About thirty years ago in the movie, Wall Street, the antagonist, Gordon Gecko, made the infamous speech about how greed was good. The writers of the movie obviously were not fans of capitalism, and Gordon Gecko was eventually brought down by the protagonist. The point of the movie was that people who make money are inherently evil and must be breaking the rules and taking advantage of people somehow since they are successful.
A true look at Capitalism shows just the opposite, especially when compared with other economic systems such as Socialism. Capitalism encourages good behaviors such as work, integrity, and taking care of the needs of others. Socialism, on the other hand, rewards – in a relative manner – those who find ways to not work and those who use bribery and favors to get special treatment by those in charge.
For any population to survive, the participants must at least do what is necessary to take care of their basic needs. For a population to thrive, they must do far more than that. Left alone, most families would be able to provide for their own shelter, food, and clothing, particularly if they were able to trade with other families and others were willing to help out when needed (such as in an Amish barn raising).
The development of extensive trade, and in particular creating a common currency that can be traded for goods and services – money – allows individuals to perform work best sited to their abilities and still get the things they need. Someone who isn’t strong enough to plow a field but who is good at accounting can perform extra work in accounting and then trade his labor for the food he needs. Because he gets money for his work, he does not need to find a farmer in need of accounting to trade for food.
If everyone who is able is doing at least enough to provide for their needs, there will be plenty of stuff produced. In Capitalism, because one is rewarded for working but receives nothing beyond basic charity if one does not work, people are encouraged to work. This is good for both the people themselves and for society since they are producing things that are needed. Those providing charity, if they are giving their own money, also tend to separate those who can’t provide for themselves or need help because of some tragedy from those who could work but choose not to do so.
Those who do the best in Capitalism are those who find the ways to take care of the needs of the most people. A guy who makes a few dozen shovels himself and sells them can make a few hundred dollars. He is providing something that is needed to a few dozen people each year. A person who opens a company producing thousands of shovels per year can make millions of dollars. She is helping thousands of people.
Still, is the person with the shovel factory gaining money by cheating people? So long as there is a sufficient amount of competition, a person who is charging prices that are unfair or selling shovels that break quickly would soon go out of business because people would stop buying shovels from her. Think of all of the purchases you make each year. How often do you feel that what you receive is not worth the price you are paying? Most people are delighted with most of the purchases they make.
But what about the people working for the shovel factory? Surely they are being taken advantage of, yes? Once again, so long as there is sufficient competition for workers, people can leave a job and take another one if work conditions are really very poor or pay is really inadequate. Few people will say they make plenty of money, or are absolutely happy with their jobs, but most people make a fair amount for what they produce and work under safe and fairly pleasant conditions.
Probably the best thing about free Capitalism is that anyone can become successful and improve their station in life. The secret is to do something that meets the needs of others. Unlike Socialism where only chosen individuals can become wealthy, anyone with a good idea who is willing to do what is needed to implement it can go from poverty to wealth.
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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.