Has Capitalism Failed Us? – An Entrepreneur’s Perspective

Michael Moore’s now famous statements on Jay Leno, “Capitalism is actually legalized greed, “is another exalted point of view thrown into America’s collective retrospection on how and why we are poorer today than we were a couple years ago and if the system that got us rich, has failed us. Here’s an entrepreneur’s two cents on the topic.

The recession has sparked new debates and bought back to life dormant ones on whether capitalism is good for the country. The definition of capitalism from dictionary.com: “an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth”. There is nothing about the verb “capitalism” that stands out as “evil” so why then are the anarchists and socialists calling it so? They do so because the people who practice and benefit most from capitalism have exhibited an uncommon level of stupidity, both as corporations and as individuals in the last couple years. Somehow good behavior and ethical decision making are considered a way of life for people in authority and power, when it is not the case as history, both recent and distant, have so clearly pointed out. So, to understand capitalism, we need to differentiate its users from its usability.

As an entrepreneur, for me capitalism is synonymous with incentives. Capitalism gives you the right incentives to do whatever it takes to bring your dreams to life; no other form of economic theory or practice gives you the outright freedom to do so. America has always been ahead of the rest of the world, neither because of its political ingenuity, nor its natural resources, America is the world’s only superpower simply because of its economic might and it got there because of its people. Honest, hardworking people, who work harder than people anywhere else in the world, and do so because they know that they will be rewarded for their hard work. The reason they work harder is because they dream of making it big. A lot of Americans I talk to have dreams of setting up their own companies and becoming the next Wal-Mart or GE. This is a dream not many people can have outside America. [In India, it takes four months to just get your company registered (personal experience), so it might take about a 100 years to become a large company and enjoy the rewards of entrepreneurial sacrifice parts of Asia]. You remove this incentive and you will soon lose the motivation and sacrifice that success incessantly asks of its followers. What if we say that there is a limit to the amount of money one can earn and the rest will be taxed at 50%. It removes the incentive to dream big and without economies of scale, you lose efficiency.

The point I am trying to make is that we have a system in America that has made what it is today. There aren’t faults with the system; it is that we expect the system to do what is never meant to do, to keep people honest and ethical. Capitalism is just a system that gives people the incentive to work hard and enjoy the rewards of their hard work; it does not address greed or corruption, for that we need to have laws. All other systems are designed to help people through other people’s hard work, and you know that I will never sacrifice my sleep just to see the money I make go to help pay for my neighbor’s laziness. Of course there are people in need and we should be able to help them, that’s why we pay taxes to have a government in place that can help them, but when that government starts to forcibly take from me what I don’t owe it, I lose the incentive to make money.

Then there are those who work for humanity and want to do it all for charity, but I can’t remember the name of even one of them who helped discover the cure for a medicine and then manufactured it for six billion people, or helped make travelling more efficient or even designed homes that were eco-friendly and safe. The ability to feed a billion people cannot be the undertaking of a single government, the pressing need to provide a vaccine to contain a flu cannot translate into a solution by any of our world’s governments, and the advancements in today’s technology could never have been conjured up by the world’s smartest military minds; all these were, are and always will be only possible if we give common people the right incentives. Charity and socialism never worked, will never work and Africa will always be poor as long as we keep giving money and do not create a system for their entrepreneurs to succeed.

Capitalism is neither evil nor greedy, but people are and people always will be, especially the ones in power, as unfettered power corrupts. For the rest of us, we have to be smart and work on being smarter so that we can hold onto what we own today for if we give our power away for somebody else to help us, then the price we pay is our right to choose for ourselves and that is a right that has to be earned, not guaranteed.