The distilled essence of capitalism is revealed in the following cycle of activity:

1) One saves or borrows some money. This is initial or "start-up" capital.

2) One uses this capital to create something one has reason to believe others will want.

3) One offers it for sale. This is a big step. One can't sell if for less than one spent to make it, and one would like to sell it for a very high price but no person may be willing to pay so much for it. So one settles on a price, or alternatively one simply offers it for sale and bargains with the buyer until a price is settled upon.

4) If one fails to at least gain back one's original capital, one has failed to generate a sustainable return.

5) If one succeeds and sells it for more than it cost, then one has increased one's capital. Now one can make two of the same things and run the process again to make even more capital. This increase in capital is termed "profit."

6) How one uses one's profit is entirely one's own business. One can hire workers to make more things, a step which itself involves a bargaining process, and where once again if one pays too much for the labor then one will fail, and if one pays too little one won't find enough workers.

The price is determined by the market. There is no intrinsic value to anything. Things are worth what people are willing to pay for them, and each individual situation is different. Some, due to their particular needs or wants, see more value in a thing, and some see less. This is an objective process, not a "subjective" method of pricing. Sheesh! Yes, it's subjective from the point of view of any particular customer's needs and desires, but it is objective as a pricing mechanism. All the other methods are coercive, assigning value where none objectively exists because no one wants the thing, (thus waste), or selling too cheap where people would place a greater value on the thing, thereby failing to incentivize the producer to make more of them. Thus - shortages.

It is already clear that things become more complex the more the loop is run, but the essence of it is that an individual can initiate their own activity, create something that others are willing to pay enough for that there is a profit that the individual can keep and use.

Nothing that interferes with this essential exercise of individual freedom and an individual's right to dispose of the proceeds of their own productive activity can properly be called "capitalism." "State Capitalism" is an oxymoron. Language is such that words can be mashed together in ways that obscure and deceive. You can call anything "capitalism" but only the virtuous cycle I've described above is actual capitalism.

For such capitalism to be possible, it is necessary to have a society and a legal and constitutional system that protects the right of the individual to decide on their own activity and to dispose of their capital without having it confiscated, etc. Non-interference and an agency to protect individuals from those who would rob them or defraud them is necessary.

Nothing else is necessary to capitalism. Other structures may arise around it, but they are not essential to the core of it.

I know some people who practice just essential capitalism and are quite pleased with it. One such person is a local street vendor I've talked with over the years. He gathers his capital and flies down to south America where he bargains hard with the locals for semi-precious stones and other materials. He then returns with these raw materials and fashions jewelry. This he sells in his kiosk on the street, at a profit from which he pays for his own needs and wants and which he mostly ploughs back into his business.

He is living the life or a pure essential capitalist. He thinks he is a socialist. Big Bernie Sanders fan. He's like most Americans, without a clue that it is the freedom they have that makes their lives possible, and with a suicidal desire to bring down capitalism, because they don't grasp what it really is and don't know that they actually do it and love it.

Incidentally, from a control systems point of view there is nothing more finely tuned that capitalism. If a capitalist has too few widgets, customers instantly convey their demand directly to the capitalist who has the opportunity to respond as quickly as possible. And the reverse is true too, when one finds one is making more widgets than there is demand for. This is what a "market signal" is. In contrast, all socialist systems impose a delay due to to planning and remote decision-making. They respond today according to information that is weeks or months or even years old, so that by the time one is told what the consensus has decided should be done, the remedy no longer fits the situation. Duh. And yet, they regard the free market as "chaos," as though self-organizing systems of capitalistic endeavor were impossible.

Now, I know that any Marxist will have nothing but criticism for what I've written here. This is what happens, when one has been educated as an alchemist and is confronted by the miracle of physics and chemistry. It is capitalism and its essentials of individual freedom and of profiting from one's own industry without interference that has raised humanity up from the 35 year life span and abject scraping poverty of all of preceding history. We better learn what it is and how to maintain it, for there is no magical "arc of history" that will prevent us from sliding back into world poverty if we lose it. Step one would be to teach true capitalism, its successes and what is needed for it to continue working for us. Teach Marxism too, but teach it honestly, as a great and destructive error to be avoided in the future.

Observing. Gathering and curating ideas. Getting ready.

Observing. Gathering and curating ideas. Getting ready.