Capitalism

While the miser is merely a capitalist gone mad, the capitalist is a rational miser.

Capital is dead labor, which, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks.

                           Karl Marx

In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.

                      Charles Darwin

A worried capitalist is like a comet: he always presages some disaster for the world.

“The Count of Monte Cristo” Alexandre Dumas

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By definition, capitalism is an economic system in which means of production is privately owned. Means of production are material and labor (or combination of labor and machine). The investor provides material and machinery, and hires labor to produce. The main reason for production is not meeting the consumer needs, but profit. It means that the owner of the capital calculates how much each product cost and adds a profit (markup) to determine the selling price. According to the classical theory of capitalism, the market determines the price through competition. Merriam Webster describes capitalism as: “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.” There is only one word in the definition that makes capitalism fair and equitable, and that is “competition”. Nevertheless, and according to the above definition, competition exists “in a free market”. Free market survives on a very small scale nowadays. We may experience free market in weekends’ farmers’ markets or adjacent stores in the downtown of small towns offering the same products, although in both cases prices could be set by consultation. The industrialist creates a market for the product, within the boundary of a country by inventing needs (consumerism), or outside of the boundary of a country by the help of the government. Considering government subsidies, advertisement, monopoly or share of the market, globalization (cheap material and labor, and vast market) and many other such factors, the theory of “competition” is only in theory. Government regulations protecting industries, monopolies (or present day oligopolies), price fixing, marketing and advertising, media control, and many such tactics do not leave any room for a free market. Another important factor is chain stores developed by large investments.

It took about 600 years to replace feudalism with capitalism. Capitalism had no use for slavery, as it benefited feudalism. Slaves were employed by North in the Civil War to fight feudal South. By this time, it was already established in England, with the effort of Adam Smith and David Hume in mid 18^th century, when industrialists replaced Mercantilists. In 1930, the great depression could only be harnessed by intervention of the government according to the theories of John Maynard Keynes. Later inflationary periods caused a change in policy from Keynesian economy to Chicago School and with the classical theories of capitalism introduced by Friedrich Hayek and Milton Friedman. Ronald Regan’s “trickle down economy” extenuated this policy giving more power to private investors, cutting taxes on the rich, and abolishing regulations limiting private businesses. Neo-liberalism and globalization are the newest form of capitalism. Marx and Engels had predicted such policies that would lead to monopoly, as the highest stage of capitalism. They argued “surplus” and “accumulation of capital” which would reduce the benefit of the laborer in favor of the investor, and increase the disparity between the rich and the poor. In return, they introduced Socialism as the most adequate system for all citizens and the most advantageous policy for the government. Other types of capitalism are free market (Friedman), social market (Keynesian), and state capitalism (Soviet Union).

Mahatma Gandhi was once asked by a journalist what he thought about Western Civilization. He responded: “that is a good idea”! Capitalism was born in the midst of western civilization, after the period called “the enlightenment period”. It was the industrial revolution in Europe, as it was mentioned above, that paved the road for capitalism. The bourgeois who was living off the land toiled by others, used its money to invest in machinery and equipment and received interest for the investment. Like any other economic theory, capitalism could not survive without the support of the government. Early in the history of capitalism, bourgeoisie that was deeply rooted in the government established a system of receiving benefit on capital that was later called ‘surplus’. The most important aspect of any organization is to increase profitability. The theory is that through competition, consumer or the services or goods will enjoy lower price and better service. However, this simple theory does not take into account many variations of capitalism that suppresses the very people it is serving. The richest continent on earth has always been Africa, for the splendid climate, plentiful of minerals, abundant nature and species, and above all, where the first human is known to come from. However, all African countries are the poorest in the world. The reason is centuries of Western incursion, invasion, and foray. Today, in the year 2011, all governments operate based on a single ideology, an ideology that is specific to that government. US government has been operating based on capitalism since its inception. Soviet Union adopted socialism as its ideology (state capitalism). Western European countries have a little bit of both! With the recent global financial crisis, capitalism is challenged again, but this time its faith is definitely in question.