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People tend to hate capitalism without knowing what it means. More often than not, capitalism is often confused with commercialism. However, we must know the difference between the two. It's very crucial to learn what the difference is aside from the spelling. We need to take a view of two socio-economic systems and why one isn't the other.
Let's define capitalism in its plain simple terms
Capitalism is simply defined by the Investopedia as:
...an economic system in which private individuals or businesses own capital goods. The production of goods and services is based on supply and demand in the general market—known as a market economy—rather than through central planning—known as a planned economy or command economy.
In short, capitalism's focus is that private individuals or businesses are in charge of production. In turn, these businessmen fill in the supply and demand gap of the market. The supply and demand gap starts from basic goods to goods you want. Part of the supply and demand gap is people looking for jobs. People will be looking for jobs and those who own the capital provide the jobs. Capital is used in hiring people, buying machines, maintenance, paying bills, and all expenses related to the company. The net profit is based on money left after revenues are deducted from all expenses which include operation expenses, accounts payable, and taxes. Any good entrepreneur will pay their workers well, buy the best equipment, pay all their accounts payable, and pay taxes. This is the net income after taxes which is the wealth of the capitalist.
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| Research Gate |
The model above by Adam Smith shows the allocation of capital. In short, the capital is meant to be distributed. Capital is placed on the means of production which includes labor and material. Finished products are sold to consumers. Money is generated in the process which goes to two ways--back to the operating budget and the net profits after taxes of the owners. To say that the workers own the means of production is stupid. The workers are partakers of the means of production and must be treated well such as proper pay and good working conditions.
Capitalism is the default means by which businesses and markets operate. That's why they must be regulated by ethics and government. Any good entrepreneur is not just concerned about profits. That's why business ethics subjects are taught in business school. Business in itself is a healthy competition--not some bloody gladiatorial struggle as leftists and communists may want to present it. That's why the government exists to present laws such as intellectual property rights, labor laws (which include compensation), consumer act, fair competition act, environmental laws, and every law designed to prevent misuse and abuse of capital. There are departments like the Department of Trade and Industry (DTI) and the Department of Labor and Employment (DOLE) to regulate capitalism as healthy competition. Treat them like judges in a contest who disqualify people who break the rules.
With all the rules set, the capitalist must think creatively about how to win profits without breaking the rules. A capitalist wants to sell more but there are rules such as environmental rules to follow. A capitalist may start to think that a clean-up drive and being a role model in environmentally-friendly business practices would be good. A capitalist may open not just to compete but to also fill in the demand. It's pretty much like how Jollibee and Bo's Coffee Club are foreign-inspired. The desire for burgers and coffee gets filled in. Breaking the rules such as illegal dumping,
Now, let's see what commercialism is really all about
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In contrast, commercialism is defined by Investopedia as:
...the idea that increasing the consumption of goods and services purchased in the market is always a desirable goal and that a person's wellbeing and happiness depend fundamentally on obtaining consumer goods and material possessions. In an economic sense, it is related to the predominantly Keynesian idea that consumer spending is the key driver of the economy and that encouraging consumers to spend is a major policy goal. From this point of view, consumerism is a positive phenomenon that fuels economic growth.
In short, commercialism is capitalism gone wrong. There's room for ethics and socio-economics in capitalism. However, when you go into a commercialized mindset--all you care about is profit even if it means doing what's wrong. It means that the focus is more on quantity than quality. When a service becomes commercialized--it's more focused on money than customer satisfaction. It's all about the accumulation of capital than the proper use of capital. It would only focus on getting the money now instead of thinking long-term. Some people who do this are either stingy or spendthrift people. A stingy person's only concern is to hoard money like there's no tomorrow. The other's only concern is to get as much money as possible to splurge on. These people will do anything to either hoard money to splurge on it at the expense of others. One may underpay workers to make a profit. The other may cheat customers to make a profit. Either way, that's where commercialism is a failure. It's because capital is a force of good unless misused and abused.
That's why a certain degree of government intervention is still necessary to prevent commercialism. A capitalist system allows private ownership of goods. However, the government may want to seldom intervene with some rules. One involves setting a ceiling price or suggested retail price (SRP) for necessities to protect buyers. It's like you may buy a gallon of distilled water at PHP 50.00 because it's within the SRP. The government would have permission to call the attention to capitalists who overcharge or overprice beyond the SRP. The government also has the duty to call the attention to any capitalist with abusive labor practices and engages in destructive production methods. It's all about capitalism with reasonable restraint. Commercialism is all about capitalism without any restraint.
References
"Capital" by Marshall Hargrave, reviewed by Bryan Barnier, fact-checked by Yarilet Perez (Updated: April 3, 2022)
"Capitalism" by The Investopedia Team, reviewed by Marguerita Cheng, fact-checked by Pete Rathburn
"Consumerism" by Adam Hayes, reviewed by Robert C. Kelly, fact-checked by Kristin Rohrs Schmitt
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