Finance: What is capitalism?

What is capitalism? Capitalism is a economic system where ownership of property and capital goods are in the hands of private companies and individuals. The free market can determine the value of goods and services, and capitalism allows the negotiated exchange of goods and services for compensation with limited government regulation.

College and CareerPersonal Finance
CoursesFinance Concepts
FinanceFinance Definitions
Financial Responsibility
Personal Finance
Finance and EconomicsTerms and Concepts
LanguageEnglish Language
Life SkillsFinance Definitions
Personal Finance
SubjectsFinance and Economics

Transcript

00:19

Hello Communism Yes your darkness our old friend Communism is

00:24

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

00:27

unquote that is Communism believes that via central planning in

00:31

estimating and bureaucratic controls the markets for pretty much anything

00:35

can be run better fairer and more efficiently than by

00:37

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

00:41

the political will that under a communist system politically everyone

00:46

is equal fish you know two cellphones good for cellphones

00:50

bad Something like that Whereas communism is a frank instant

00:53

ian attempt at cloning in or reproducing life in a

00:56

lab and then copying it market by market locale by

00:59

locale capitalism is well financial Darwinism Survival of the financially

01:04

fittest More or less Communism failed globally in hindsight that

01:08

so much for its ideology of governments controlling things But

01:12

for the one little element that was never addressed in

01:15

the Soviet laboratories where communism was at that element Yes

01:19

corruption Yeah When central planning happens enormous power is concentrated

01:24

among a very small number of individuals usually individuals who

01:28

came to power through Machiavellian means often military or other

01:32

yes men Grey flannel suit wearers not through believers in

01:35

a cause innovators visionaries or business runners So the very

01:39

powerful became very corrupt and the ideology of political communism

01:43

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

01:45

stage fairly and squarely where it has been tested and

01:49

works has been in tiny enclaves with rare compositions Take

01:54

the Kibbutz in Israel Well a kibbutz is a collective

01:57

farm Everyone shares equally and well pretty much everything The

02:00

farm produces one for all and all for one like

02:04

Israeli Musketeers or something like that The big diff Well

02:08

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

02:11

background same culture same unfortunate run ins with boils So

02:15

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

02:18

the guy or gal across the table was truly equal

02:20

to you In talent and drive and other natural gifts

02:23

you get two cell phones and you get to cell

02:26

phones and you get two cell phones Yeah all equal

02:29

And yeah a kibbutz structure would never work in a

02:32

large city where the disparity and talent is usually massive

02:35

from top to bottom So where does that put capitalism

02:39

Well structurally capitalism refers most directly to a frictionless set

02:42

of transactions No controls no governing no government just perfect

02:47

markets where supply and demand intersect here and prices live

02:51

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

02:54

one person can change everything kind of corruption that you

02:58

get in a central bank or central allocation system The

03:01

capital markets the brutal Darwinism of companies competing in the

03:05

marketplace gives a kind of truth or honesty or really

03:08

quote fair unquote price that applies more or less everywhere

03:12

in the system At its most extreme we witness capitalism

03:15

at work in the stock market At any given moment

03:17

tens of thousands of investors are inspecting what Amazon is

03:20

really worth and letting their investing dollars speak for themselves

03:24

The trading of stocks is almost a perfect market with

03:27

no central government dictating what it thinks Amazon should be

03:31

Trading at two thirty p M On a Tuesday in

03:33

a communist stock market While the government might dictate that

03:36

well today Amazon should trade for fifteen hundred twelve dollars

03:40

a share and for a ten dollar fee per share

03:42

trade paid to the government trader you too can be

03:45

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

03:48

bucks Take it or leave it Communism in this sense

03:50

runs is a kind of command economy That said the

03:53

U S Is not a perfect capitalistic set of markets

03:56

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

04:00

mark but when compared with other systems of commerce in

04:03

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

04:06

violators are punished severely and this has been going on

04:09

for centuries The positive result Trust in general Investors around

04:13

the world trust in the American capital market system They

04:17

trust that accounting and financial disclosures are fair and full

04:20

and honest Just remember that capitalism is financial Darwinism under

04:25

the fair rubric of laws and structures analogous to what

04:27

biology and physics and geographic location due to the evolution

04:31

of species of animals cos that best fit their contemporaneously

04:35

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

04:39

Toys R Us and the Dodo Bird are living happily

04:42

ever after together you know along with Sears and soon

04:46

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