A Primer on Capitalism

ChrisBanescu.com | Chris Banescu | Jan. 22, 2009

In today’s turbulent financial times and difficult economic conditions, a lot of unjustified criticism and unwarranted accusations have been laid at the doorstep of capitalism. Many in the mainstream press and academia, a majority of politicians, and a large number of Americans have jumped on the bandwagon and unfairly blame capitalistic principles for the huge mess that we are in. Such widespread confusion evidences a misunderstanding by many Americans of how value is actually created in society and what capitalism really represents.

All societies, in order to prosper, grow, and take care of its citizens must create new value to sustain its economy and support an expanding population. Common sense and experience dictate that there are only three (3) possible ways for anyone in life to have, create, or obtain value (monetary or economic) or acquire any assets (property) to be able to live or sustain oneself or one’s family:

(1) You ethically earn it by working and providing value to your employer, investing in other people’s ventures, risking it in a new business to provide new value to others via a service or product, or by inventing, creating, or discovering something new and original, that is useful (device, process, cure) or pleasing (literature, music, art) to others. This is known as ethical capitalism, which I’ll simply call “capitalism” going forward.

(2) You appropriate it from others, or someone else (person, institution, or government) appropriates it on your behalf. Communism, socialism, the US government (federal, state, and local), and criminals practice this approach. This choice is always coercive, but legal in some cases (taxes) and illegal in others (criminality).

(3) Someone voluntarily gives it to you, through a gift, a will, a trust, or a charity donation. Note however, that in order for someone (individual, government, church, institution, etc.) to have any value (money or assets) to give, they must first attain it by choice #1 or #2 above. No other source for the donation exists.

Inherent in option #1 is also the absolute right of individuals and organizations to have and own property (money, assets, etc.) that is exclusively theirs and the right to dispose of such property as they see fit without interference from anyone else.

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