Punchinello’s Chronicles

October 6, 2008

Capitalism, Possession, and Profiteering

Filed under: Just Thinking,Word of the Day — Punchinello @ 1:00 pm
Tags: , , , , ,

“It’s no fair that the oil companies are profiting from our oil shortages! They’re making obscene profits, and by gosh, something ought to be done about that! We should pass a law! Let’s make them pay a special tax!” That’s the rallying cry of the modern-day democrat politician.

By what standard is the profit measured as just right, too high, or too low? Is there an objective standard or only a group of people and their feelings? What says, or who says that someone’s profit is right or wrong?

America is founded on an economic philosophy of capitalism. The Soviet Union and People’s Republic of China were based on a Marxist philosophy of economics. Socialism and communism are failing completely, yet capitalism is struggling. Far too many people believe that capitalism is synonymous with greed, obscene profits, and robber barons controlling all important resources. It just ain’t so.

Financial capital, the essence of capitalism, refers to money that can be used to pay for the development or improvement of something else. We often hear the term venture capital, meaning money invested in a new invention. Capitalism as a philosophy is based on the fundamental concept of private ownership.

To own something means having the capability of selling that thing. It means a choice, to sell or keep some item of property. “Property” can mean tangible things like land, coal, gold, cars, or it can include intellectual property. Software code, music, books, articles, chemical formulas all are intellectual property. They can be owned by someone.

The key difference between capitalism and Marxism is in this ownership. In capitalism, individuals retain property rights. In Marxism the whole society in the form of the State owns the property. The individual has no ownership, can’t buy or sell anything, and retains nothing by working or using that property. It’s all “for the good of the people.”

Suppose I have a car and someone takes it away from me. Do they now own it? How do you know? What determines the ownership?

The title, a piece of paper that isn’t at all a car, indicates that regardless of who is in possession of the car, I own the car. I have legal title to the car. The piece of paper isn’t the car itself, it’s the legal proof of my ownership. But that means a legal system must be in place that not only honors the title, it enforces the title.

Capitalism is a legal and philosophic structure. Without the law (and guns) backing up the right of private ownership, the entire edifice of capitalism comes to a crashing stop. Part of buying and selling, though, includes making a profit. When you sell something for a higher value than you bought it for or created it, then the difference is a profit (simplistically speaking).

How much profit is “too much” profit? What’s an “obscene” amount of profit?

If I manufacture a DVD player, I set a price and sell each unit. Suppose I sell you a DVD player for $400 and the very next day I change the price overall to $100 dollars. Is that fair? No, it isn’t.

The right amount of profit fundamentally depends on the concept of fairness, equitability, justice, honor, and other such very high-level abstractions. Each of these concepts in turn descends from a morality. This morality (code of ethics) is the set of rules and policies by which someone or a group of people choose to live.

A fair profit is a moral question, not a legal question. And so the final problem here is to decide which comes first: a legal system or a morality?

In the nature of people being people, everyone lives according to some sort of rules, even if they make up the rules to fit only themselves. Whether it’s an organized morality or a disorganized sense of feelings, societies from the start of history have first come together to live with a set of “unspoken” rules. They then speak those rules, passing them down to the children.

It’s only after a society becomes organized that they choose to codify those rules into a body of laws. Morality comes first, then is written into law. What kinds of laws, based on the particular morality, makes for all the “-isms” we read about.

Capitalism requires a legal system to be in place, especially designated to enforce what can be owned, who owns it, and how that ownership is sustained. Profiteering requires an articulated moral structure, but may not necessarily be codified into law.

Before people start going on about obscene profits from oil sales or corn or any other item, let’s see if we can get a common definition of the word “fair.” If we’re going to throw around “obscene profits,” we should also be able to clearly define “fair profits.” After all, that’s only fair, right?

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