Capitalism Does Not Equal Corporatism – Part 1

“Capitalism” is not the same as “Corporatism.” Yet, whenever you mention capitalism, there is palpable anger arising from a fundamental widespread misbelief.

“‘Evil’ corporations are greedy and take advantage of the system for their benefit.”

I have two words for you – “No S***.”

Such does not mean capitalism has become “broken.” On the contrary, capitalism created the opportunity for corporations to exist. Things went wrong when corporations took advantage of the system.

However, that isn’t their fault. It is yours and mine. 

As the saying goes, “Don’t hate the player. Hate the game.”

Let’s explore the differences, the problem, and the solution.

Capitalism Isn’t Broken.

I recently took a poll about “capitalism.”

There is a generally false assumption about capitalism.

“Corporations are hugely profitable but fail to share the fruits of capitalism equitably. 

Let’s define what “capitalism” is and isn’t.

Capitalism is an economic system of property rights, the rule of law, and free markets. As such, capitalism allows ANY individual to create wealth.

“Properly understood, [capitalism] provides a level playing field for entrepreneurs to offer goods and services producing incomes and profits. I don’t think equitably distributing ‘profits’ is capitalism’s role.

Ensuring that all participants get treated fairly and, to some extent, regulating these personal and corporate endeavors, is the role of society in general and government in particular.

So when you say that capitalists are not very good at sharing profits, I would say that capitalism did not get designed to do so.” – John Mauldin

Therefore, an economic system that equally shares profits, goods, and services is not “capitalism.”

It is “Socialism.”

Furthermore, let’s understand what these debates are really about. The debates over capitalism aren’t about Mike Jones, who operates the local auto mechanic repair shop. Nor Annie Smith, the operator of a personal training studio. Mike and Annie are taking advantage of a capitalist economy. Capitalism provides the ability to earn more wealth than paid employment.

Mike and Annie took significant risks as entrepreneurs and expended capital in the process. There were no guarantees of success when they ground out 50-70 hours work weeks. Should Mike and Annie now get forced to share the fruits of the labor with everyone else who did not take those same risks?

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