Much has been written about capitalism, a system that existed thousands of years ago, although the word “Capitalism” was patented by Karl Marx in the nineteenth century, but was not fully developed either by Marx or by anyone before, what is Capitalism? How does it work? What are its parts? In this article we will solve this lack, ordering all the pieces of this puzzle.
If the dear reader is unfamiliar with the subject of money, we recommend that you prepare yourself by reading or seeing the greatest geniuses of our times in the economic arena: Robert Kiyosaki, Mike Maloney, Paul Grignon, Christ Martenson, Steve Keen y Charles Hugh Smith. (Most are self-taught economists)
First some definitions in which, surely we will all agree.
What is capitalism?
Capitalism: it is a system to multiply an initial amount of money, the capital.
What does capitalism consist of?
Capitalism consists of implementing an idea to multiply capital.
What are the actors of capitalism?
The investor or capitalist, the entrepreneur, the resources and the consumers.
The investor or capitalist, is that person who puts the initial money, the capital that is going to multiply. This investor has the opportunity to multiply his capital as well as the risk of losing that capital.
The entrepreneur is the person who has the idea of how to use resources to multiply capital.
Resources are the material and human resources needed to implement the idea.
Consumers are the customers who buy the products or services offered by the entrepreneur.
So far we are all agreed, and we are not saying anything new, or anything we do not know.
The interesting thing comes when you go into detail.
If companies multiply money, are they the source of money?, if not, where does the money come from?
From the above we know that companies, businesses, in society are elements that multiply money.
For employees, the source of their money is their salary, a product of the work they do.
For entrepreneurs, their companies are the source of their money, for the work of implementing their business idea.
For investors are the gains, proceeds of risking investing in business ideas.
But from the point of view of society, the source of money are: banks. More details about the mechanism of creation of money by the banks in this other article: Money, Economy and Finance.
Summarizing the money theme of the previous article: banks are the source of money when they give loans, this is neither good nor bad, it is the role of banks.
It becomes negative, when private banks take credit interests, which are the product of the collective work profits of entrepreneurs and employees.
Because the immense profits of the creation of money, are left in few hands, a strong social distortion, expressed in social inequality, inequality of opportunities and inequality of power is generated.
This social distortion leads inescapably to economic crises, and the economic slavery of citizens and entrepreneurs to benefit a very small minority (the bankers).
The reality is that in 2014, 80 billionaires had the same wealth as half of the world population, in the 2,015, 62 billionaires and in 2,016, with only 8 billionaires already has the wealth of half of the world population.
The demonstration that the profits of private banks must always be distributed among all social actors is in the historical verification that when private banks fail, it is not the shareholders of the private bank who pay the losses are the state coffers The ones that pay.
That is privatization of profits and socialization of losses. We saw in the bankruptcy of Lehman Brothers in the USA in 2008, we saw it in bankruptcy Bankia in Spain, and we saw it in Venezuela, because the banking system is the same throughout the world.
And what does the creation of money have to do with capitalism?
In capitalism, companies are the multipliers of money, but they are not the source of money. This implies that, in order for companies to multiply money, it must be created through bank loans or when exporting products.
Which gives us four options: 1- That entrepreneurs get into debt by requesting credits, 2- That consumers get into debt by requesting credits, 3- That governments get into debt by requesting credits, 4- That companies go out to export. (There are more details, which we already explained in the other article mentioned).
To summarize: for the capitalist system to work, the continuous creation of money, either by exports or by debt, is required.
Therefore, financial crises are when the money created as debt can not continue to increase, since there is no one else asking for credit, and without injection of money, the ability to pay deteriorates, then the bankruptcies, and the financial bubble explodes. Therefore, the GDP of a country, which indicates that so much increase the economy, has to be positive, a value of zero, that is a GDP that does not grow, is very bad news, not to mention a negative GDP.
Also explains the continued pressure of companies and countries to export, and the paradox of Why the called, rich countries are the most indebted countries in the world? Which dosen´t make sense, the most indebted people can not be the richest, on the contrary the rich people are the ones who have the least debts.
As Paul Grignon explains in his famous documentary, at the money created as credit, means that money is debt. So when someone has money in their hand, what they have is someone else’s debt. If everyone paid their debts, then there would be no money.
This is evidenced by the fact that when countries apply measures to reduce their spending, and raise higher taxes to pay their debts, countries enter an economic crisis, because what they are doing is disappearing the money. So although companies have products, consumers do not have the money to buy their products and go bankrupt they.
The great engineer turned in economist, C.H. Douglas in 1920. In his writing the “Social Credit”, mathematically developed what I call “Theorem A + B”: If there is only money paid by companies in salaries and inputs, then there is not enough money to buy all the products that companies make .
The root of this is that companies are mechanisms of multiplication of money, capital, but they are not the source of money, since the source of money is mainly the loans granted by banks, and without a source of money, You can´t multiply the money unless another actor is losing money.
The main factor influencing the multiplication of capital.
When we talk about an entrepreneur having an idea to multiply capital, the discussion about the capitalist system has focused on what is the main factor that allows this multiplication of capital.
To clarify this point, avoiding philosophical discussions floating in the air, we have to give concrete examples that illustrate the case.
Communists like Marx argued that the main factor is the human resources, the workers required to implement the business idea. But since the industrialization of the past, the participation of workers in production is becoming less and less, since the work is done by the engines and machines, and with the new generations of increasingly intelligent machines, the human labor required Is getting smaller.
For entrepreneurs, the main factor is the effort and ingenuity of the entrepreneur to realize the business idea. If we transplant the great businessmen of our day, such as Bill Gates of Microsoft, Jeff Bezos of the Amazon, or Amancio Ortega of Zara, a century ago, we will realize that they could not be as successful as they are in the current era.
The correct answer is given by C.H. Douglas, who in 1920 realized that the main factor affecting the multiplication of capital is the cultural heritage of which all human beings on the planet are a part.
How would the world be if language did not exist? Language is a super important tool in all businesses, without the ease of transmission of ideas with the richness of details that gives us the language, the business ideas of many entrepreneurs would be Impossible.
This clarification is super important, since it is fundamental to understand capitalism well. The economic benefit that the entrepreneur and the capitalist obtains, as well as the benefit in products and services that the consumer receives, are a product of the work, not only of the present actors, but of all the previous generations, of the whole world !.
This reality kills the selfish expression of all the actors of capitalism, since without the cultural inheritance, which they obtain from past generations and the present, they would not have their individual benefit.
We are saying that capitalism is successful, mainly because of its collective nature. And not to the apparent individualism expressed by its actors.
The failure of the current implementation of capitalism.
We are saying that the capitalist system has attached a financial model, which benefits a very small minority of the population, bankers, to the detriment of the vast majority of the population, entrepreneurs and citizens, who are the true source of the wealth of a country. In this way the bankers have built a system that take advantage of the wealth of those who produce it.
This financial model requires a continuous growth of the amount of money. That in the beginning is not noticed, but with the passage of the years this increase of the money is getting bigger, until in the year 2,017, the central banks print of the nothing, the immense sum of 250 billions of dollars to the month, Which is equivalent to the value of all the food consumed by the world population in a month.
Central banks use that money so that big banks and stock exchanges continue to make a profit (free money), http://www.zerohedge.com/news/2017-05-06/problem-emerges-central-banks- Injected-1-trillion-2017-its-not-enough, this produces immense social distortions.
People such as Karl Marx and others were blatantly wrong with capitalism, blaming their problems on the production system, when the fault was in the system of money creation, the banking system.
Marx predicted that entrepreneurs would take over everything, leaving the workers in utter misery that did not happen. The bankers were much more astute, than these thinkers, given that the bankers were left with the wealth, while they left to indebted businessmen, citizens and governments.
Their cunning lies in not completely strangling their prey, since the key to bankers’ success is to share a part of their profit with businessmen and citizens, making us all complicit in their system, without noticing the final consequences of the whole system.
The demonstration that in the final stage of this implementation of capitalism (although there are other possible implementations), it is the reality that the bankers are getting richer and totally dominate the economic and political scenario worldwide.
As banker Mayer Anselm Rothschild put it: “Give me control over the money and I do not care who makes the laws” ie with money I can buy media, politicians and judges. O this video https://www.youtube.com/watch?v=Nnfe7NWS1t0.
The problem in the background.
We can easily point the finger at the bankers, but the underlying problem is the selfish nature of the human being. Since we have all benefited selfishly from the system, without thinking about the ultimate consequences for all humans and the planet,
Thus we have distorted capitalism and made it a selfish and harmful system for all. Citizens have asked for credits that we know, we can´t pay for, employers have also made products and services knowing they are of poor quality, so that they get damaged quickly and we have to buy another.
If we should point the finger at someone, let’s do it in front of the mirror, since we ourselves are the culprits.
The financial problem is the unequal injection of money into society. If you are a banker or super rich, they give you free money in astronomical amounts, but if you are an ordinary citizen they do not give you anything, and by the way justify saying what is “natural selection”, another big mistake of society, the biological evolution.
Can a better capitalism be designed?
Yes, it can.
1- The first thing is to change the selfish mentality of the human being, and the form is through an educational system that teaches us to seek the collective good as a way to achieve the individual good, Ten principles of New Circular Education.
2- After that, the next thing is to solve the problem of measuring everything with money. Happiness can not be measured with money. But if it can be measured, it is necessary to add a set of indicators such as those developed by Christian Felber in the economy of the common good.
Adjusting it to have the correct ideological foundations. Reviewing: Liberty, Equality, Fraternity, Purpose of the New Society and Definitions and so expressed this video https://www.youtube.com/watch?v=dKBb9571XeA.
3- Solve the problem of the need for capitalism from a constant source of money.
The injection of money has to be equally for all, as proposed by C.H. Douglas in 1920. In his letter “Social Credit”, where he justifies this injection of money, as a social dividend, product of the country’s cultural heritage, popularized today with the name of universal minimum income.
This injection of money can be done in two ways:
A- Adding money to all, which can produce inflation (read more about the difference between theoretical and real inflation in our article money economy and finance).
B- Depreciating all the money and dividing it equally (not only the money saved), and the distribution of this depreciation through public works or a universal minimum income. (This option is based on Worgl’s successful monetary experiment of 1930)
For us, it is best to mix these two options, and adjust according to the measurements on the street, to avoid the potential problem of inflation.
Capitalism is a good engine of the economy, which has to be complemented with indicators of human and ecological well-being. Executed with clear, transparent economic rules as we wrote in our article: The Fundamental Laws of the Economy.
Capitalism as we know it, is an imperfect version that the time has come to improve. And our contribution is the following proposal: https://sbmlibre.com/