Make sure you read the introduction to The Book of Capitalism first if you haven’t already.
Defining capitalism is a critical, yet often overlooked, first step in understanding exactly what it is and how it influences the world we live in.
Politics, economics, psychology, and nearly every other subject that the average person cares about has been altered, one way or another, by capitalism.
But, unlike other prominent ideologies such as communism, there isn’t a definitive “Capitalist Manifesto.” This translates into widespread misunderstanding of what it is and how it influences the world we live in.
Part of my fascination with capitalism is this paradoxical ability to play such an outsized role in the lives of those who live with it while remaining largely hidden in their minds.
In short, we’re all playing the capitalist “game”, but not very many of us understand the structure or rules of that game.
How did that happen? How can something so pervasive be so misunderstood?
That’s a big reason for the creation of The Book of Capitalism, but in general in starts with a lack of definition in most peoples’ minds.
Most people seem to believe that a workable definition of capitalism is “profit-driven exchange.” While profit-driven exchange is important in capitalism, such activities have existed for much longer than capitalism.
What can we do to resolve this fundamental problem?
A simple definition (courtesy of Wikipedia) can provide a useful starting point for seeing how this pattern emerges:
Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.
It sounds simple, right? It’s an economic system where people own things privately and use those things to generate profits.
From this, you can even see where exchange can start to fit into the picture.
Once something is produced, whoever owns the means of production can exchange that produced “good” (however you want to define that) for a profit.
Yet this simplicity hides a paradox: this definition does a very good job of describing what capitalism is at a very simple level, and yet it ignores so much of what capitalism does in the world it exists within.
What does it mean to own something privately? What are the implications of owning the means of production? Why is profit mentioned in the definition?
We’ll go through each of those in a variety of different ways throughout this journey.
For now, let’s create a workable definition that we can run with (and which will be expanded upon as this book grows):
Capitalism is an economic and political game that revolves around owning assets, creating large profits as quickly as possible with those assets, and then doing whatever is necessary to retain ownership of those assets for as long as possible.
There is probably still some ambiguity in your mind, but this is a much clearer, simpler way to understand what drives the capitalist system.
First of all, we’re reframing capitalism into a game. The goal then becomes understanding the structure of that game, what the rules are, how to play it, and so on.
There are arguments for and against that model which I won’t get into here. The reason I chose it for our purposes is simple: it’s a way to quickly grasp a complex, multi-faceted subject.
While I could spend time talking about how it’s a political system, an economic system, a mix of the two, etc., it’s more productive to adopt a single framework and run with it for now.
Secondly, the goals of that game are laid out within the definition. While they seem simple enough, each component is complex and requires attention.
The four key concepts in capitalism (as mentioned in the definition) are the following:
- Asset protection
Each of these topics has its own section — if they aren’t already posted, then stay tuned and they will be up soon.
Now that we have this starting point, we’re ready to move forward.
Go back to The Book of Capitalism here.