As financial advisors, we’ve already got a pretty good idea about why Capitalism is good—both for the country and for individuals. While our country is seemingly quite divided over the benefits of Capitalism vs. Socialism, it’s helpful to remember why Capitalism endures and benefits us all.
The Benefits of Capitalism
The benefits of Capitalism are far-reaching. Here are some reasons why Capitalism is synonymous with the “American Dream”:
If you think of the words that best describe America, (hopefully) one of the first that pops into your head is freedom. Freedom built America! It has been fought for time and time again. From independence to emancipation, women’s rights to civil rights, in America, we protect our freedom and capitalism works hand in hand to preserve it.
Freedom comes in all sizes – like choosing what products you want; where and when you buy them and at what price. We purchase what we desire from sources that are agreeable in price and value. The same is true for larger freedoms, like deciding where to live and what to do. We choose environments where we are rewarded for hard work and compensated accordingly. One of the biggest is our freedom to be creative and innovate. We are free to challenge the system, invent and develop better products and methods. (And, in return, make more money!)
Little or Big, capitalism ensures our freedoms and rewards our ingenuity.
One of the major ways capitalism promotes our freedom is through synergy. Synergy is the cooperation between people to produce far greater than simply the sum of their parts. The methodical short film, “I, Pencil” captures the essence of synergy in our lives. If you have a few minutes, please take a peek.
As the video shows, synergy is in every aspect of our day to day lives; even in a simple pencil. The pencil was first cut down by loggers, who were given tools by another person, and fed lunch by another, for which food was produced by many others. The cycle goes on and on for each part of that pencil. A plethora of people in sync producing even the little things we use every day.
In America, we get to work together in a stream of synergy. We give our efforts to another and receive wages to go out and obtain the products we desire. Those products were produced by others, who also work in return for wages. We simply work to produce to make money and it’s voluntary. But we also strive to advance. We get raises, gain experience and education and move on to the next level. Capitalism allows us to work together and also compete. The element of competition in the marketplace allows us to be mobile. There is no “big boss” pinning us down in an assigned job with fixed wages. We get to choose our own paths!
America truly is the land of opportunity. Capitalists are constantly pushing to compete, grow, innovate and challenge the marketplace. To strip away capitalism is to strip away one’s ability to advance. With capitalism, the world is your oyster where your pioneering efforts are rewarded with gains. This is how our country has revolutionized agriculture, energy production and modern technology. This is how we produce more food more efficiently, have the largest oil reserves since 1972 and cars that even drive themselves. Plus, as a WallStreetMojo article states, “Innovation led by capitalism has been one of the major reasons why the US has developed corporations like Apple, Microsoft, Amazon, Google and Facebook”. Each of these pioneering companies is rooted in the capitalist ambition to innovate and prosper!
Another aspect of free market opportunity is equality. It is also the most attacked and devalued notion. Often, we see reports or articles about how equal opportunity is eroding in America.
Usually, what these stories are attempting to express are unfair practices and disadvantages for those who are less skilled. Let’s think about a modern capitalist, Elon Musk, for example. He has produced amazing innovations through determination and intelligence. But opposers to capitalism might say that Musk’s superiority is unfair and that others should be given the same rewards for less effort and determination. Should Elon be handicapped then, so that the field becomes equal?
In that sense, their vision of equal opportunity is equal to the concept of participation medals. Imagine you are in a race where the fastest runner wins a big shiny medal and a million dollars. You would run pretty fast, right? Even if you didn’t win, you’d probably get a little faster. But what if, instead, someone thought that it was unfair to make slow runners feel bad when they didn’t win the race? Instead of giving away a big medal and prize, every single runner got a small participation medal. With nothing pushing you, you would not care to run very fast.
But, hey, we all got the same thing, right? Wrong! No one achieved anything or made progress because the incentives were removed.
Capitalists like Elon Musk and Jeff Bezos push the market. They inspire others to be innovative, challenge precedents and grow. There lies our equal opportunity. Every single one of us has the chance to improve! Even if we don’t become the next innovative billionaire, there will always be an opportunity to strive for a new personal goal.
In this way, capitalism is consistent with human nature. We like incentives. We like to be rewarded for our work. We like to know our efforts will benefit us. Accomplishments make us energized in the morning, ready to bounce out of bed and hustle. That capitalist opportunity for accomplishment gives us motivation for each day (Let’s not forget the money!). It’s a race we are eager to run.
One of the greatest, most overlooked, benefits of capitalism is its effect on the environment. The article, “Tragedy of the Commons” describes when properties are privately owned, they are taken care of. Capitalist landowners will care for their land because they have a direct investment in them. It is when property is made to be “common” with no real ownership, that they become neglected. Again, the incentive to care, improve and potentially profit is stripped away. “Why should I bother?” becomes the mantra of complacency versus “If I hustle and take some risk, something great may happen!”, which is at the capitalist core of innovation and improving lives globally.
If you’re like us with a strong belief in a free market, innovative society that embodies capitalism, please schedule a video conference with one of our advisors to ask them how the ‘Demand Patriot’ portfolio may help you achieve your financial goals by investing in companies that strive for the “American Dream”.
This report is a publication of Demand Wealth. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.