Capitalism is not the problem

Before you think I am getting on some kind of rant, I promise you this is not meant to be such. As a business consultant and small business owner, I wanted to offer an observation that is most disturbing to me. I hope in some way it is disturbing to you and wakes you up to the realities around you.

Recently there has been a lot of discussion in the US media about business and the evils of capitalism. This does not surprise me since we can trace back much of this dismay even before the market crash of 1929.

What is disturbing to me is that business owners… yes, you read that correctly, small business owners are speaking out against capitalism. Excuse me?  Have they lost their collective minds? Before you drop me an email – I am not saying ALL small business owners are against capitalism. What I am saying is that the logic behind this position is – well – illogical.

It is generally accepted by entrepreneurs that capitalism is an economic system comprised of private ownership of organizations for the purpose of creating goods and services for profit or income AND it is also considered the accumulation of capital (wealth). Capitalism includes the competitive market, voluntary exchange of goods, services, and capital. Capitalism is made possible through the use of wage labor. Overall, capitalism is generally viewed as encouraging economic growth in a given market.

Now, I don’t want to go rouge economist on you here – I just wanted to point out that the problem is not with the concept of capitalism. It is a problem with government intervention. Capitalism is a system of raising, conserving and spending a set monetary value in a specified market. When we have intervention on this market by some outside force, we skew the results and thereby causing artificial changes to the market. Business are less willing to take risks, raise capital, expend capital or even hire labor when faced with uncertainty.

Politicians would like us to believe that this is caused by those evil capitalist! A free market system has both rewards and punishment in the role of risk. A market left alone will correct itself one way or another. Either, you make wise decisions and you stay in business or you make foolish decisions and lose everything. That is what risk is all about – that is the heart of capitalism. Free markets also connote that there will be big players and small players. Most all businesses started small and built themselves to the size they are today. That is certainly a reward of the risk taken so long ago.

Before you extol the evils of the free market system and capitalism – you must realize that you cannot have one without the other. Regardless of whether a company is privately held or publicly traded, you cannot have a free market system without capitalism. You cannot have significant reward without some risk and to be honest – there is no motivation to do anything if there isn’t an intrinsically valued reward at the end.

If you are a business owner and you are against capitalism – you are against the free market system – which means you are against risk.  That only leaves one question for me – why would anyone go into business if they hate the system by which they desire to be rewarded? It is illogical to me.

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Philip A Foster, MA is Founder/CEO of Maximum Change Inc. Elevating leaders and their organizations to the next level since 2005. Master Certified Coach, Philip A Foster, MA and his associates facilitate effective positive change by helping organizations, leaders and individuals in high demand — design and implement strategies that maximize focus and deliver results. Specializing in Organization and Strategic Leadership.

Email | LinkedIn | Facebook | Twitter | Web | Skype: philip.a.foster | 615-216-5667

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2 thoughts on “Capitalism is not the problem

  1. I agree with your definition of capitalism and its function, however government “hands-off” isn’t the panacea to all economic problems. One must take into consideration a lack of ethics and simple irresponsibility.

    If a group of individuals, in any context, wishes to be left alone, then the actions of that group should merit that privilege. Civic and ethical duties and responsibilities should be center in their decision-making process and chosen course of action. This isn’t to limit the benefits of capitalism, but rather temper it from driting to its “dark side”. A system where all parties involved don’t gain something is unsustainable and destructive.

    The typical political debate is hyper-charged with ideological diatribe from both sides. We have a responsibility to step away from the diametrically opposed manufactured talking points and have a real discussion on what works, not what fits into a sound bite.

    1. William:

      I don’t disagree with you. Your comments open up a wider issue to the problems we face. I was simply pointing out that anyone in business who is against capitalism – does not understand fully the mechanics of business.

      Interesting side-note: If you will recall back in the late 80s there was this huge push to teach ethics in business schools everywhere. My question is this… it has been nearly 30 years since the push for that subject matter – why do we still have so many ethical failings? I think ethics is an issue separate from my point on business owners against capitalism. Still an important matter to discuss.

      Keep the comments coming – It is good to dialogue.

      Philip

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