How is capitalism supposed to work?

[HouseMoat]

I already know the answer, just want to see what people say

Again, I said SUPPOSED to, not what's currently happening/has always happened

[rigmarole]

Everyone has a right to compete to serve the customer better and more cheaply than the next guy unimpeded by the government. Trade is carried out with a goal to profit and build wealth for individual gain which can be bought and sold freely. Private ownership of property is a core idea. That is, it is the right of individuals to own assets such as tools, natural resources, land, and even information. Everyone must voluntarily cooperate and be willing to keep their promises (i. e. contracts), because property rights are worthless if they are not respected by others. For example if barbarian hordes of BLM resort to violence and raid your store to pillage your property, then you lose your private property rights. Thus limited government is established to protect individual rights and maintain the rule of law. When the law is maintained, property will naturally shift hands to those who can make the most efficient and best use of said property. When people are allowed to compete fairly, competition spurs innovation of technology driving prices lower and wages higher.

You do not have massive taxation of the masses to redistribute wealth by the central government to their self appointed winners and losers via government spending programs as part of a centrally planned economy. You don’t have fiat currencies controlled by central bankers that act as a silent tax by the aristocracy to make them the de facto winners. When you play monopoly with a cheat, they always stick their filthy hands in the bank and new money materializes out of thin air so that they can acquire whatever they want without ever having to work for it and thus they always win the game. You don’t have government regulations like minimum wage that impede competition and protect that establishment. You don’t need to regulate companies when the market is willing to do it. If a company doesn’t serve the people well, then the people in the market that make up the community of customers and workers Bud Light them… You don’t have government dictates by self appointed kings that shut down your business for COVID-19 while allowing large established companies to prosper. This is tyranny by feudal royalty.

[rigmarole]

*That is, it is the right of individuals to own assets such as tools, natural resources, land, and even information which can be bought and sold freely.

[Soteris]

In layman terms I guess you could boil it down to private profit being a motivation for work and innovation.

Its a fairly simple system actually. By giving people the profit incentive to own private property and perform work you can motivate them to investing further into growing their investments and to find new innovations to earn even more. This both grows the economy of the country and the technology as well as even the culture.

It only really has two major flaws in my opinion. Capitalism relies on competition to function since it is this competition that drives the need for higher efficiency and innovation but Capitalism does nothing to protect this competition. Once a capitalist corporation manages to eliminate the competition, like for example in a monopoly, then capitalism stops working.

The other major flaw in capitalism is similar to the first one, it makes an assumption that something will always be true. In this case it assumes that jobs will always be available so that everyone has access to a means to make profit which is required to live in a capitalist society. If this were to ever change, like for example if corporations could replace human workers with automation, then Capitalism has no answer to what unemployed people should do to survive in society.

Aside from that Capitalism works pretty well. The desire for profit motivates people to work, innovate and continue to invest into the country as they compete against everyone else. The one who works the hardest, innovates the most and invests the most receives the most profit to push them even further ahead. Ideally this means that the resources in society goes to the most productive people so that they can in turn use them the most efficient and in turn benefit society the most. In reality, that is never the case.

[msmissydc]

Well there are different views. I consider smith one of the originals though so here it goes: free market leads to people invest into production, which leads to employment, which in return leads to everyone profiting. If there are more people with money they will invest and give money back to those with production who than can invest more and give better and more salaries. As long as there are no taxes that is supposed to an ever evolving spiral which leads to wealth of everyone. Bassically as long as the revenue is bigger than wages everyone wins and wages rise. That is the ultra short form of course. Not giving a synopsis of wealth of nations here😅.

[RavVid]

Essentially using invested capital to produce goods & services advantageously.

Advantageously is I think as far as you can go. We need to include services when we wouldn't have in the past. A lot of products and services would not be possible without invested capital - you can't handcraft an iphone.

Some argue competitive free markets are a necessary part of capitalism. Back in 1790 textiles did not have to be cheaper to justify machine looms; a latent demand for more clothes would have been enough.

[exitseven]

In a free market economy you produce a product nd if there is a demand for it, people will buy it unless there is am bettter of less expensive product out there.

[DarkWinterNights]

It’s the free exchange of goods or services between willing parties and the government only stepping in to prevent monopolies that threaten to prevent the free exchange of good or services.

[BarryLiverstone]

Free markets that allow the price of goods to be set by supply and demand. The freedom to invest in capitol to build a business.

[shortster]

The government isn't supposed to be subsidizing large businesses; and creating new regulations to penilize small businesses.