you for the compliment! Yes, that's also a worrisome part of capitalism - a lot of creative energy is being poured into manipulation of currency, and people get massively rewarded for it, even though there's no useful good or service provided by them... Maybe if it was somehow connected to say a universal basic income program, where people's cunning can reward themselves and the wider public, but I don't know how the math pans out on that and I imagine the type of person who pursues this kind of living wouldn't be interested
The quest for more wealth is the driving force here. Capitalism is a double edge sword. Yes, it rewards those for work but at the same time, it creates a societal gap that is becoming irreparable. Resources diminish and the poor get poorer. It will be interesting moving forward when it comes to resources like water. Capitalism is already making an impact on water and how it is supplied. We already have bottled water being sold for more than a litre of gas. Wait until it becomes more scarce and the capitalism machine kicks into overdrive.
You are wrong. The poor is richer than they would have been in the past. Everyone has gotten richer.
I agree with you, of course. I think greed and manipulation has skewed the system toward the 'capitalist class'. I think it may be self correcting if we live long enough. When workers can't work because they don't have enough water somebody will come up with something that will re balance the equation. All three sides must be in balance for the equation to work, and it tends to be self correcting. Those corrections, however, can be incredibly painful when they occur.
Good post @adsactly. You know. I hope ur be succesfull. Great 👍
Hello!
Very interesting and informative post!
I like reading history and learning something new ..
Thank you for sharing this information with us.
I'm glad you learned something new. Thank you for following along!
:)
I think capitalism is the best economic system we have up to date. Since it rewards work, yes it not flawless and people are abusing the system but I think that can be solved by laws preventing it. Like laws that protect the worker and gives their fair share.
Thanks for the educating post, I really enjoyed it
Winston Churchill had a quote that I'm going to butcher here "Capitalism is an awful system, just better than any other so far."
I know that I am glad that I've lived my entire life under the system.
An awful system that creates Yachts, iPhones and BMWs wow so horrible! 😑Capitalism is paradise.