ShmoopTube

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And finance Allah shmoop What is capitalism Oh well there

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are really two faces of capitalism you know kind of

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like Aria on game of thrones Yeah or like any

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little kid trick or treating in Halloween or you know

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two face So let's start with what capitalism is not

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Hello Communism Yes your darkness our old friend Communism is

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all about the government being quote smarter than the market's

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unquote that is Communism believes that via central planning in

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estimating and bureaucratic controls the markets for pretty much anything

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can be run better fairer and more efficiently than by

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its polar opposite cousin capitalism That's the economic application to

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the political will that under a communist system politically everyone

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is equal fish you know two cellphones good for cellphones

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bad Something like that Whereas communism is a frank instant

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ian attempt at cloning in or reproducing life in a

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lab and then copying it market by market locale by

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locale capitalism is well financial Darwinism Survival of the financially

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fittest More or less Communism failed globally in hindsight that

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so much for its ideology of governments controlling things But

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for the one little element that was never addressed in

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the Soviet laboratories where communism was at that element Yes

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corruption Yeah When central planning happens enormous power is concentrated

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among a very small number of individuals usually individuals who

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came to power through Machiavellian means often military or other

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yes men Grey flannel suit wearers not through believers in

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a cause innovators visionaries or business runners So the very

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powerful became very corrupt and the ideology of political communism

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I'LL never really came to be tested on a global

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stage fairly and squarely where it has been tested and

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works has been in tiny enclaves with rare compositions Take

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the Kibbutz in Israel Well a kibbutz is a collective

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farm Everyone shares equally and well pretty much everything The

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farm produces one for all and all for one like

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Israeli Musketeers or something like that The big diff Well

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they're all equally well educated They're all from the same

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background same culture same unfortunate run ins with boils So

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it's easy to divvy things equally when you feel like

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the guy or gal across the table was truly equal

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to you In talent and drive and other natural gifts

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you get two cell phones and you get to cell

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phones and you get two cell phones Yeah all equal

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And yeah a kibbutz structure would never work in a

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large city where the disparity and talent is usually massive

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from top to bottom So where does that put capitalism

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Well structurally capitalism refers most directly to a frictionless set

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of transactions No controls no governing no government just perfect

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markets where supply and demand intersect here and prices live

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within nana meters of here There isn't the kind of

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one person can change everything kind of corruption that you

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get in a central bank or central allocation system The

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capital markets the brutal Darwinism of companies competing in the

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marketplace gives a kind of truth or honesty or really

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quote fair unquote price that applies more or less everywhere

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in the system At its most extreme we witness capitalism

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at work in the stock market At any given moment

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tens of thousands of investors are inspecting what Amazon is

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really worth and letting their investing dollars speak for themselves

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The trading of stocks is almost a perfect market with

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no central government dictating what it thinks Amazon should be

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Trading at two thirty p M On a Tuesday in

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a communist stock market While the government might dictate that

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well today Amazon should trade for fifteen hundred twelve dollars

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a share and for a ten dollar fee per share

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trade paid to the government trader you too can be

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a proud owner but that's the price Fifteen hundred twelve

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bucks Take it or leave it Communism in this sense

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runs is a kind of command economy That said the

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U S Is not a perfect capitalistic set of markets

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either It's just a relatively capitalistic approach to transacting in

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mark but when compared with other systems of commerce in

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the US we have laws they're actively in fourth and

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violators are punished severely and this has been going on

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for centuries The positive result Trust in general Investors around

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the world trust in the American capital market system They

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trust that accounting and financial disclosures are fair and full

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and honest Just remember that capitalism is financial Darwinism under

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the fair rubric of laws and structures analogous to what

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biology and physics and geographic location due to the evolution

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of species of animals cos that best fit their contemporaneously

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environment thrive and those that don't well don't and somewhere

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Toys R Us and the Dodo Bird are living happily

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ever after together you know along with Sears and soon

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target in a whole bunch of others that'LL be Amazon

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