What is Capitalism 101

What is Capitalism? Capitalism is a political, social and economic system where needed and wanted, goods and services are made available to the consumer because entrepreneurs have an INCENTIVE and the freedom to make a profit.

Capitalism is a free market enterprise system where businesses compete to bring the best goods and services to the market at the best price the market will bear. The consumer benefits most from a capitalist system by having a wide choice of needed and wanted goods and services available at the best price the market will bear.

What is capitalism? Capitalism is a socio-economic system where free people have the ability to create a better lifestyle for themselves and their loved ones by producing goods or services that other people need and want.

What is capitalism? "Capitalism is an economic system based on private ownership of the means of production and their operation for profit". (Wikipedia)

What is capitalism
BENEFITS OF CAPITALISM

Some people chose to create goods or services as entrepreneurs. Others chose to create goods or services by working for entrepreneurs.

Profit is what we call it when entrepreneurs (businesses) make money over their costs. Wages, salary or income is what we call it when people working for entrepreneurs make money for their services. Both are motivated by the incentive to make money.

The benefits of capitalism that does not get told is that it is the incentive of earning money that is responsible for bringing goods and services to the market place. If it were not for the incentive to earn money, consumers would not have the goods and services available that are needed and wanted when they are needed and wanted, at competitive prices.

If it were not for the paycheck, few people would be working to produce goods or services.

What is capitalism
HOW CAPITALISM WORKS

The goods and services that we need or want for our survival do not appear just because we want them. We or someone else has to produce or create them. If we cannot create all the goods or services that we need or want for the lifestyle that we seek, then someone else needs to produce those goods or services for us.

To get what goods or services we need or want from someone else, we would not get far by just taking what we need or want. To get goods or services that we need or want from someone else, we can trade goods or services that we can produce for goods or services that someone else has to offer. That would be a "barter" market system.

For our convenience, we do not usually trade goods or services for other goods or services. For our convenience we trade goods or services that we produce for money, and then at our convenience, we trade the money for the goods or services that we need or want, when and from where we want them.

Money allows us to trade goods or services that we can produce and use it (money) when and where we see fit to buy goods or services that someone else has produced or created. In other words, in return for us providing what other people need or want, we earn an exchange of money for us to get what we need or want for the pursuit of the lifestyle of our dreams. This is how capitalism works.

What is capitalism? In capitalism, any private citizen can pursue the lifestyle of their dreams by providing goods or services that other people need or want. In a capitalist system, others get the goods and services they need and want because someone else had the incentive to earn money. Money is only the convenient tool to exchange measures of values between parties.

THE SPIRIT OF CAPITALISM

What is capitalism? A priceless piece of art created from a worthless piece of scrap metal has more value than the piece of scrap metal it was created from. By creating a priceless piece of art from a worthless piece of scrap metal, you have created added value to the piece of scrap metal.

In a barter market system, if you traded the priceless piece of art for other goods or services, you would expect to get goods or services worth your priceless piece of art. You do not expect to get goods or services in the exchange value of the worthless piece of scrap metal.

When trading the priceless piece of art for money, we expect to get money for the value of the priceless piece of art. We do not expect to get paid on the value of the worthless piece of scrap metal.

If we made a sale based on the value of the priceless piece of art, didn't we make money above the original value of the worthless piece of scrap metal? If our costs for making the priceless piece of art were the costs of the worthless scrap of metal and the use of whatever tools needed, didn't we make a PROFIT off our efforts?

If more people want us to create more priceless pieces of art from worthless pieces of scrap metal, then we need to earn a fair exchange of money for the value we create. If not, we could just sell the worthless piece of scrap metal.

What is capitalism? Capitalism is earning money, or making a profit by producing added value for the consumer.

THEORY OF CAPITALISM

What is capitalism? It costs gas, wear and tear on your car to get to work. When you exchange your services at your job to earn a paycheck, do you expect to get paid just enough to cover your costs to get to work; or, do you expect to make more than it costs you to get to work? Should someone that walks to work get paid less than you do because his costs are less? If you are making more for your services than it costs you to get to work, aren't you making a "profit" in exchange for the services you provide?

What is capitalism? If you produced a priceless piece of art, someone might feel that your priceless art is valuable enough to exchange a beach front mansion with you. Or, you might receive a luxury car in exchange for your piece of art. Or, if no one sees value in your art, you might settle for an exchange of a hot meal. Your priceless piece of art is worth as much monetary value as someone is willing to exchange monetary value for it. If it took you a day or a week or more to turn the piece of scrap metal into a priceless art piece, then you would probably not make many art pieces if the incentive was not worth the effort. That is how capitalism works.

If you produce a piece of art or any other goods or services for money, you may not receive enough money to buy a beach front mansion, but if you keep producing goods or services and save your money, you could buy that beach front mansion. That is how capitalism works.

THE CONSUMER BENEFITS
FROM CAPITALISM

Producing goods or services that other people need or want in exchange for money is not a bad thing.

What is capitalism? The production of goods or services that other people need and want is a service that is needed and wanted. You earn money for the service of turning raw goods, goods of less value, into goods or services that have a much higher value. You could trade your goods or services for other goods or services, but that is quite inconvenient. Trading what goods or services you produce for money is just far more practical, convenient and easier to carry in your pocket.

What is capitalism? Capitalism serves the consumer by taking raw materials of little use to the consumer and turns them into goods or services valuable to the consumer. The consumer pays money for those goods or services that best fulfill their needs or wants. The consumer profits from the incentive of the capitalist. That is capitalism.

HOW CAPITALISM SERVES THE CONSUMER

What is capitalism? Commodities like milk, clothing, toys, TVs or auto parts, etc. are already finished products before a retail store receives them. Why should a retail store make a profit on the sale of these products?

A service of a retail store is convenience. Retail stores buy in bulk (wholesale) and sell (retail). The service provided is that multiple goods and services are available at your convenience to pick and choose what goods or services you may or may not want at your discretion. The money they earned for their service is called a profit. That is how capitalism serves the consumer.

Before you get all worked up about the retail store earning a "profit", let me remind you of the money you made on your services over and above what it cost you to get to work. Let me also point out that you made many times more money over your costs than the retail store did. The retail store, just like other businesses make their money on volume of goods or services sold instead of profit per item.

HOW CAPITALISM IS TARGETED
BY ANTI-CAPITALISTS

The difference between what it cost to produce the goods or services and what the consumer paid is called the "profit". Profit has been turned into a pejorative by those not understanding profit. Profit, is just the money earned for the service of taking goods or services of less value and turning them into goods or services of more value for the consumer.

Profit has been demonized as a pejorative because it is a way of targeting private enterprise for tax increases. When the public sentiment is turned against businesses, it is easier to get the majority voting bloc that have no business ownership, to vote for higher taxes on the entrepreneurial minority that do.

The uninformed voter does not realize that the added tax on businesses is an added expense that adds to the costs of bringing the goods and services to the market place. This added expense has to be passed on to the consumer in the form of higher prices of goods and services for the consumer. In other words, when higher and higher taxes and new regulation costs are forced onto businesses, it is really just a hidden tax on the consumer.

When taxes are raised on businesses, it affects the price of goods and services at the market place. That means that the consumer's paycheck has less purchasing power, i.e. inflation.

What is capitalism
WHAT IS THE SOUL OF CAPITALISM

The soul of capitalism is that the production of goods and services which are needed or wanted by the consumer are produced by businesses because of the INCENTIVE of businesses to make a profit.

What is the soul of capitalism?

Milton Friedman says it best in
"The Lesson of the Pencil".