Fewer and fewer people understand capitalism, despite every, single, one of us being a capitalist.  This is an odd distortion of knowledge and understanding, and it has taken a lot of work.  There are two kinds of capital: earned and unearned.  Figuring out which is which will make clear where each of us is on the spectrum.

Consider a newborn baby.  He or she will cry and fuss until he or she receives food and/or comfort – often the very same things.  There is no sense of sacrificing for greater rewards an hour or two later, or of “saving up” cries in order to obtain a larger portion at a later time.  Babies exhibit raw capitalism: pure barter.  I won’t make your motherly instincts feel the discomfort of a crying baby if you will provide what it takes to comfort me and put enough food into me so that I will sleep… like a baby.  We all start out as capitalists.

We might also note that a baby doesn’t save any food or comfort for later, nor does he or she offer more quiet alleviation of motherly guilt in exchange for food than it takes.  Everything is on the expense accounts as “current” – no accrual.

It takes a while for infants and toddlers to figure out that kindness and caring can be “banked,” as it were, for increased pleasure and happiness any time later.  It’s a big concept.  If lovingly raised, however, children do learn to avoid punishment for “bad” or costly actions, and to express love and kindness toward parents and others when they are not hungry or uncomfortable… and even to share possessions.  At some point they learn to trade possessions for perceived “profits.”  Something Tommy has seems more desirable than what Jeffy has – and vice-versa – and both parties “profit” from an exchange of goods.  Also a big concept.

Like all human “isms,” even incipient capitalism requires regulation and “institutionalized” bounds.  Almost every child learns that simply taking something of Tommy’s is extremely profitable: nothing is given up in exchange.  Parents or other adults are, at that point, obligated to punish – or dis-incentivize – that practice.  Jeffy’s taking, or stealing the possession of Tommy’s, must be made costly enough that Jeffy learns as immediately as possible, that there is no advantage or profit in that act or acquisition.  And, it must be a cost that exceeds the simple return of the stolen property.  Whether it’s a period of disfavor from a parent, or deprivation of a desired activity, a slap on the hand or something else proportional to the “crime,” there must be a cost that the perpetrator, Jeffy, will do his best to avoid going forward.  Otherwise, stealing becomes a habit and will be perceived as profitable and worthwhile.  Several big concepts.

It’s easy to imagine the fairly short-term consequences of the lack of institutionalized sanctioning of “bad” actions.  In this case, the “institution” is the “law,” or, at least, the automatic and swift punishment (let’s hope, by parents) of theft in addition to retribution.  This is the fundament of civilization; capitalism is woven amongst all the threads of civilized society.

Now let’s assume that our properly guided and sanctioned child grows up, essentially according to the Ten Commandments.  People of faith attempt to obey all ten, there being nothing negative about any of them, which is to say: nothing that hurts social cooperation and quality of life, or the raising of new adults with civilizing self-control.  Strictures against creating and worshipping graven images instead of God; taking the name of God in vain (cursing involving God’s name or power); keeping the sabbath day holy is also a good idea, albeit one that we in America have cleverly set aside; honoring our fathers and mothers is both logical and essential to the health of society; not killing one another; not committing adultery; not stealing; not lying about our neighbors; and, not coveting the property of our neighbors.  These are essentially society-protecting strictures that we attempt to talk ourselves away from only at our peril.  The hate-based riots of 2020 are the clear and clarion proof of the fragility of civilization in the absence of “the Commandments,” whatever their source.

Our new adult decides to start a business.  Having been raised “with a conscience,” Jeffy plans to sell his skills as a carpenter, and he recognizes that he’ll need a partner with similar skills in order to keep his contracting promises and to help avoid mistakes.  He makes arrangements with a local lumberyard to establish an account with sufficient credit to do significant renovation or add-on projects.  The account is based on Jeffy’s reputation as an honest person and, in part, on his father’s equivalent reputation.  The lumberyard considers the potential of a growing business customer as a worthy risk of a certain level of credit, or debt.

By virtue of hiring Aaron, a friend he knows from High school, who also loves building things, Jeffy takes on a remarkable burden of employer obligations, including various benefits that must be paid, including health care and liability insurances, and, of course, meeting “payroll.”  As owner of the business, Jeffy also is responsible for legal contracting with customers, and for other tax consequences of success.  He and Aaron still believe in their abilities and respective roles. and business commences.

“Jeff’s Construction” finds itself busy and able to pay both the owner and his employee reasonable wages while gaining assets in the form of two trucks and several power tools, and while accumulating some money in a local bank.  In other words, “Jeff’s” is profitable.  Knowing that his little company was facing taxes on his profits at both the state and federal levels, Jeff decides to make a donation to his church’s Christmas Food Drive.  With profits on the books of about $12,000, Jeff donates $2,000 to the food drive.  He and Aaron get their picture in the paper handing over a big cardboard check to the chairman of the Drive committee.  The minister and several other key people are also in the picture.  Jeff makes a handful of new connections, as a result, a couple of whom later contract with “Jeff’s Construction” for renovations of their homes.

As the years go by, “Jeff’s Construction” becomes “J & A Builders, Inc.” incorporated and no longer a proprietorship.  They grow to 6 full-time employees.  Each summer J & A work with the regional technical high school to provide summer jobs to budding carpenters.  Aside from income taxes to state and federal government, J & A’s building and garages plus the property taxes on the two partners’ and their 6 employees’ homes total over $100,000 per year, while excise taxes on their vehicles kick in another $26,000.  Donations to the Food Drive, the Boys and Girls Club and to the local “Y” for Summer Camp sponsorships plus support of a local Little League team, amount to nearly $25,000.  J & A also matches 401-K contributions up to 5% of income for all 8 personnel.

Those who misunderstand the immense values of honest profit are always looking for “businesses” and “business owners” to right non-business wrongs in society, perhaps because they are “fortunate.”  But that is not a business obligation.  The business is obliged to operate legally and honestly, delivering what it promises and not cheating customers, and to do so at a profit so that all legal obligations to employees and suppliers are met.  By providing multiple streams of tax revenue, businesses provide for all that civil society is relied upon to provide for residents.  Charity is in addition, and a blessing, not an obligation.

Of course, everything is different for those small businesses that have a room in the back that’s full of cash… cash they’re just too greedy to share with their oppressed workers and every poor person in town.  But, there are damned few of those. 

There are  many ways to add new wealth to an economy and to a nation.  The first of these was personal manufacture, in a sense, where the best tools or weapons compared to other groups or tribes created an advantage in terms of safety, hunting and survival.  Next came agriculture, permanent villages and cities and the need to defend them, which latter need spurred invention, metallurgy, and more.  Along with agriculture, fishing also introduces wealth and spurred marine technology.  In the presence of defensive pressures came a third major source of new wealth: mining.  Everything, of course, required managed labor and the necessary efficiencies that make ever-larger projects, whether construction or war-fighting, possible.  Indeed, it all made the Roman Empire possible – a success of management and leadership that taught some lessons to all of today’s successful – and failed – governments.  Religion, particularly in terms of Judaism and Christianity and the economic and familial ethics they spread across Europe, led, eventually and often unpleasantly, to the enlightenment and the explosion of technology, which made intellectual invention a new source of wealth and source of medical advantage, which is another form of civic wealth.

Today, virtually pure intellect is like a global form of mining.  New products are “manufactured” from a raw material of electrons, bringing new wealth into existence.  Construction, of homes or factories or office towers or highways and bridges, adds new wealth, too: fixed assets, from which use is derived for years and decades, enabling other wealth and our gigantic “service economy.”  Still, no matter the type of business in which one engages, the obligations of businesses and business owners – including stockholders – are the same.

What are they?

• Operate legally (but don’t hesitate to challenge regulations and laws that are irrational and which amount to unequal application of the law)
• Earn a profit legally, without cheating customers
• At best, manufacture a product (best way to create new wealth benefitting the most people)
• Next best, grow a product and/or improve the growing process
• Treat employees equally and provide appropriate training and safe conditions for work
• Provide real services that add value to products and their use or availability
• Deliver what is promised, never less than promised, and more if you can
• Do not employ false advertising or sales tactics
• Maintain honest accounting, pay applicable taxes
• Do not dirty your property, the air or the waters

Individuals, business owners or not, are always free to be charitable and to take part in politics or social issues they believe in.  But these should be personal decisions and personal resources.  A business owner fails his or her basic obligations to a community , to customers and to employees, by diverting business resources that should be enhancing working conditions, or providing insurance against future threats to the business.  Otherwise, if this sense of purpose and obligation to the health of the business is being weakened for any number of reasons, the business should be sold to those who will work to meet the listed obligations, or folded, having fulfilled, or no longer fulfilling, its mission.