ROMNEY WORDSWORTH – Capitalism. Capitalism is freedom. Capitalism is what people do, naturally and without coercion, when they are left alone to pursue their own happiness. Capitalism is often referred to as “free market capitalism”, because the free marketplace is integral to capitalism.
Capitalism is the use of Capital, which refers not only to money or currency, but any other asset in order to generate greater wealth. It is important to note that free market capitalism can exist, and thrive, with neither corporations nor money. Indeed, as the Western world emerged from the Dark Ages, and free markets began to be set up on an institutionalized basis, there were virtually no corporations in existence. Currency, when used at all, was strictly crude gold, silver, and copper coins (oftentimes relics of Roman mintage). Paper money hadn’t even been invented yet!
To illustrate: Imagine that you and a small group of friends travel to the imaginary land of West Eden. You arrive by ship to this distant shore with the clothes on your back and a small amount of tools and supplies. Left to your own devices, you and your friends will naturally stake out some land to build a dwelling and plant some food. Domesticated animals that you brought with you, or you caught in the wild, add to your diet. Cutting down trees is a lot of hard work, but eventually you are able to turn it into a humble dwelling. You and your friends may agree to help each other to make the work easier. Voila! You have used your land and the natural resources on it to improve it by building housing and planting crops, making it more valuable.
This is the very setting encountered by the Pilgrims when they left Europe and wound up on the shores of Cape Cod. Did you know that the Pilgrims originally tried to live on a communal basis? It’s true. It’s also true that living on a communal basis was a colossal failure for the Pilgrims, one that almost got them all killed by starvation. William Bradford, the second governor of the Plymouth colony, kept a journal and noted that the colony was first organized on a communal basis, as required by the financiers of the expedition back in England. The results were disastrous, if not entirely predictable. Young single men simply did not work that hard, and often spent time looking for gold or other quick riches in the surrounding countryside. Too few applied themselves to the occupation of producing food, which did not promise great rewards, as it would be distributed on a communal basis. The Pilgrims were soon on the edge of starvation. Desperate, Bradford abolished the communal system and replaced it by giving each of the colonists’ private plots of land. Whatever they produced on their plots was theirs to keep. The result was a bountiful early harvest the first year under the new system. To give thanks to God for their new found bounty, the Pilgrims celebrated their first Thanksgiving on August 9th, 1623.
The experience of the Pilgrims illustrates something else about Capitalism: It works! Giving people the freedom to produce capital as their talents allow, and to keep and trade those assets; is the best economic system ever devised. It also is the first economic system that follows the Natural Law. It is the system that allowed great inventors with an idea, from John Ericsson to Andrew Carnegie, to Thomas Edison, to the Wright Brothers, to Steve Jobs, to take that idea, sign up investors, and create enormous new wealth and new employment for America.
Depending on your natural talents, you will find that you are pretty good at doing one thing more than another, or enjoy doing something more than other endeavors. Maybe you’re good at gardening, and produce a bumper crop of green beans. Your next door neighbor has a knack for making butter from the milk he gets from his cow. He could use some greens in his diet, while you’d like some of his butter to make your green beans tastier. So, after some haggling, you decide to trade a bushel of beans for a pound of butter. A free market has been created! That’s rudimentary capitalism.
It was that kind of trading between farmers and tradesmen that gave rise to more complex free markets in Western Europe after the rigidity of feudalism was relaxed. Eventually, using grain, chickens, and other agricultural commodities in barter exchanges becomes rather cumbersome. People want a way to store wealth in a way that is compact and more easily carried. Enter the use of precious metal and gems as currency. This is also known as “hard currency”, as the currency itself has a “hard value”, being a commodity itself.
Somewhere along the line as the great merchant families were establishing themselves in the Italian city states, wealth creation became so great that even using gold became unwieldy (not to mention dangerous to transport lest you be way laid by a highwayman). The Italian bankers invented the “cheque” as a paper promissory note, allowing easier transfers of currency. Eventually, the “bank note” was issued as a form of currency, which is used in most countries today.
So remember that when someone tells you they are an “anti-capitalist”, what they are really telling you is that they are against freedom, and against wealth and prosperity. Whether they know it or not.