Capitalism is about expanding the economic pie, not trying to divide a static pie equally. Quite frankly I am getting tired of socialist writers and progressive politicians implying the economic pie is static, and we must divide it equally. They claim everyone deserves their “fair share” of the pie. Life isn’t fair, nor will it ever be. Only from everyone collectively caring about themselves does the quality of life improve for the whole.
With capitalism the quality of life improves for everyone, not just the elite 1% as some might lead you to believe. The poor in the United States are richer than many other countries, especially if we compare ourselves to emerging countries like China. Here is an interesting stat from the Millionaire Next Door, 80% of today’s millionaires in the United States are first generation wealthy. Unlike what our politicians lead us to believe, most citizens did not inherit their wealth.
What if Apple Didn’t Exist?
Let me give you a great example to prove my point about the growing pie of capitalism. Imagine for a moment if Apple (AAPL) did not exist. The many technologies that Apple either invented, leveraged or perfected has touched so many individuals. There would be no iPod, iPod Touch, iPhones, iPads, and Apple Macintosh computers. There would be no App Store, no third party accessories, no applications for the Macintosh OS X platform.
Imagine all of the copycat products that have emerged because of Apple. Many high flying companies had to change their business strategy (cough RIMM) because of Apple. In the process this competition directly improved our lives.
Now imagine all the Apple employees, and the vendors it uses. Imagine the amount of individuals generating an income indirectly from Apple:
- Developers creating apps for the app store
- Cases for the iPhone
- iPhone battery add-ons to extend it’s battery life
- Classes offered to educate on how to use Apple’s products
- Shareholders who’s wealth has increased dramatically
- The net effect goes on and on…
Can you truly say if Apple didn’t exist, the world would be as great of a place? Apple’s products changed the lives of millions, and I’ll assume for most the better. I use Apple as an example because it recently became the largest company in the world from just starting as an idea in someone’s garage.
That’s not to say other competing technologies couldn’t/wouldn’t exist if Apple didn’t exist; they certainly do. My point is businesses, entrepreneurs and workers create value from where there was none. The added value improves the lives of not just the people who created it, but increases the wealth for all.
This is especially true with information and service age we live in. With a service economy there’s no natural resource to dig out of the ground, nothing to transport, and no machines to build. It’s purely the sharing of knowledge that adds value to others.
But Capitalism Isn’t Perfect
I’ll be the first person to admit there are flaws with capitalism. Yes there is inequality with capitalism, but inequality exists with socialism and communism. The inequality in communism and socialism is determined by the state, and favors people who have inside connections. The only thing these economic systems do is force the economic pie to become stagnant, and the pie no longer grows bigger. There’s a reason why Cubans still drive cars from the 1950’s. If you ever visited Cuba, it would appear you are in a time warp.
I’m not saying Apple is a perfect company either. Apple, just like capitalism, is currently the best economic system available. History has shown all other existing “isms” have failed miserably.
Until someone devises an economic model that works best with man’s psychology of fear and greed – capitalism is the best way to collectively improve the lives of everyone. Capitalism has also proven to be much better than the path we are going towards – socialism. The only thing socialism makes equal is misery.