Friday, October 16, 2015

What Socialists and High Tax Progressives Forget About Capitalism

Capitalism is nothing more than private ownership with a profit motive. Economic profits exist only after all costs are paid. Material, labor, and equipment costs, plus debt cost (interest and principal) and a fair return on invested monies must be paid regularly or a company will cease to exist. If there are no profits, then there is insufficient money to pay back completely the costs of material, labor, equipment, and debt and equity investment. Without profits, workers do not get fully paid; material and equipment suppliers do not get fully paid; lenders and investors do not get paid.

A company that cannot regularly pay back its costs will cease to exist. Workers will not work for free or partial wages. Suppliers will not supply it. Lenders will not lend to it and investors will not invest in it.

Capitalism enables business to be self-sustaining. It enables a company to pay back all its ongoing costs. Capitalism is a sustainable economic system. The companies that are not self-sustaining are removed and replaced with sustainable companies.

Not-for-profits and governments are not financially self-sustaining. They are not economically sustainable systems. Left on their own, they would cease to have funds and government printed money would be worthless. They always are in need of more outside funding. Not-for-profits are always planning fund raising campaigns to pay off expenses they have already incurred or will incur in the coming year. Governments are always looking for ways to increase fees and taxes and to rollover debt to pay for government employee salaries, government programs and the military. Governments and not-for-profits are dependent on a vibrant capitalistic system to create wealth and companies with profits. Without a dynamic fully functioning capitalistic system, governments will quickly run out of funds to tax and redistribute.

Not-for-profits and governments need a replenishable source of funds. Capitalism is the only economic system that can regularly generate a sustainable source of profit and wealth.

Taxes and income and wealth redistributions do not create income, profits or wealth.

Government interference through laws, regulation and taxes creates structural rigidities and additional expenses for businesses. In general, government reduces businesses ability to generate wealth and profits and adapt to changing business environments.

A government that increases business costs through restrictive laws and regulations and harshly taxes business and wealth will find itself unable to accomplish for its populace the very things it thought its laws, regulations and taxes would allow it to do. It will diminish its very source of sustainability. It will find that its source of funding is no longer as reliable and plentiful as it once was. It will find it cannot do what it set out to do through law, regulation and tax.

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