What is capitalism?

What capitalism is can be summed up simply as a free exchange of value for equal value.   What that means is that people are free to exchange between each other their goods, effort, ideas, and any thing else with a value, tangible or otherwise.


Before I continue, I feel that I need to define a few terms.

Property is the sum of what an individual owns. This is not limited to tangible goods, but includes their life, labor, and ideas.

Free exchange is the principle that a person is free to dispose of their property as they see fit. this means that, not only is a person free to sell their property, but is also free from inducement to sell their property if they do not wish to do so. This also includes freedom from selling their property for a value of exchange less than they feel the property is worth.

Market-based economy is an economic system where goods and services are sold in an open market, and the relative scarcity and demand for the good or service determines the relative worth of the good or service.



it is not, an unrestrained search for wealth, even if that search is not incompatible with capitalism. it is a delicate system that needs a strong government to protect the property rights of it's citizens. By this, I mean, the government needs to have the authority to match the responsibility entrusted in it.

capitalism has been given a bad reputation for a while, but this is an undeserved reputation, as it stems from a lack of a basic understanding of what it is. There are many people that can be blamed for this, social activists that think they know better than everyone else, opportunistic politicians, and corrupt businessmen are a few. The recent meltdown on wall street is not an indictment on capitalism, but an affirmation of it's most fundamental principles. The business that needed the bailout were all guilty of: fraud, stock manipulation, seeking government protections instead of competing with other businesses, and worst of all, rewarding those entrusted to run the businesses for failing to run the businesses properly.


All of those behaviors are counter to the most fundamental principle of capitalism, which is a fair exchange between two or more consenting parties.
Fraud violates this principle because it is outright theft. while it may not use force as an inducement, it is still theft because one or more parties involved in the exchange is being deceived, and is therefore unable to give an informed consent.
Stock manipulation is also theft, as it involves fraud.
Seeking government protection violates this principle because it allows a party in the exchange to force the other party to give a greater value in exchange than the true worth of what they are receiving.
The reason the last is the worst is due to it not only being theft, but also a form of theft that encourages the other behaviors.

Another aspect of capitalism in the market-based economy is the labor market. This is the market for employees, the people that make the goods or provide the services sold in the market for goods and services. because of the previously mentioned behaviors, this market has suffered greatly. This is a terrible thing, because those that earn their living in the labor market are unable to purchase the goods and services that they provide. This is due to the practice of outsourcing and limiting benefits or pay.

By limiting pay, the company makes short-term gains, but at the cost of long-term stagnation. This stagnation means that, in times of economic crisis, the economy is slow to recover, as the fundamental mechanic of the economy, free exchange, is stifled due to a lack of disposable income. This is due to the fact that a person can only spend so much money in a limited amount of time, and since the practice of limiting pay to benefit those at the top of the company has the effect of concentrating wealth, there are fewer consumers, as the few with disposable income do not create enough demand for the goods being produced to justify creating new jobs in order to create even more goods. this has the effect of limiting the market cycle.

In short, capitalism did not fail. in fact, it succeeded until the government intervened and prevented the deserved failure of the business that were pursuing bad policies.