A Capitalist is an individual who invests his personal wealth (or another’s wealth, such as Bankers do) into future production with the intention of increasing wealth through the successful increase of products or services. That is all a capitalist is. Simply said, he is using his (or another’s) money to increase production and thus make more money or wealth.
Wealth is necessary for any capitalism to be engaged upon. But not everyone who has wealth is engaged in capitalism.
Here is an example which shows five basic ways in which wealth can be handled.
Roger has accumulated a million dollars of wealth (either through his own production or perhaps an inheritance). This is money which Roger does not necessarily need to maintain his current life style. What are his options?
i) He could spend the money on items and services he needs or wants. These could include a larger or nicely located home, a more expensive means of transportation, traveling, or any luxury item or service which he thinks may boost his self-esteem and perhaps admiration from others.
ii) He could donate the money to a charity within his community which could be used to increase the standard of living for his community, such as a church, hospital, or educational facility.
iii) He could put the money in a home safe or perhaps in a bank Safety Deposit Box.
iv) He could deposit his money in various banks, where it would be better guarded from direct theft. Here the money is used by the banks to make loans to others in the community. Roger would be increaseing his wealth through interest payments received from the bank.
v) Roger could choose to invest the money into his or another’s business with the idea of increasing the production of the business and thereby increase his wealth in the future.
It is also possible and very likely that Roger would put this wealth into any number of the above options. He might spend a portion of his cash on a new car and give a portion to his church to build that school they have envisioned. He may keep some cash in his safe for an emergency fund and put a large portion of the money in his local bank for safe keeping. He may also invest a portion in his brother’s new business.
But let’s break this down further into some very familiar, often not understood, economic terms:
- Point one above is known as participating in the FREE MARKET. (The buying and selling of goods between two private parties)
- Two is giving to CHARITY.
- Three above is known as SAVING.
- Four is known as BANKING.
- Five is the economic system of CAPITALISM.
When you hear these terms, they fundamentally convey the ideas above. If these seem too simple, it may be because these terms are very often altered and perverted in their meaning which makes the subject of economics look more complex then it is. But if you understand the simplicity of the actions described above, then you understand the basic concepts of these terms.
There is another important factor which affects the wealth of an individual.
Communities, especially under times of stress, tend to form a management system (government) to care for situations which no single individual has the resources. This might include such things as defending the community, planning future growth and creation of roads, waste and water systems or any other needs which the community decides to tackle as a group. Funding these activities is done by collecting TAXES.
Each of the above points could be greatly elaborated on. But for the purposes of this article, this last aspect is most important. The actions of government can greatly effect all aspects of a person’s wealth, his potential for obtaining it and his choices to use it.
In a free society, such as was founded in the United States Constitution, it was intended that government collect a small percentage of taxes from landowners so it could fund its basic duties: formation of law – leadership and enforcement of the law – national security – and provide justice for all individuals.
This political system leaves the bulk of wealth in the hands of those who can and will produce and gives them free choice on the above 5 points regarding how they handle their personal wealth.
This freedom based political system provides a framework within which any person who produces can obtain the wherewithal to live. Wealth accumulation is only limited by the value and ability to provide service and needs to one’s community. The individual is free to apply the above 5 principles to his wealth.
The only equality guaranteed within a free society is that of justice. All men are equal under the laws and can not have their human rights subverted. No man, regardless of his wealth, is above the law. (That principle is held as an ideal by our Constitution even if it is not fully practiced.)
There is an opposing philosophy to this system of handling wealth. Communism has a different view on the subject. Communism proposes that there must be equality of “wealth” amongst all people of a community, within a state or nation and for that matter across the world. And though this system has been implemented in various countries it has never resulted in an overall long term rise of living standards. In fact quite the opposite can be observed.
It is interesting and important to examine why it fails. It can be seen that communism attempts to elimination individual wealth and assumes control of the five points of wealth listed above.
How does it do this?
Let’s look at each of these five points of wealth under communism:
- The Free Market: is the buying and selling of produced goods between individuals and groups. This form of exchange is prohibited under communism because it is done outside the control of government. Because the free market is the most basic aspect of economics it tends to persists within the society. However, any such activity falls under the label “Black Market” and is a crime. In other words, the free market becomes illegal in the eyes of a communist government. What is set up in place of the Free Market is an exchange system where one’s products are taken and given as deemed proper by the government and the common good. If you make shoes, they are made for the government (who puts them into the “social pot”) for allocation to those who need shoes. In return, you would be permitted to pull from the government’s “social pot” those things you need, if they are there.
- Charity: All “charity” is performed by government. All those who cannot work have their homes, food, clothing, etc. provided by government. And because the idea of “equality” is so exaggerated (if not perverted) under communism, all housing, clothing, etc. available from the “social pot” is the same. Society becomes a uniformed blandness of equality.
- Savings is obstructed. A person is not paid directly for his work. If a refrigerator is needed, it is requested from the local commissary and is provided, when and if available. Individual wealth in the form of savings is not really possible under communism unless acquired from the Black Market.
- Banking: This option becomes unnecessary for the individual because again, one has no wealth to place in a bank. The Communist Leadership would own and controls the State banks and credit system. All wealth of the country is collected and controlled by the Communist Party. One could simple say that the Leadership accumulates all the wealth of a communist country. How they would handle the country’s wealth can been seen by inspecting the five points of wealth above. As a government entity, they will either fail or succeed based on how they handle this acquired wealth.
- Capitalism: It is quite funny and ironic that Communists come into power by altering the meaning of and attacking Capitalism. Any aversion you feel toward the term “capitalism” and “capitalist” comes from this attack.
No communist country will survive if it does not use capitalism to increase their accumulated wealth. They must continue to increase their wealth if they intend to carry out their promised social programs. If they do not invest their wealth in the business of production, in the worker who is producing, etc. they will find less and less production occurs resulting in less and less wealth possessed by the group, which is the eventual condition communism finds itself.
So they attack and pervert the very system they must use to be successful on a collective level.
As an example of this, China has learned this lesson after decades of poverty. They finally realized they must invest in production in order to obtain more wealth (and prevent revolt!). By opening the doors to their seeming limitless, low cost labor pool China is on a path to becoming the wealthiest country on the planet. But by doing so, they have also cracked the door of freedom for their people.
The attempt to centralize all wealth into a “community pot” from which all people will obtain a fair share is called SOCIALISM. In socialism all wealth is controlled by government, taken from those who will (or are made to) produce.
Communism was codified by Karl Marx. He reportedly had no capacity to work for a living. He was financially supported by others his entire life and thus lived and died a fairly miserable life in very low standards. The socialist economic philosophy he outlined is a system of taking from those who work and giving to those who need: “from each according to his ability, to each according to his need.”
Fundamentally, communism is a form of government which attempts to eliminate the five points of wealth as noted above except for Charity; this roll being played by government, supported by the ability of those who work.
It can be easily deduced that those who desire communism are either people who want to control the entire economic system of a community or are those who feel they are more financially secure by having government control their destiny and fortunes.
It appears that communism gains a foot hold to the degree that those who successfully engage in capitalism fail to take an active role in improving the life of their fellow man or worse, use their wealth to damage or hinder the rights and freedoms of their fellow man.
As a final comment, it appears that the conflict is not between capitalism and communism. It is a war being waged to determine who will hold and control wealth. Though progressive communists relentlessly attack the building block of the United States, The Constitution, it is the very system which provides the best of both worlds; where individuals can rise to higher levels through their own work, groups can operate together to assist the support of the individuals with-in and every man, whether wealthy or poor would be viewed equally under the law. An equality that is far superior to that of equality of material possessions.