Please note that these are the only two essential characteristics of Capitalism. Capitalism does not imply the existence of corporations, of democracy, of a government, of copyright, of patents, of large industrial facilities, or any of the other trappings which are frequently associated in the popular imagination with capitalism. If you strand two naked people on an island, and they trade with each other without violence, you have created a Capitalist society.
- One who owns capital, and manages it's use in the production of goods
- One who produces goods or provides services
- One who receives income from the ownership of land
- These roles are not immutable. An individual in a capitalist society will more than likely play more than one of these roles in his lifetime. He may well start out as a worker, and choose to refraining from spending some of his income, and to invest it instead. Now he's a capitalist. He may choose to invest in land, rather than tools and equipment, in which case he's a landlord.
These roles are not exclusive. An individual may well play many of these roles simultaneously. Consider a carpenter who owns his own tools. When working, this carpenter is making money through his labor, which would make him a worker. He is also magnifying the effects of his labor, by using tools, which he owns. This, of course, increases his income, making him a capitalist as well. An even better example would be an family farm. Consider the owner of such a business:
- He works his own land, making him a worker.
- He owns his land, and receives income from it, therefore making him a landlord.
- He owns his tools, and thereby increases the income from his labor. This makes him a capitalist.
- These roles do not imply different levels of wealth. It is a common misconception that a business owner makes more money then a worker. This misconception does not bear even casual scrutiny. It is quite possible that a business owner or landlord will lose money through error or while ramping up a new business. A worker, of course, runs no risk of losing money through his labors. The worst that could possibly happen would be for his employer to go bankrupt, and fail to pay his wages. Even in this case, though he has not been paid, and rightly feels he has been cheated, he has not actually lost anything he already had. He has failed to gain his rightful due. This is bad, but not nearly as bad as having built a business and then lost it.
- These rules do not imply different levels of power. In a command economy, like socialism, the various roles imply a level of power over others. If a member of a subordinate class fails to obey his master, his master can have him killed, imprisoned, or otherwise punished. This creates a tremendous power differential. In a market economy, like capitalism, however, there is no difference in power. Any person can make whatever offer he chooses to any other person, but there is no way for him to punish those who refuse to obey his request. He can, of course, refuse to pay those who refuse to work for him, but he cannot take from them their lives, their liberty, or their ability to pursue happiness.
This is probably enough information to absorb in one sitting, and it is as much as I choose to write right now, so I will sign off, and return later to expound further on the joys of capitalism and freedom.