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It's Called Capitalism for a Reason Thumbnail

It's Called Capitalism for a Reason

I have a simple speech I like to give younger people on Capitalism. It goes something like this: We live in the greatest country and economic system in the world. The wealth of the United States dwarfs all other countries on Earth. We are economically the most successful country in the history of mankind and most of the reason for that is that we have adopted and developed a form of Capitalism that has made the formation of companies and their funding, easy, cost effective, and tax efficient. These policies are all supported by a deep respect for contract law and the general rule of law.

The economic antithesis of Capitalism is Communism, which favors, in its laws and policies, labor. As the name implies, capitalistic systems favor capital or savings in its laws and policies. The be successful in a capitalistic system it is important to quickly switch from a laborer to a capitalist as soon as you possibly can by saving a portion of your labor earnings. This allows you to take advantage of the favorable tax, laws, policies and labor leverage afforded to capital deployed by companies in this economic system. Most of us start our work life with more debt than savings. You must put together a plan to live below your means (salary), to pay down debt and start building savings/capital to be able to fully participate in the greatest economy in the world. The long-term earnings on capital are favorably taxed at sometimes half of what labor or ordinary income is taxed. This is how Mitt Romney, the Presidential candidate, only paid 15% tax on millions of dollars of earnings in 2011. 

Capital can be deployed either in your own created company or in investments such as the stock market. Most of the wealth created in our country comes from savings/capital that has been deployed in ways where investment grows and is taxed at a lower favorable rate. If you want to truly take advantage of the greatest capitalistic system the world has ever known, you must become a saver and curb your consumption of goods and services.  Save! Save! Save!