Capitalism in two lines

[Plu]

I've been stuck with this in my head, so I'd like to hear opinions. It seems to sum up the concept behind capitalism really well, as well as explain many of the things we're experiencing because of it.

Capitalism is turning money into more money. Everything else is overhead.

[josephpalazzo]

Whenever you oversimply, more likely than not, you will mischaracterize. Call this Joseph Palazzo's law.  :-D

Probably whoever wrote that was referring to a well-known principle in economics -anyone running a business will raise their eyebrows if you show yourself that inept at this: business tend to maximize profits. So yeah if you would invest X amount of dollars to start a business, your pre-occupation will be to lower your costs as much as possible, and sell your goods as much  as possible. The difference (revenue - cost) is your profit. If you don't maximize your profit, you are running your business inefficiently. If the economy takes a downward turn, you run the risk of going bankrupt.

[Plu]

whoever wrote that

That would be me, I wrote that :P


Also, it's not meant to show you how to be better at it. Only to show you where a lot of the problems and misunderstandings around capitalism come from.

[Solitary]

Class division

Capitalism is the social system which now exists in all countries of the world. Under this system, the means for producing and distributing goods (the land, factories, technology, transport system etc) are owned by a small minority of people. We refer to this group of people as the capitalist class. The majority of people must sell their ability to work in return for a wage or salary (who we refer to as the working class.)

The working class are paid to produce goods and services which are then sold for a profit. The profit is gained by the capitalist class because they can make more money selling what we have produced than we cost to buy on the labour market. In this sense, the working class are exploited by the capitalist class. The capitalists live off the profits they obtain from exploiting the working class whilst reinvesting some of their profits for the further accumulation of wealth.

This is what we mean when we say there are two classes in society. It is a claim based upon simple facts about the society we live in today. This class division is the essential feature of capitalism. It may be popular to talk (usually vaguely) about various other 'classes' existing such as the 'middle class', but it is the two classes defined here that are the key to understanding capitalism.

It may not be exactly clear which class some relatively wealthy people are in. But there is no ambiguity about the status of the vast majority of the world's population. Members of the capitalist class certainly know who they are. And most members of the working class know that they need to work for a wage or salary in order to earn a living (or are dependent upon somebody who does, or depend on state benefits.)

The profit motive

In capitalism, the motive for producing goods and services is to sell them for a profit, not to satisfy people's needs. The products of capitalist production have to find a buyer, of course, but this is only incidental to the main aim of making a profit, of ending up with more money than was originally invested. This is not a theory that we have thought up but a fact you can easily confirm for yourself by reading the financial press. Production is started not by what consumers are prepared to pay for to satisfy their needs but by what the capitalists calculate can be sold at a profit. Those goods may satisfy human needs but those needs will not be met if people do not have sufficient money.

The profit motive is not just the result of greed on behalf of individual capitalists. They do not have a choice about it. The need to make a profit is imposed on capitalists as a condition for not losing their investments and their position as capitalists. Competition with other capitalists forces them to reinvest as much of their profits as they can afford to keep their means and methods of production up to date.

As you will see, we hold that it is the class division and profit motive of capitalism that is at the root of most of the world's problems today, from starvation to war, to alienation and crime. Every aspect of our lives is subordinated to the worst excesses of the drive to make profit. In capitalist society, our real needs will only ever come a poor second to the requirements of profit.

Capitalism = free market?

It is widely assumed that capitalism means a free market economy. But it is possible to have capitalism without a free market. The systems that existed in the U.S.S.R and exist in China and Cuba demonstrate this. These class-divided societies are widely called 'socialist'. A cursory glance at what in fact existed there reveals that these countries were simply 'state capitalist'. In supposedly 'socialist' Russia, for example, there still existed wage slavery, commodity production, buying, selling and exchange, with production only taking place when it was viable to do so. 'Socialist' Russia continued to trade according to the dictates of international capital and, like every other capitalist, state, was prepared to go to war to defend its economic interests. The role of the Soviet state became simply to act as the functionary of capital in the exploitation of wage labour, setting targets for production and largely controlling what could or could not be produced. We therefore feel justified in asserting that such countries had nothing to do with socialism as we define it. In fact, socialism as we define it could not exist in one country alone—like capitalism it must be a global system of society.

It is also possible (at least in theory) to have a free market economy that is not capitalist. Such a 'market economy' would involve farmers, artisans and shopkeepers each producing a particular product that they would exchange via the medium of money. There would be no profit-making and no class division—just independent producers exchanging goods for their mutual benefit. But it is doubtful whether such an economy has ever existed. The nearest that may have come to it would have been in some of the early colonial settlements in North America. Some Greens wish to see a return to this kind of economy. We do not think that it is a viable alternative for modern society. Such a system would almost inevitability lead to capital accumulation and profit making—the definitive features of capitalism.

Solitary

[mykcob4]

I've been stuck with this in my head, so I'd like to hear opinions. It seems to sum up the concept behind capitalism really well, as well as explain many of the things we're experiencing because of it.

Capitalism is turning money into more money. Everything else is overhead.

Capitalism is nothing more than making a profit no matter what it takes. For capitalism to work someone and something MUST be exploited. The easiest way to exploit something is to be corrupt.

[Mister Agenda]

Capitalism is investing some of what you have now so you can have more later. Trading your excess fish today for fish tomorrow so you can stay home and make a new net so you can catch more fish the day after is just as much capitalism as buying shares in IBM is. To work best, some protection of property rights is needed, or there's no point to investing. If the chief gets all the fish, getting more fish in the long run is done by doing whatever gets the chief to give you more fish. The basis of economics is the idea that people, in general, respond to incentives. The problems we're having with our economic system has everything to do with skewed incentives (particularly our encouragement of rent-seeking behavior) and little to do with investing for future return being a bad idea.

That our economic system should inform our morality rather than the other way around is a better example of a bad idea, I think. Economics tells us how to achieve various ends, when the means becomes the ends, we have a problem.

[josephpalazzo]

whoever wrote that

That would be me, I wrote that :P


Also, it's not meant to show you how to be better at it. Only to show you where a lot of the problems and misunderstandings around capitalism come from.

Capitalism can be thought of as an ideology, and different schools of thoughts have their own take on what capitalism is/should be. However, not understanding basic economic principles, which is neither on the right nor on the left of the political spectrum, will skew your understanding. (hint:  read the responses on this thread, and you can tell if someone is answering you from the perspective of the right or of the left.)

[stromboli]

By way of comparison:

Socialism: You have two cows. The government takes one and gives it to your neighbor.

Communism: You have two cows. You give them to the Government, and the Government then gives you some milk.

Fascism: You have two cows. You give them to the Government, and the Government then sells you some milk.

Capitalism: You have two cows. You sell one and buy a bull.

Nazism: You have two cows. The Government takes both and shoots you.

[mykcob4]

By way of comparison:

Socialism: You have two cows. The government takes one and gives it to your neighbor.

Communism: You have two cows. You give them to the Government, and the Government then gives you some milk.

Fascism: You have two cows. You give them to the Government, and the Government then sells you some milk.

Capitalism: You have two cows. You sell one and buy a bull.

Nazism: You have two cows. The Government takes both and shoots you.

Wrong. Capitalism that is unregulated.:Your boss orders you to steal a bull and two cows.

[Jason78]

Can you just turn money into more money?

Surely Capitalism is using money to convince other people to give you more money?

[Plu]

Can you just turn money into more money?

Nobody has figured out how yet, so we have annoying overhead like "making a product" and "convincing people to buy it". But they are just a neccesary overhead, nothing more.

[SGOS]

Capitalism can be thought of as an ideology, and different schools of thoughts have their own take on what capitalism is/should be. However, not understanding basic economic principles, which is neither on the right nor on the left of the political spectrum, will skew your understanding.

That's a pretty good response.  Capitalism is an ideology.  It's neither good nor bad.  Except that ideologists tend to see their own particular ideology as flawless in theory.  Any resulting problems with the ideology are a result of contamination from other competing ideologies.  It's not working properly because everyone is not indoctrinated sufficiently and not acting in accordance with the theory.

Christianity is an ideology.  If God fails you, it's because you don't believe sincerely enough.  Outside forces like Satan contaminate the perfection. If everyone would just get with the program, we would live in Utopia.

Ideologies are perfect at the theoretical level, but run into problems when humans are introduced into the equation.

[the_antithesis]

Capitalism in two lines:

"Man, that is a shitty t-shirt. I'll give you ten bucks for it."

[SGOS]

Capitalism in two lines:

"Man, that is a shitty t-shirt. I'll give you ten bucks for it."  

"Man, that is a shitty t-shirt. I'll charge you ten bucks for it, more if I can get it."

[josephpalazzo]

Capitalism can be thought of as an ideology, and different schools of thoughts have their own take on what capitalism is/should be. However, not understanding basic economic principles, which is neither on the right nor on the left of the political spectrum, will skew your understanding.

That's a pretty good response.  Capitalism is an ideology.  It's neither good nor bad.  Except that ideologists tend to see their own particular ideology as flawless in theory.  Any resulting problems with the ideology are a result of contamination from other competing ideologies.  It's not working properly because everyone is not indoctrinated sufficiently and not acting in accordance with the theory.

Indeed, ideology works to exclude others, including slightly different variance in the theory. You see that among different christian denominastions, likewise for capitalism. The right attitude would be to look at capitalism as a work in progress, so that if the theory fails in certain area, then it would be open to corrections. Unfortunately, anything that involves politics quickly spirals to extreme, either to the right or to the left.