Thursday, October 1, 2020

Basics of capitalism in less than 2 minutes

what is it  ?

It's an economic system where someone owns(privately) the raw materials and tools for production of goods and services and their operations for profit. Its primary goal is to generate profit and use it to invest back to generate more profits. 

what's good about it ?

Incentives - Providing better goods and services will result into more profit. 

Innovation - It's based on the idea of level playing field which simply means everyone has a fair and equal chance of succeeding. This brings competition which brings innovation because without it you won't be able to provide better/cheaper products.

What is NOT capitalism

People at all times have tried to amass capital(land, resources, money), that's not capitalism.

Contrary to what some people believe, It does not only create either winners or losers. First of all, it creates more winners in the system. second, everyone might have a fixed portion of the pie but the size of the pie is increasing. In other words, it's not a zero sum game, it's a positive sum game.

why someone opposes it ? where it fails ?

When capitalists becomes extremely successful and create monopoly, they might have influence over government because they control significant chunk of economy. This gives birth to the possibility of killing the competition via unfair means e.g. the competition does not get the tax benefits or the contracts even after being more innovative. Monopoly also affects innovation due to lack of competition, which further affects pricing which further affects affordability of common man in the society.

When capitalists become so consumed in short term profits that they ignore the things that are negatively impacting the society in the long term e.g. pollution, climate change etc.  

Children of capitalists inherit huge amount of wealth and ownership sometimes without deserving it, they do not have the incentive to work hard as they already have enough wealth which impacts meritocracy.

In the end, I want to leave you with some food for thought. Try to think which one would you choose, given you have a choice.

1. Government owns the oil, gas and the big businesses and collects direct profit instead of taxes on the  profit, uses this money to make societies better through various government programs.


2. Individual citizen owns the business and controls how to spend the profit( You may choose to invest in making society better if you like, it's a freedom you get being a capitalist)

Leave a comment if you like. Thanks for reading it. 

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