Capitalism – a Defense

Is capitalism really the big, bad, mean ogre that many people think it is, or is there is misconception of what it is.

This great country was built on capitalism. America became strong because of it and we became a powerful nation because of it.

In order for a company to grow and become successful – it must make a profit – but some people will say But does it have to make That much of a profit!

Let’s take a look at a company. This company starts out and the fist thing that it needs is capital. The bank however, only lends enough money to give it it’s start – so the company must prospect for investors – people that are willing to give/invest enough money that will enable this company to have enough capital to succeed. Now because of this raising capital from people called investors each of these people have an ownership in the company.

Let’s assume that this company has done all the right things of hiring the right people and all that and has a product that a lot of people want to buy.

It’s now 5 years later and the company is successful and making money. Now they have accumulated a lot of cash. Now because they needed people to invest – they can now start to pay those people back which is called a dividend which is a percentage of the profits. Dividends are payments to investors every 3 months.

It’s now 10 years later and this company is looking to develop another product. This new product will take a portion of the profits to market and tell us what it has developed And because this company had this cash on hand it is able to accomplish the task. This product is aimed at making life better and easier for us. This product is also a hit and this company is now making more money. The company now ups the amount of dividend it pays to it’s investors.

It’s now 40 years later and some of the first employees are getting ready to retire. To make retirement life easy for it’s retirees – it pays them a pension and medical insurance – how does the company pay for these – from the profits that it made and kept for this day. And for the new employees that it had to hire to keep going – it must also have enough money on hand so that these new employees also will kept being paid.