The title of this post is a question on Quora. Confession: I have a truckload of stuff to get done. Whenever I have stuff to do, I do all sorts of useless stuff. Clean the desk drawers. Or something silly like that to avoid the more difficult important tasks. I put off doing important stuff by answering silly questions on Quora. Here’s my answer to the above question.
The undefined “we” in the question is problematic. True, some people attack what they believe to be capitalism but they are most likely mistaken in their critique of capitalism. Part of the problem is that the word lacks a widely shared definition.
According to Irving Babbitt, all revolutions begin in dictionaries. I think that much confused thinking begins with an improper understanding of words — and often ends in needless man-made misery. To think and discourse effectively, we must define precisely the words we use. In the context of economics, words like “capitalism” have been misused and the concepts abused to the point that all related discussions are pointless. Douglass North (1993 Prize recipient of the Nobel Memorial Prize in economics) said, “I don’t know what the word capitalism means and therefore I have never used the term.”
Some people appear to think that capitalism is a system in which the private employers become rich by exploiting the workers. They think that there is some fixed amount of wealth that exists in the world, and the rich become rich by stealing/robbing the poor of their fair share of that fixed wealth. Capitalism, according to this conception, is a zero-sum (or even a negative sum) transfer from the poor to the rich.
Part of the distaste for capitalism springs from envy. Why should some folks have more than I have? I am equally worthy of all the good stuff? Down with the greedy capitalists.
Others who have addressed this question have noted correctly that capitalism involves capital and its private ownership. I like to start with thinking about stuff. Stuff is that we value. Food, clothes, houses, cars, and all sorts of wonderful things (shoes, and ships, and sealing wax, and cabbages), et cetera. Some of the stuff we value because we can directly consume them. Call them consumer goods.
But to produce consumer goods, we use other things to get things done that help in the production process. Tools. Hammers, spades, lathes, Machines. Combine harvesters. Computer aided numerical thingamajigs. These have to be produced themselves, using other tools, and human labor and human ingenuity. Know how, or what is called technology.
All these “produced goods that are used for the production of consumer goods” — that’s called capital. Without capital, you’d be stuck in the stone age. Stones exist. They don’t have to produced. Everything else requires effort to produce.
When you are producing capital, you are not producing the stuff you consume. So you have to give up eating, or eat what food you have saved to produce the capital. Saving leads to investment leads to capital production. If you’ve saved and produced capital, you should get some reward. With your capital, you get people to produce more than they would have been able to produce without your capital. Here, let me use your machine and I will produce $10 worth of stuff; you get to keep $5 and I keep $5. I bother with giving you $5 because without your machine, I would have produced only $2 worth of stuff. So, we are voluntarily collaborating to produce more than we could have if we were not to cooperate.
Nothing comes for free but if after paying the price we are better off than we would otherwise be, it is wise to pay the price.
Too long. Let’s just ask a simple question. There are countries that are considered capitalist and countries that are socialist/communist. Which would you like to live in? In the US or in Venezuela? Which countries do people risk their lives to get to? North Korea or South Korea? (In the past, West Germany or East Germany?)
Capitalism works, bitches.
(Echoing Richard Dawkins’ “Science works, bitches.”)
 I sometime plagiarize myself.
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