Dear Friends,
It seems to me that there has always been capitalism. The market system may be a relatively new invention but capitalism is as old as humanity. From the first time Ug traded Grug a spear head for a dear head there has been capitalism.
The market system has it’s roots in the time just before Adam Smith. It was the invention of the factory and the division of labor factories brought about that made production cheap and of higher quality. These innovations along with a capitalistic ethos have made our modern society so prosperous.
Imagine if the Romans had discovered the market system. Today Humanity would be striding among the stars. But they didn’t. It was after the last gasp of Roman Civilization (about a century after the fall of Constantinople) that the market system was being born in Denmark. The market system has evolved and devolved in steps since then.
But capitalism is a consequence of mankind’s social nature. It is a fact of our sociability that we mingle and trade. Each getting a need met in the trade. The one a plow and the other funds to build another plow and to feed his family for the day. Each getting more than he had before in the trade. No matter if the product or service is a spear head or fiber optic service the result is the same. It is a win-win.
That is the driving force of capitalism. That we all win when we engage in it. The buyer gets a good or service that in some way enhances his life and the seller gets to make a livelihood. Both have a positive outcome from the transaction. The small personal gains translate to huge societal gains in the aggregate.
Taxation lowers the good for each person. Some profit is diverted from new production or personal wealth to government use. Or some good or service costs more than it otherwise would, The good is lessened by taxation. Regardless of the societal good gained by the service paid for by the tax. There is a cost to a tax.
It is a valid role of government to protect the persons and property of it’s citizens. To that end taxation is a necessary evil. But it is never stopped at that end. Taxes are like an unstoppable tide. They rise and rise until they have drowned economic progress. Then the lawmakers responsible lament the lack of economic progress. But more importantly… the Elite lament the lack of tax revenues. So they raise taxes more…
This is because; if taxation lowers the good to the point that it is equal to or greater than the positive effects from all transactions, transactions will only go on, “under the table.” Off balance sheet transactions become more and more prevalent, when government taxation or other interference in markets are too onerous, erasing the benefit of a free exchange transaction.
If, a country want’s to measure how much it’s interference in the markets effect their markets, they need only compare the size of the black market to the legal market. If there is almost no black market the government is doing a good job not interfering in the markets. If there is a large black market then the government must look into it’s policies else it will face poverty and hunger in the future.
Capitalism is like air. The level of economic activity being like the pressure… The positive outcome is like the oxygen in the air. You can have plenty of air pressure but if there is no oxygen, (Because of government interference) then you cannot breathe. But if there is plenty of oxygen but little pressure you can breathe… If labored.
In other words… Business can go on in a poor country if the government doesn’t, tax too much, impose unnecessary rules, licenses, or other ways governments cause friction in their markets. The profit motive is still there. Even though business conditions are poor. But when government makes doing business too expensive to make a profit…
The point being that government policies have a direct bearing on the state of their economies. To blame capitalism for poor performance is like knowingly depleting the oxygen in a closed room then blaming the inanimate oxygen itself for our shortness of breath…
… if you use rhetoric, like “capitalism is dead.” no one points out the idiocy of the statement, and I believe it…who‘s the fool?