Mises Institute: What Is Capitalism?

Looking for a short but in-depth explanation of capitalism? Or maybe you need a convincing video that is sure to grab the attention of your capitalist doubting friends? This short but beautifully animated video, created by the Mises Institute, is exactly what you need.

The civilization of mankind can be traced to the establishment of property rights. With property rights, individuals could own land, capital, and goods and then trade or sell them to others. This economic activity is referred to as “the market.” This doesn’t mean it necessarily takes place in a physical market; it simply means that goods and services are voluntarily traded. For most of human history, property rights have been limited to those in power. For example, a king or lord had ultimate control over those who lived under their protection. If the king desired beets, farmers were to farm beets. If the lord needed horseshoes, blacksmiths forged horseshoes. Ordinary people had the ability to trade among themselves, but those in power could direct their production if they so desired, or punish those who resisted. The emergence of capitalism changed this. Capitalism is mass production of goods to satisfy the needs of the greatest number of people. Capitalism was revolutionary by recognizing property rights for all, regardless of background and social standing. Under capitalism, even the most vulnerable in society had an absolute claim to their own labor and property. It did not guarantee equality of property, but capitalism eliminated any right by anyone else to infringe upon it. In doing so, capitalism empowered consumers—rather than those in power—to influence what was produced in the economy. This happens via the profit mechanism. If enough people demand a good and it can be sold for more than it costs to produce, that means the production of that good is profitable. Some of the richest people in the world today have made their money not by appealing to the rich, but by appealing to the masses. Walmart’s business model, for example, is geared toward selling goods cheaply to as many people as possible. Critics of capitalism try to condemn it as “greed.” This is false. Greed and envy are human vices, and they exist in any economic system. What capitalism does is incentivize the production of goods and services that people desire on the market, rather than leaving those decisions to powerful individuals or governments. Throughout human history, we have seen property rights and markets lift billions of people out of poverty. Everywhere in the world, property and economic freedom are correlated with improved quality of life, health, and life expectancy. Capitalism is a peaceful system of collaboration between producers and consumers, and functions by the wants and needs of the greatest number of people. The government plays no role in a truly capitalist system. When the government interferes and forces regulations on producers and consumers, it ceases to be a capitalist system. Capitalism is freedom of consumer choice. Questions Critics of capitalism accuse it of simply being “greed.” Do you think it is greedy to profit from creating things that others want to buy? Some people think that voting is the fairest way of making decisions for a group. What do you think? If a majority of a group wants cheese pizza, but you want pepperoni, do you think it’s fairer to allow you to buy your own pizza or go with the group? Because capitalism empowers consumers, rather than politicians, the market often creates products that are just for fun, like video games. Do you think allowing consumers to spend money on these sorts of things is good, or would we be better off if the only products we can get have value to everyone (the “common good”)?

Chris Spangle is the publisher and editor of We Are Libertarians, a news site and podcast that covers national and Indiana politics from the libertarian perspective. Spangle previously worked in marketing for the Englehart Group on behalf of the Advocates for Self-Government. He also served as the Executive Director of the Libertarian Party of Indiana and producer of the Abdul in the Morning Show. He now works as the web director of a nationally syndicated morning show.

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