With the selection of Republican Paul Ryan for the Republican vice presidential nominee, we can prepare ourselves for the onslaught of attacks on capitalism.
Tobias Barrington Wolff at the Huffington Post brings accusations to Romney and Ryan of ruthless self-enrichment, vulture capitalism, and selfishness. Wolff states that “Mr. Ryan’s morality is one of selfishness – the selfishness of the rich, the selfishness of the corporation, the selfishness of the powerful – joined with utter contempt for the virtues of charity, community, and the imperative to love your neighbor as yourself.” I'm guessing he thinks capitalists are selfish.
Additional attacks claim capitalists kill people and they don’t even care. Obama’s now infamous quote of “You didn’t build that” only add to the perception of a disdain for capitalism within the liberal ranks.
If we’re going to have a debate about the merits, or lack of, related to capitalism, let’s be sure that we are talking about the same things.
Webster's dictionary defines capitalism as "a system of economics in which private ownership of resources is permitted, along with the right to transact business for personal profit." Listed as the antonym for this definition is socialism, "a theory that land, industries and goods produced should be owned, managed and distributed by a government representing the people; any system aimed to put these ideas into practical application".
In short, a capitalist thinks it is OK for people to own property for the purpose of making a personal profit whereas a socialist thinks the government should own everything and then distribute profits. The second alternative may sound quite noble, but in fact, has failed as an economic system time and again. Capitalism, even with its imperfections, has been proven to be the superior economic model.
The greatest challenge to capitalism came with the Russian revolution in 1917 and the establishment of the first communist state in the world. One of the keys to capitalism (and opposite of communism) is property rights — once you have something, it can't be taken away from you; otherwise, it destroys the entire integrity of the system. With the collapse of the USSR in 1991, the superiority of property rights was restored and capitalism remained the world's most prevalent economic model.
The definition of capitalism can also be expanded as an economic system where one person(s) supplies the capital (money) required to run a business and another person(s) supplies the labor. Economist Adam Smith, considered by many to be the founding father of economic thought, was one of the first philosophers to emphasize division of labor — workers specializing in a particular task to increase the speed of production. This specialization of labor led to the Industrial Revolution and subsequent improvements in nutrition, life expectancy, infant mortality, literacy, and education.
Smith also recognized that while division of labor starts the growth process, it is capital accumulation that keeps it going. From goods produced, a portion will be consumed and part is reserved for deriving further revenue through investment. The larger the portion delegated to reinvestment, the greater the growth potential for a nation.
Capitalism also requires establishing a wages fund from profits by which workers are paid. I don't know of any workers who would be willing to keep working for me if I told them, "As soon as I get this product sold, you are going to get paid. That may take 30-90 days, but just hang around, keep working and I will get you a paycheck." That would be nonsense. An owner must set aside a portion of all current sales to be used for payroll, inventory purchases and future expansion. The larger the amount he can set aside, the larger number of workers can be employed, which increases the size of the national output.
Today, many capitalists are afraid to be identified as such. The Occupy Wall Street movement has promoted the negativity to new extremes. The “I want what you have” crowd has successfully tagged capitalism as a negative. How dare you use your talents and resources to make a profit for yourself? The assumption has become that if you have more than me, somewhere along the way you lied, cheated, stole or inherited your way to prosperity. Envy is replacing accomplishment.
If you don’t like capitalism, the alternatives are socialism, fascism or communism. The differences in these economic models are rooted in "who owns all the stuff." We may not like the fact that in a capitalistic economic society, private ownership will never result in equal portions of wealth. But the only way for a poor country to become a rich country is to increase the amount of goods and services they produce. Capitalism is the most efficient way to do this and benefits everybody, but not in equal proportions. There are no economic systems that can effectively redistribute wealth, only those that can effectively redistribute poverty.
“The inherent vice of capitalism is the unequal sharing of the blessings; the inherent virtue of socialism is the equal sharing of miseries.” – Winston Churchill.