By Carl D. Rafoth
CANFIELD, Ohio – George Gilder, renowned economic theorist and prolific author, recently published an article answering the question: what is capitalism?
It traces its meaning back to Karl Marx who defined capital as “embodied in machines and resources.” The word capital derives from the Latin word caput which means “head” – as in the headquarters of each of our state capitals.
Gilder, referring to both Adam Smith and Karl Marx, postulates that capitalism is essentially a system of incentives. The incentive to give the best of oneself is the very essence of the system of production of goods and services that capital (money) enables and promotes.
Appropriately, he uses the phrase “free markets” in conjunction with the word capitalism, and his pro-free trade references bolster the cause of global prosperity.
As economist Thomas Sowell explains, when China and India began to move from bureaucratic planning to increasingly free markets, 20 million people in India were lifted out of poverty in 10 years and more than one million per month in China. That’s progress, not progressivism. Robert Reich takes note.
In an exchange between a supply-side economist and Reich, a former U.S. Secretary of Labor and currently a university political science professor, the supply side said superbillionaires have found ways to improve the situation of the rest of the world (Bill Gates through Microsoft for example, Sam Walton founder of Walmart and Jeff Bezos of Amazon).
Reich responded with the implausible premise of abolishing billionaires through a wealth tax. If he is taken away tomorrow, a billionaire would find a way to take it all back in a generation, because a super rich person knows how to create prosperity for millions of others. He or she created it and should also benefit from it as a result. Most super-rich don’t have huge piles of money – they invest and reinvest in their own and others, creating hundreds of millions of jobs along the way.
The redeeming grace of this is that many other countries are rushing down faster than we are. The “almighty” dollar remains the reserve currency of global commerce for now, but it is under serious challenge from the Chinese yuan and the cryptocurrency.
Capital requires an investment of time, talent, and treasure. The treasure is money, and capital investment in money alone is useless, but leveraged over time and when the incentive for talent is present.
As famously stated, “Capitalism causes unequal prosperity, socialism, even misery.”
George Gilder would wholeheartedly agree.
EDITOR’S NOTE: Carl D. Rafoth is an attorney in the Canfield office of Friedman & Rummell Co. LPA.
He is a member of the Mahoning County and Ohio State Bar Associations, the National Association of Bankruptcy Trustees, the American Bankruptcy Law Institute, the Association’s Bankruptcy Law Committee of the Mahoning County Bar. He is a board member and attorney for Boardman Community Baseball, Inc. In addition, Mr. Rafoth is an adjunct instructor at Youngstown State University and Kent University.
The comment of the lawyer Rafoth belongs only to him.
Published by The Business Journal, Youngstown, Ohio.