Capitalism = a model of economic behavior where someone doesn’t consume all the produced capital but saves a part of it for future use (as risk assurance against future shortages-capital destruction or to be invested in the development of better tools and new products-new capital). Opposed to Consumerism where all the capital is produced for immediate consumption.
Capitalist = a person with a capitalist behavior.
Socialism = a model of social organization in which all the existing and newly created capital belongs to no one in particular and a central planner (person, group of persons organized according to an hierarchy…) make all decisions regarding to the production, the distribution, the exchange and the consumption of capital. Opposed to Free Market where all the capital is privately owned and only the owner can decide on the production, the distribution, the exchange and the consumption of his capital. Under Socialism the exchanges are planned and compulsory. Under Free Market the exchanges are voluntary.
A central planner under Socialism may well have a capitalist conduct. The central planner may or may not be subject to “rationality”, “fairness”, “pacifism” or other subjective characteristics. An individual in a Free Market may very well have a capitalist or a consumerist conduct.
Under Socialism there is only one entity making decisions while under Private Property there are billions. If in Socialism one individual or group opposes the central planer, he becomes not more than a “cancer cell” in the body of the Society and he is forced to obedience or eliminated. For that reason one may logically say that Socialism is not a model of social organization between individuals but more likely describes the interior organic functioning of a multi-cellular individual entity.
It was demonstrated long ago that under Socialism the economic calculus is impossible lack of information and means of comparison. The Socialist societies fail the same way an individual would find it very hard to survive alone. The theory was confirmed by all almost-Socialist societies that ever existed.
Men are imperfect. They are subject to immoral acts such as aggression and corruption.
Men’s answer to their own imperfections is Government. “If men were angels, no Government would be necessary” (James Madison).
Man invested their power in Government. Thus the Government is the ultimate concentration of power.
Power corrupts. The source of money and regulation attracts the most corrupt like bloody meat attracts sharks.
The banks and corporations that grew in symbiosis with the Government are nothing but necessary.
So what would be the World with no Governments?
The aggressive will go on with their aggression but with no power to sustain wars, they will only be able to seek conflicts.
The corrupt will go on with their corruption but with no power to create money and regulations they will only be able to fool one or another of the most naive.
The energy of an army of clerks now building ramparts of officialdom and bureaucracy will be unleashed to something actually productive.
Stagnation is the major reason for depression.
Free yourself of inertia, propaganda and fear.
Confidence is essential for the well being of humans. This applies to material accomplishments also. If the concept of stealing would be stranger to mankind, there would be no time and resources allocated to the action of guarding. Should people be more respectful of contracts or simple promises, there would be less people occupied with mediation and risk assurance. More people and time would be implied in production, innovation and leisure.
Somewhere there are people wishing things that would make them happy. Somewhere else there are resources and means to create those things. The entrepreneur is the person who discovers this misallocation of resources and takes it as an opportunity. He invests his savings or he may borrow resources to produce the goods in need and/or move them there where they are more wished He consciously and/or unconsciously balances the psychical unrest of loosing his investment versus the psychical gain of satisfying his needs from the return of investment The entrepreneur proceeds with his action when doing it brings him more contentment than not doing it. It’s important to gasp the idea that the profit is always psychical. The entrepreneur may produce and move goods from the area of harvest and production to the area of need not for material gain but for emotional satisfaction also. Usually there is a mix of material and emotional reward for the entrepreneur’s actions. This mix is the psychical or mental profit. It’s not the wealth in itself making one happy but the actions sustained by that wealth and the reassuring mental feeling of owning that wealth.
Bear in mind that if the entrepreneur isn’t sure that the needs of some individuals or populations are genuine; that producing the needed goods with the given manufacturing process and with the given resources is feasible; that the buyers will be able to reward him once the products will be ready for use; that his profit will be safe from some kind of partial or total confiscation; that his goods will not be stolen or destroyed – he may not even begin his action.
Confidence is the basis of development. Confidence builds in years and it can be lost instantly.
Halting the entrepreneurial action by any of the above misconducts not only leaves some needs unsatisfied and some people less happier, but also halts the technological and scientific improvement that the concurrence between entrepreneurs leads to.
Seeking psychical profit by preventing others by force to seek their own psychical profit is misconduct. Giving moral justification to such misconduct is hypocrisy.
The one who forces you to stay with him/her or to do as (s)he tells you for your own good, (s)he doesn’t love you as much as (s)he loves him/herself for doing this. That one needs you more that you need him/her and have no strength, nor will to let you go. For a whole society, that one is the State.
The one who allows you to do wrong things hoping that you will learn from them, that you will assume and learn responsibility; the one who lets you go with sadness be it your will – that one loves him/herself but loves you equally. For a society, that one is Liberty.
My 1st law of Human Civilization: do not acquire more property than you can work and defend yourself.
My 2nd law of Human Civilization: do not delegate more responsibility than you can directly keep an eye on and that you can reclaim back in case of non-compliance.
What I believe it happens when the laws are not followed at a large scale: the Civilization ceases to exist.
Additional observation on the human specie, may help one to calm down should he lose his patience because no one reacts to the decline of the civilization: people only act when they are hungry enough.
Since he is born, the human individual feels the environment in which he lives. As the environment always changes, the human has uninterrupted feelings. The changes may be within the nature (e.g. temperature changes, wind changes, air composition changes, natural events like storms or earthquakes). The changes may be produced by neighboring humans or animals (e.g. other humans acting near him, humans addressing to him, animals attacking him, viruses entering his body). The changes may happen in his body (e.g. growing up, growing old, developing a tumor, became stronger or weaker). Even the perpetuation of the same environmental state is a change because time is always changing. Ask a human to stay in a place with constant 12 degrees Celsius: for three minutes he will say it’s fine, after ten minutes he will say it’s chilly and after half hour he will say it’s cold. Even if the temperature is the same, in time his body changes. Ask to a tired man to sleep: for 9 hours he will happily sleep, the next 2 hours he will lay down then he will ask to stand up and do other things. Ask a human to do something he likes: he will do it for a while then he will ask for a break. Something always change deep inside us, may it be only the time. Thus, the human continually reacts.
The feelings may be pleasant, unpleasant or neutral. The neutrality often transforms in annoyance and become unpleasant. There in an infinite amount of degrees for pleasant and unpleasant. The human answers to those feelings first by thoughts, then by reactions. The thoughts may be shorter or longer and more or less conscious. Some changes in the environment trigger very fast unconscious reaction of the human. When the feeling is very strong like an enormous pain or pleasure, the thinking part reduces his length and happens in some unconscious parts of the brain. The reaction comes almost instantly. When the feeling is slower and less intense, like the confusion from the fact that the time passes and we’re always doing the same thing, the thinking part increases in length and it happens in the conscious parts of the brain.
Humans adapt to new states. A change in the environment like sudden cold or the death of someone close may create strong pain and unconscious reactions in the first moment. With the time passing, however, the human is likely to adapt to the new situation: the body develops higher tolerance to cold or the brain accepts the disappearance of the beloved one and tolerates more loneliness. When the pain is considered by a human to be too much for too long, he may abandon his life by suicide. If the human resists those painful moments, he may found that any pain reduces its intensity in time. There’s the same for the pleasure: if someone repeats the same pleasure again and again, it’s likely that the intensity will decrease in time. Each human is different, so is his capacity to adapt to and tolerate different pains and pleasures.
Each human individual also evolves and changes, so are his tolerances to various pains and pleasures. Since the baby human is born with no memory and no conscience, the first thing he does is to react to the environmental changes. This chain of reactions continues throughout his life. Every adult’s action is nothing more than a reaction to a change in the environment. There are no pure actions in human’s life. However, humans established a rigid definition of terms. We use to call reaction whatever occurs almost instantly after a change in the environment, processed by the unconscious parts of the brain. We call action whatever occurs relatively slower after a change in the environment, processed by the conscious parts of the brain.
We call thinking only the processing of the information in the conscious parts of the brain. If we consider those definitions, we must bear in mind that humans naturally have different tolerances for various environmental changes and states. One pointing a finger to your left eye may cause an almost instant, unconscious reaction of your body to remove his hand, even by breaking it if necessary. Some other human individual may react by asking himself why the other does this, select some answers then ask the other if he saw something on his eyebrow and wants to remove it. Following the common definition set we consider that the former reacted without thinking while the later taught, then acted. In absolute terms, the change in the environment induced a very short thinking process in the unconscious part of the brain for the first individual, and a longer period of thinking process in the conscious part of the brain for the second individual. The change in the environment provoked an unpleasant feeling for the two human individuals: intense fear for the former, inquietude for the later. The former reduced the fear by brutally removing the threat. The later reduced the inquietude by asking the other human to confirm his intentions. The two different individuals had different feelings from the same change in the environment. They reacted differently according to the feeling resented and the neuronal connections in their brains. However, they have something in common: they both reacted to the change in order to transform the very unpleasant in less unpleasant. This is the reason behind any human reaction (commonly, action): to transform a less satisfactory state in a more satisfactory state. To ease the lecture we may call whatever a human does aside feeling and thinking, an action. Breeding, moving, talking, writing: all may be called actions, but we must keep in mind that in their essence, all are reactions to changes in the environment.
The feeling induced to a human by a change in the environment is a natural phenomenon, objective and not to be judged. The feeling is processed by the brain then the individual acts. If an individual’s act is the answer to a feeling processed by thoughts at subconscious or at conscious level may be of great importance for ethical, subjective trial by other human individuals. We commonly consider that an individual is guilty for bad actions resulting from conscious thinking and except those whose acts are subconscious reactions. We commonly consider unusual, rarer subconscious reactions and unusual, rarer feelings to be signs of illness. Generally, human feelings, thoughts and actions are as twisted as the changes which caused them. The most confusing factors for the interpretation of the human action are the time and the conscious/subconscious barrier. The only belief that later he will rejoice a lot of satisfaction may cause a human individual to endure a lot of pain in present. Analyzing just over a short or a medium time, it may look that our human isn’t struggle for a more satisfactory state. Considering a very long time, we may found that this human sacrifices present satisfaction for a future, hypothetically bigger one. Even the act of sacrifice and the anxiety brought by the risk taking can excite him to some pleasure. There are humans acting somehow unpleasant. Ask them why they act so and they will have no answer. Search in their subconscious cerebral circuits and you’ll find deep hidden reasons and strange pleasures. Human individuals are so different: they have various feelings from the same changes in the environment; they process differently and at different level of the consciousness the same feelings and they come out with various different acts; they have different perception of what is pleasant and what is unpleasant; they even perceive differently the time. But they all act in response to changes in the environment and overall, they strive to change a less satisfactory present for a more satisfactory future.
There is a common myth spread by the left-wing media during those days: market economy (sometimes they call it capitalism or liberalism, the truth is they have no idea what they are talking about) is bad because markets use to fall. According to them, markets fall because of financial engineering (some kind of voodoo science) and when they fall, crisis occurs: sudden bankruptcies in the private economy, the insolvency of commercial banks and Government’s debt-default. They mix all these in a big evil soup and they give the magic pill for the indigestion: strong regulation of the economy and nationalization of some industries and services. On the other hand, the right-wing media tells us that small bankruptcies and small debt is harmless and that the markets are very useful because they are a source of debt financing for Governments. But Governments must not accumulate too much debt because the markets will stop trust them. The same Governments must sometimes intervene and prevent big bankruptcies, even by nationalizations if necessary. Between left and right I see more similarities than differences: subjective affirmations with no real back up, a complete lack of fundamental basis, exceptions from the rules and exceptions from the exceptions. In other words, there is no reason. Left and right politicians say that exceptions, subjectivity and compromise are a sign of flexibility. To objectively rely everything on strong and inflexible fundamentals is a sign of radicalism and radicalism is evil. In the next section I will be evil as I will try to describe as simple as possible how a market falls under a free market economy, then how a crisis can occur in the real present economy.
The fall of a free market happens when a new material or process is discovered or when a new product is invented, which satisfies better human needs. It can also be a new, innovative service. It can even be a material which better realizes the function of money (universally recognized as precious, in a reasonable amount, impossible to create it out of nothing, easily divisible, not degradable in time). The demand for the new product/material/process/service/money (from here on I will call it “thing”) will increase while the demand for the old ones will fall. However, the fall cannot be as sudden as one could think. The producer of the new thing will set up the price at the maximum superior limit in order to maximize his profit. (This is wise because he needs to restore fast after the investment, to pay his creditors and to make new savings. Time doesn’t stop with this thing, no matter how successful it would be. Life goes on and the future must be already prepared.) In the same time, the producers of the old things will lower the prices in order to sell their stocks. A lot of people will continue to buy the old, cheaper things while waiting for the new ones to become more affordable. The replacement is relatively gradual, not sudden. The producers of the old things and their employees have a margin (in time and in savings) to think of something else. The employees can very well be recruited by the producer of the new thing because they have already some experience. If the new thing is based on a breakthrough technology which requires totally new competences, then the producer will need more time to train people able to work for him. This will give more time to the producers of the old things and to their employees to prepare for something new. Under capitalism, the producers of the old things have even the possibility to copy the new ones. They start from behind technologically and they lose the image advantage of being the first but they have a chance to stay on the market. Regrettably, the present patent system sets them aside as the producer of the new thing can keep a patent monopoly. Moreover, the producer of the new thing needs raw materials and workforce to begin mass production. But the free market is based on contract. Most of the workers, suppliers and clients have already ongoing contracts with the producers of the old things. They will establish contracts with the producer of the new thing as the old contracts end or they will serve him by increasing the production capacity. Both cases demand time… More time for the producers of the old things and their employees to move on.
Of course, time is relative. In some situations, changes can occur very fast. Local or personal disasters happen. Losing your job or lose your business after a lot of work and money investment is horrible. Sometimes, people simply loose their interest for some things so markets fall with nothing else to replace them. But what can we do when there are billions of us, each one with his subjective, personal and always changing needs? The fall of a market is a natural phenomenon, relatively slow and vital for the human evolution because it allows continually refreshing our life with innovations and optimal satisfaction of our needs.
Without having to go into details, I will write a few lines about the fall of a financial market (let’s say a debt and currency crisis) in today’s world. Today, money are not a commodity (like gold) naturally selected by people for its qualities (as it would be in a free market capitalism), but an arbitrary unit created and imposed by Central Banks, important institutions of the present States (characterized by dirigisme). The monetary mass is not established by nature (like the quantity of gold on Earth) but by the Central Banks. As for the Governments, they run deficits each and every year. That is consuming more than they produce, which is opposite to capitalism. Governments, however, do not produce much. They collect money, which is again in opposition with capitalism in which the State receives rather than takes. Government debt is financed by loans from other Governments, Central Banks and from private, regulated markets (commercial banks, investors). Governments pay yesterday’s debts with today’s loans which they will have to pay tomorrow. When creditors don’t trust a Government’s capacity to pay back because of excessive debt and weak economy, the respective country risks a debt-default. The private investors are those who usually notice such a situation and stop borrowing a Government (by buying its bonds). And usually, international organizations such as the International Monetary Found (IMF) or the World Bank replace them by borrowing that problematic Government. They sometimes give Grant Loans (money that the Government don’t have to pay back), which increases the monetary mass in that country. In extreme situations, the Central Bank of that country creates money (debase the currency) and give it to the Government to cover its debt. In any case, private investors want to get rid of the devaluated currency. Businesses are moving abroad. Private Banks with reserves in that currency have huge losses because the money they recuperate from their debtors doesn’t value much. Many private enterprises are going bankrupt because the money they have to import materials is devaluated so insufficient. And Government faces debt-default, which means that all the population in the respective country will have to pay for it.
You must have noticed by now, there is no direct link between the first part of the article in which the fall of a market in capitalism is described, and the second part, where a big monetary and economic crisis in a country is briefly presented. Indeed, because the first part describes a common phenomenon of a hypothetical free market capitalism while the second one describes a situation that sometimes occurs in the present dirigisme. So now we can answer to the left-wing media: huge crises with bankruptcies, insolvencies and debt-defaults are inherent to present dirigisme so there is no need to attack capitalism or to propose all kinds of regulations and nationalizations. And we can answer to the right-wing media: there is no such thing as small bankruptcies and big bankruptcies, small debts and big debts, small interventions and big interventions. There are just bankruptcies, it happens. There are just Government interventions to stop them when it shouldn’t. And there are just debts, because the present dirigisme with paper money and deficit-driven governance allows them to exist and to accumulate. The natural solution is not the left, nor the right. It could be a change in the line of thought for every one of us. We should give ourselves more freedom, but also assume the responsibilities that arise from it. We should bear in mind that with each election we recruit servants, not rulers. We should put an end to the biggest fraud of our times by dissolving Central Banks and restore free sound money. Finally, we should educate ourselves and our children in the spirit of peace, freedom, responsibility and honesty. We should write our knowledge and transfer it from generation to generation. But instead of going on, we keep repeating the same old mistakes.