Introduction – Welcome to Furious Fridays
Imagine you are a child
North Korea - After school (which is mostly propaganda to solidify your ruler), 10 years mandatory military service No option to accumulate anything No way to start a business No way to buy your home Never own a car, telephone, or travel overseas Constantly looking over your shoulder, similar to Soviet Russia, 1 in 10 were government informants South Korea - Whatever you want – get a degree, buy a home South Korea out produces North Korea’s economic output by 37 times - $33,400 vs $1,800 GDP per capita (that is, per person) Live 10 years longer in south, infant mortality is almost 7 times lowerSo, what makes them so different? Capitalism!
Let’s look at the history:
Capitalism is characterized in the following ways:
Capitalism provides a system that create incentives and efficiencies
What are incentives? – Rewards for your effort Not a zero-sum game – earn more, keep it, and use it as you want If someone can take your stuff, why bother?What capitalism provides: Inclusive system
FREEDOM! - Why is it important? Allows improvement, and people to dream of betterment. Protection! - Why start a business, or take risk, if it can be taken or taxed away from you?The easier it is, the safer, the more you trust the system, and others trust you in the system, then easy!
The political System - Inclusive Vs Extractive systems
Needs to be Inclusive - Equality of opportunity – everyone has the same rights Inclusive - Opportunity providing Lack of interference – restrictions (regulations) Reduced barriers to entry, freedoms/opportunity - laws Non-exploitive (Extractive) – shouldn’t take from some to give to othersWhat inclusive systems have– what incentivises should be available
Property rights - keep what you own Ownership of what you own and purchase, Patents and intellectual property Legal system - protect what you have, you know deals will be honoured Contracts and Borrowing capabilities = TRUST in the system – Economy is built on confidence Public services – Well functioning state Infrastructure – Roads, transport, water, power, etc Legal system enforcedAll are needed simultaneously!
What doesn’t work – Extractive systems – Socialism
Extraction from the productive is a race to the bottom – history repeatedly shows this. Extractive – the more it is, more people will fight over it. Dictatorships and democracy are both fought over Example - Proof – Christianity hasn’t had a major war since churches power was separated from the state. Other parts of the world where Government and Religion are one and the same aren’t as peaceful. Dictatorships – violent overthrows, for power state has. At least they are public about it, as there is little the public can do to get them out beyond another violent overthrow – rinse and repeat Democracy – trash talk about the opponents, depending on conspiracy level – shady behind the scenes like “House of Cards”. Incentives – They are the thing that makes you want to do things. Example – state run systems – ‘they pretend to pay us, so we pretend to work’ Property rights – providing people of China with property rightsIf profits are the purpose of capitalism, is this immoral?
Capitalism is painted as heartless, but nobody wants to see the poor suffer. Those that want to provide for the poor through taking what the wealthy have, stand on a moral position of wishes….and theft Example - You bring bubble-gum to the class – you better have enough for everyone? But why? What if you worked mowing lawns as a kid to buy gum, when others in the class didn’t? Renee (shout out!) – her niece is 8, and makes shirts, and sells them to earn her money for roller skates, rather than asking her parents. Now makes and sells healthy muffins each afternoon after school. That is what kids need to learn, as she will likely be successful! Ask yourself – What is greedier – Keeping what you have earned, or demanding someone else provide for you with what they earn?Importantly, what has been proven to reduce poverty? Capitalism
The more capitalism produces = more things, the more things we have, the lower prices are and easier they are to get! The more things being made, the more people need to be employed, so lower unemployment. These two together is what reduces poverty in the long term – but takes time Not as easy as the Venezuela model of reducing poverty by 50% - by stealing But no further redistributions – as all the wealth is goneWhat is better? One that provides lower costs for things, more welfare (as more tax to redistribute), and greater employment opportunities through freedom of opportunity?
Society is a sum of all the individuals in it – If everyone is doing better, then so does society!
Need for Inclusive System – Thankfully we have one of those, some extractive elements, but not enough.
System that allows for individual choice, and incentives to the individual to increase their wealth. Inclusive - Equality of opportunity – everyone has access, same rights, no preferences - Property rights – Legal system - Public services Next part we will run through how to prosper in this system – if you understand demand and how to create this for yourself, or something you produce, you will increase your wealth!Thanks for listening! Head to https://financeandfury.com.au/contact/ to leave a question, or send in some feedback