Grateful For Capitalism
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By Joe Morgan, CFP®, CFA, Principal: JWM Wealth Management, LLC, Resident since 2004
Before capitalism, the world knew only one way to live together: follow someone who became a leader either through feats of strength, lineage, or some other unrelated factor, and depend on him (mostly “hims”) to lead you well.
But in any case, follow.
The key to a growing and well-functioning economy is to optimize the allocation of resources. Some systems try to do this “intelligently” through great study and decision-making at the top. Those systems don’t work.
Capitalism allocates capital based on the individual working in their own best self-interest. This way, when transactions occur they, by definition, benefit both parties, creating an improved situation for everyone.
Of course, there are bad actors in capitalism as with any other system, so it is left to government (in whatever form) to prevent these bad actors from creating transactions out of deceit. Honest dealings drive capitalism.
Want proof that capitalism has driven growth?
From the year 0 to 1820, it is estimated that global GDP grew about 0.1% per year. Since then, driven by all the aspects of capitalism, GDP has grown about 2% per year, or 20 times as fast (according to a recent book by Alan Greenspan and Adrian Wooldridge titled Capitalism in America).