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Capitalism: The Cornerstone of Human Advancement

By Greg Samples

1/20/14

Capital is defined as the means of production. Money is only capital when it is used to produce. A shovel sitting in the garage is not capital. A shovel used to dig a foundation for a house is capital. Rice consumed by human beings is not capital. Rice used for planting the next crop is capital.

Money, however it is created, is not wealth. No one can eat money, sleep under money, or use money for warmth, (unless you burn your cash). Wealth is the accumulation of durable goods. Houses, cars, computers, and washing machines, (durable goods), create wealth. Services and consumed items do not. Services, although needed and useful, do not create wealth.

From what we produce, we must first meet our survival needs. Food and water are consumable items and shelter (normally) is a durable good. The more of our production that we are able to put into the category of durable goods rather than consumables, the wealthier we become. For example, if one has a dollar to spend at the fair and must choose between cotton candy and a yoyo, the yoyo is the better choice, because pleasure from the candy will be fleeting, whereas the yoyo could bring joy for years. You might say the yoyo is the macrobiotic, long term choice.

Durable goods are therefore preferred over consumables once basic needs are met. But both must be produced, and to do that efficiently requires the 3rd category, capital. The more assets we can put into capital, the more we can produce, therefore the more wealth can be created, not just for those with the capital, but for everyone in society.

Before the industrial revolution, the great majority of humanity existed at a subsistence level. Every day was survival mode, and any community was just one drought and growing season away from extinction. If crops failed, there was no transportation system to bring in massive amounts of food in or to evacuate large numbers of people. The industrial revolution changed all of that and it was fueled by capital investment. Wealth creation of durable goods not only raises the standard of living of all human beings, but also enables the production of that wealth to get more and more efficient, as machines do more and more of the work that human beings once would have done.

This efficiency gives mankind a commodity more valuable than any house, car, machine or plaything. It gives us time. Time to think, time to learn, time to explore, time to contemplate our existence and our role in the universe. It gives us time to rest, time to enjoy recreation with our friends and families.

Of course, everything has a back side. It also gives us time to engage in activities that degenerate our health, that shrink our minds, and that harm our relationships. But that is the nature of change. We know we cannot have day without night, love without hate, health without sickness. If we are to have the positive, we must embrace the negative as well.

Capital is therefore essential for rapid human advancement. Knowledge and understanding multiply logarithmically with each passing decade. The question arises as to what system or systems best facilitate this. No one advocates doing away with capital. The question is who shall control it, private individuals (capitalism), or governments (socialism, communism, fascism).

When we observe those negative aspects mentioned above, degeneration, sickness, crime, poverty, etc, we feel an urge to diminish them. Since groups of people are more powerful than individuals, we naturally look to the largest group of all, government, to address the problems. The drawback of this approach is that individuals who seek to embellish those negative aspects for their own personal gain also seek government as their tool. Since they are usually more unscrupulous than those who seek to promote the positive aspects, they are much more likely to win elections. Thus, the more government involvement, the greater the potential for unsavory actions.

When private individuals control the capital, in order to maximize their profits they must satisfy the consumer. When government controls the capital, in order to maximize their profits they must satisfy those who bribe them the most. The latter is often in conflict with the public good and the demand of consumers. Therefore the capitalist system is the most efficient way to grow the wealth of all people, and as a consequence, facilitate the material, intellectual, and spiritual advancement of mankind.

We can say then that the best use of government is like that of salt. How much do we need? Very little, but not zero.

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