Is Capitalism Unfair?


Ask SmallIvy:  Please send investing questions to vtsioriginal@yahoo.com or leave in a comment.

Today on the Dave Ramsey Show, Mr. Ramsey had an hour where he asked the Occupy Wall Street groups to call in to explain what their protest was about.  Several did.  Some cited strange concepts about transfer of wealth from the government to corporations who quickly backtracked when questioned.  The Occupy Wall Street Website provides the normal Socialist bromides about ending poverty, health care for all, living wages for all, and the like and lists several such platitudes as their “One demand”.

Others, however, stated a feeling that they had somehow been cheated.  That the good job, high pay, and big house that they expected when they graduated from college just wasn’t sitting there waiting for them.   They feel that the outcome they have received just isn’t what they expected, and that somehow this was the fault of politicians and Wall Street firms.  This sentiment appears to have been used by some anti-capitalism forces to inspire these rallys in an effort to institute their Marxist agrenda.  These Marxists are blaming the Capitalist system for the apparent failed outcome of todays twenty-somethings.

Here is a different take.

Capitalism, while certainly not perfect, has been proven to be more successful than any other system yet conceived to promote innovation, efficiency, growth of wealth, and reduction of poverty.  Capitalism is also the best way to promote service to others and the meeting of the needs of the community.  In fact, in Capitalism it is those who best meet the needs of others who most prosper.

A person who opens a shop selling things that people don’t want will not sell many items.  Likewise one who cheats his customers, provided there is sufficient competition, will also eventually fail.  One who provides something his customers want and need, and who does so in a manner that pleases his customers, will prosper with substantial amounts of business.

Think of driving across the country and how you rarely ever need to worry about finding gas, food, or a place to stay.  Everywhere you might need such services, someone has probably set up a business to service those needs.  While the price may not be a great deal, it is usually reasonable for the service offered and the difficulty in getting the goods and services to that location.  Likewise, the scale of the business is normally appropriate for the number of people who need the service.  This isn’t the result of some central planning, it is the result of the Capitalist system at work.

This concept goes beyond businesses.  An employee who has skills that are needed or is willing and able to do what is needed by a business will be rewarded more than one who does not.  Employees who provide some critical function such as generating business for a company or seeing that tasks get done that directly impact the company’s bottom line will br paid more than those who simply do the minimum necessary to hold their jobs.  While this is not true universally, and there are some employees who are invaluable but are paid less than they deserve, so long as there is adequate competition for labor these employees are free to move to other companies that will reward them better.  If no option is still available, employees can start their own business and become their own bosses.

So for those who have graduated from college with that degree in French literature and have not found their dream jobs – rather than asking “Why am I not getting what I deserve?” ask yourself  “How am I providing for the needs of others?”  If you find that the answer is that you are not, figure out how you can and prosperity will follow.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

2 thoughts on “Is Capitalism Unfair?

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  1. I completely agree with capitalism as a concept. I don’t, however, agree with how out of control our country has become in regards to capitalism. The too big to fail mentality is not actually capitalism, and it’s not fair. The same people who spout that capitalism is the ONLY way were only too happy to take government handouts (i.e. taxpayer dollars) when times got hard. Capitalism means your business fails when you run it into the ground.

    What the protestors have failed to do is establish a clear message. What I think it should be is “We’re tired of paying the wealthiest people in America their bonuses with our tax dollars and investments when their unethical business practices caused us to lose our money”.

    I am all about the freedom to make buckets of money. Although it’s technically legal for a CEO to make hundreds of times the salary of his average employee, that doesn’t make it right. If I owned a company that employed people, I wouldn’t allow myself to make more than 20 times the amount of my average worker. If the average worker is making 50k, I don’t take home more than $1,000,000.00 per year. If I want to make more, I need to help everyone else increase their lifestyle as well. After all, without them I wouldn’t be able to make my enormous salary.

    1. I absolutely agree. It is not capitalism when a government steps in to bail out companies that have made bad business choices. In capitalism, companies that are poorly run fail and are replaced by those that are well run. If the banks and car companies had failed, there would have very quickly been a whole host of smaller companies there to buy the useful assets from those companies and take their place. Bailing out the companies was not capitalism.

      As far as salaries go, as a citizen I don’t think it is any business of the government what a company pays their officers. Likewise, it really isn’t any business of the workers. What does it matter what the CEO makes if you feel you are being paid fairly for what you are doing. The role of government is to make sure there is enough competition, both for consumers and workers, to make sure there is a choice to allow the free enterprise system to work. This means breaking up big monopolies that arise, and perhaps doing things that cause new companies to be formed. Unfortunately, our government tends to collude with big businesses to create regulatory barriers that keep new companies from forming. Big companies don’ t mind expensive regulations because they can afford to comply, while start-ups cannot.

      As a shareholder, I do think executives are overpaid, on average. If you have a CEO who is able to generate hundreds of millions of dollars due to his/her actions and it would be difficult to find another person who could do so, I don’t mind offering a salary of ten million dollars. If they are not, however, I’ve got to believe you could find a lot of people for $1 million or less who could run a company. I also don’t see why shareholders need to fund their trips on corporate jets, make low interest loans for their houses, and the other perks.

      The leaders of the protests, however, aren’t really interested in prosperity for all. They are interested in same thing as Stalin was – power.

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