QUORA : ‘Capitalism only works when it rewards the winners and punishes the losers. What should a modern society do with the losers?’

 QUORA : ‘Capitalism only works when it rewards the winners and punishes the losers. What should a modern society do with the losers?’

I posted this answer:

Capitalism, economically, doesn’t “reward” or “punish” anybody. It is not a top-down, centrally planned social system. Just the opposite. Economically, capitalism protects the freedom to produce and trade, and to keep whatever you earn in the process. To earn is to provide an economic value that others are willing to pay you for at a payment to you that is more than the cost you incur to produce it. There is no guarantee of success, or if you are successful that you will continue to succeed. 

Since production is not a “zero sum game,” and trade is by definition a win-win transaction, economic activity under capitalism is not about winners and losers, in the zero-sum sense.  It is about success, and the level of each individual’s success (or rewards) is determined by the degree to which he satisfies consumer desires. Since society is made up of individuals, the only thing “society”--other individuals--can do for those who fail to succeed is to help them out voluntarily, but otherwise leave them free to learn from their failures, pick themselves up, and try again. 

“Society”—as represented by the government—should do nothing directly for the less- or non- successful, in the sense of forced redistribution and/or special political favors (cronyism). The best thing the government can do is to maintain a fully free economy. The beauty of Capitalistic free markets is that the successful provide an unending stream of opportunities for those who fail in some venture, yet have the drive to try again. Of course, living in a free economy, where there are no government-imposed impediments to success, such as occupational licensing or NIMBY zoning restrictions, the motivated individual does not have to count only on opportunities provided by others. Through innovation and entrepreneurial energy, each person is free to create his/her own opportunities. Of course, not everyone can be a top wealth creator. But each can learn from these Prime Movers and apply the lessons according to his/her own levels of ability, motivation, and interests.

Capitalism works because it not only fosters success and achievement, but maintains the individual freedom for all but the tiny minority who have lost the physical/mental ability to take care of themselves to avoid becoming the “loser” who has to depend on modern society to “do something” with them.

Related Reading:

QUORA: ‘Why do you agree or disagree that Capitalism has been responsible for dramatically improving the working class’ standard of living?’

QUORA: ‘How is capitalism NOT a zero-sum game?’

QUORA: ‘Is capitalism voluntary?’

The Capitalist Manifesto by Andrew Bernstein  

QUORA *: 'How is capitalism good despite the fact that it creates higher and lower classes?'

QUORA: '[W]hy do we ignore all the examples of capitalism failing, like the major divide between the wealthy and the poor in the US?'

QUORA: ‘Given that I live in a capitalist society, how can I avoid having my labor exploited?’

QUORA *: 'How is capitalism good despite the fact that it creates higher and lower classes?'

QUORA: '[W]hy do we ignore all the examples of capitalism failing, like the major divide between the wealthy and the poor in the US?'

QUORA: ‘Given that I live in a capitalist society, how can I avoid having my labor exploited?’