The Good & Bad of Socialism & Capitalism. II

Yesterday I wrote at length about, "What's Good about Socialism?", and as promised, today I write about ->

What's Good about Capitalism ?

The proper name for the political economic system commonly called Capitalism is the free, private economic system [see blog post of July 28, 2008]. Yes, it's clumsy, so I'll reluctantly use the Marxist term, Capitalism, and will assume a "perfect" form for today's exposition, unmodified by what has happened in modern, mixed systems or how pure Capitalism can - and has - mutated on its own.

The freedom inherent in Capitalism permits each person individually to pursuit his maximum happiness derivable from the material world. That person is maximally motivated to work hard and innovate as he keeps everything he can realize from his efforts. He is completely free to form associations with others, such as limited liability corporations or partnerships or any other beneficial form, and to work jointly with them on new endeavors that seem profitable.

The private ownership inherent in Capitalism provides for free movement from farm, town, city, region or even nation. He owns his property and factories himself in fee simple title, unfettered by governmental rules or regulations. He can move himself, move his factory and / or his money anywhere he thinks he can achieve more. He can alter, adjust, divide, or combine all those resources of money and property however possible to increase his profits and wealth as he freely desires.

Capitalism creates optimal prices of exchange of goods and services completely internally and self-consistently. No government determines the prices - the Capitalist system creates them and changes them as needed to maximize wealth. Capitalism internally prices the transfer of money and resources over time self-consistently: the value of consuming now versus saving for the future is determined by Capitalism. No government specifies it. This emphasis I make on self-consistence is crucial: only a self-consistent system can operate and evolve on its own without external support. By optimally pricing the transfer of goods and money over time, Capitalism becomes a dynamically optimal system, meaning it will seek own its own to increase wealth over time. The simple individual motivation and freedom of the free persons comprising a free, private enterprise system - Capitalism - will tend to do that.

One can mathematically prove under very general conditions that under this system of pure freedom and private ownership that the pure sum of linear wealth over each person in a Capitalist society can be a maximum. Yes, Capitalism can produce more wealth.

Examples from the world support this. Under a fairly unfettered form of Capitalism, the United States grew from zero to become the richest nation in the world in just about 250 years, surpassing the Old World which had 5,000 or more years to create wealth. China under Mao was a poor nation. By adopting much of the system of free, private enterprise to liberate the Chinese peoples as individual persons to create wealth, China has rocketed past many other developing nations which are still burdened by Old World ideas of socialism, such as India.

Capitalism motivates innovation. Persons with good ideas can start businesses, raise money, operate as they see fit, sell or market their goods and services anywhere they wish for whatever prices they can charge. With the maximal freedom that Capitalism offers, again, one can mathematically proves that such a firm would be able to create more wealth in the system of Capitalism than in any other system. Of course the US provides innumerable examples of this innovation and massive wealth creation.

Old Europe also provides examples of the success of moves toward Capitalism from the older systems: England in the 19th century and Netherlands of the 17th century come to mind.

Capitalism - the free, private enterprise system - is provably superior to all other systems for the creation of wealth and does work in systems of human beings to produce massive wealth from nothing.

Notice I used the conditional "can" and "would" in describe the provable superiority of Capitalism. Person are free - they have free will - and do not necessarily always make the correct decisions to maximize that wealth.

Tomorrow I will write about what's bad about Socialism.

Markets

I will check later to see if Krypto has any sell orders. Also I point out that the price for TIPs is approaching my initial level (102 is my first level) to move some cash to TIPs. [TIPs are Treasury inflation protected securities. I invest in those in tax-free IRA accounts.]

Word of the Day

"Puissance" - noun & adjective [$10] archaic & modern & literary
Puissance means (noun - archaic) strength, power; (adjective - literary) having great power or influence, mighty; (noun - modern) a test of a horse's ability to jump large obstacles in showjumping.
Sentence: The puissance of Capitalism for creation of wealth is incontestable and unsurpassed by any other political economic system.