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What is Capitalism?

Capitalism is a political social system based on the recognition and full acknowledgement of individual rights, including the private ownership of the means of production and distribution. These concepts are based on the fundamental principles of natural inalienable rights to live free from physical force, which are found in the original U.S. Constitution and its amendments.

Of primary importance to the function of capitalism are liberty and the freedom (from the government) to pursue by virtue of self-interest the legal right to create businesses. That means creating business with full property rights, and without controls and regulations. This can result in the material well-being to the individuals who are successful, but potentially incurs total losses to those who are not.

The cornerstone of capitalism depends (and rests on) the rule of law, private property, and on a foundation of reason and rationality. It is not compatible with envy or jealousy, with the consequence then being the call for redistribution via progressive income taxes i.e. Marxism (or as Marx put it "from each according to his abilities; to each according to his needs.")

Capitalism is characterized by creating value for consumers, and thereby realizing capital accumulation, and or savings that result in further investment. This happens during the voluntary exchange of goods and services between producers and consumers, utilizing sound money i.e. a gold and silver standard.

Integrated within the fabric of capitalism is the profit motive, economic competition (i.e. free markets), and an uncontrolled market price system that allows for the reflection for supply and demand of consumer desires. There are no bailouts, protectionism, subsidies, special favors, or laws for cronies in true capitalism. In addition, there is no choosing of industries to favor or destroy, no licenses, no permits, and no handouts of any kind. Helping people - because of catastrophic events or any other need - is done by charity, which is voluntary.

Liberty is not a privilege from government, but a right that elected representatives are chosen to protect. Thereby all earnings from investments, wages, and income belong to the individuals who earn them, not the government or anyone else. In true capitalism, taxes are meant to finance a limited and small government, and must be based on consumption rather than income, wages, or investments.

The consequence of capitalism, liberty, and freedom, is individual inequality. But no two things are equal. Different intelligence levels, skills, talents, work ethic, persistence, social skills, desire, the perseverance to succeed, and the intensity of the psychological attitude to win are all factors in determining who is successful.

The morality of capitalism is consistent with the nature of man. Man survives in two ways: by providing for himself, or by someone providing for him (welfare being a modern example). However this is an unnatural state, because when government subsidizes it also controls and regulates. This is a quasi-slave relationship in that the people who get government assistance have to live by its rules and dictates. They are not free per se, but regulated. This is not capitalism, but a "Welfare State" that eventually becomes Socialism. What is the end goal and strategy of such a social structure?

As Fredric Bastiat stated in The Law in 1840 (later translated from French to English):

"The delusion of the day is to enrich all classes at the expense of each other; it is to generalize plunder under pretense of organizing it. Now, legal plunder may be exercised in an infinite multitude of ways. Hence, come an infinite multitude of plans for organization: tariffs, protection, perquisites, gratuities, encouragements, progressive taxation, free public education, right to work, right to profit, right to wages, right to assistance, right to instruments of labor, gratuity of credit, etc. And it is all these plans taken as a whole, with what they have in common, legal plunder, that takes the name of socialism."

Therefore the United States is currently, at best, a "Mixed Economy", but is heading more to outright Socialism and economic Fascism (a.k.a. "Corporativism") every day.

The economic progress caused from the capitalist system will occur for all people (in the aggregate) who desire to work, more or less. That determines the level of economic growth created by the producers and risk takers, who drive it over a business cycle. This in turn generates growing wealth for the whole nation, and thereby to all people who wish to be a part of it.

©Victor Sperandeo. All rights reserved. No part of this article may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the publisher, except by reviewers, who may quote brief passages in a review.


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