Capitalism

A Capitalist

A Capitalist enjoys his profits

What is Capitalism?

First, let’s talk about Capital. Capital is the MEANS OF PRODUCTION. This is a fancy way of saying the stuff you need to run a business.

During the industrial revolution, when Marx was writing the Manifesto, “capital” primarily referred to factories, machinery, buildings, and all the other extremely expensive physical things that were needed to manufacture goods.

Today there are huge, powerful corporations that don’t own anything physical. Platforms like Uber and Google might not own factory machinery, but the barriers to starting a company like Uber or Google are still phenomenally high.

Let’s say you want to start up a competitor to Uber. You’re going to need a few hundred thousand dollars for facilities and a few million dollars for marketing at the minimum. You’re also going to need a few million more to hire employees.

All that money? All those resources? That’s what we call Capital.

So, the first tenet of capitalism is that Capital – the means of production – the stuff you need to run a business – can and should be owned by private individuals.

Profits on Wages

The second tenet of capitalism is that Capitalists – the owners of Capital – should be allowed to generate extra money – profit – from the wages of employees.

Capitalists believe they are entitled to profit from the labor of employees because they took a big risk when they started their company. They made a huge investment and they should have the right to enjoy the lion’s share of the profits if things go well.

Capitalists also believe that private ownership of Capital is the most efficient and fair way to distribute resources and produce goods.

Adam Smith developed the philosophy of Capitalism at the same time Thomas Jefferson and company were hammering out the foundation of the United States of America.

Smith introduced the idea that all private companies should operate within a “free market,” unrestricted by governmental intervention, and that an “invisible hand” – an unobservable force – would automatically guide the supply and demand of goods into “equilibrium.” In other words, Capitalists believe that the number of people who want a product compared with the number of products that are available will balance out and lead to a perfectly fair price for that product.

Leave a Reply Text

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.