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Explaining Capitalism by Using the Sport of Fencing

Updated on January 22, 2019
jackclee lm profile image

Jack is currently a volunteer at the Westchester County Archives. Before retiring, he worked at IBM for over 28 years.

Introduction

Over the years, I have written about finance, economics and political systems and sports and technology. Now, I want to try a simple way to explain capitalism using the sport of fencing. Bear with me.

- Jan. 2019

Background

Economics is a hard topic, to teach and to learn. It is not an exact science like math where 1 + 1 = 2. It has certain basic principles that it operates under. Once you understand these principles, and how it applies to human behavior, then you have achieved the knowledge.

I am going to teach you about basic economics as it applies to an individual and later how it translate into a company. To do so, I will explain a bit about the competitive sport of Fencing. It could be almost any other sport but fencing is what I know best.

In competitive fencing, individuals like you and me can decide to participate. We can join a club and hire a coach and learn the concept of the sport. Then we can invest the time and energy to perfect those skills. Then, at some level, we can participate in open competitions. If we do well, we earn a ranking of A, B, C, D, E or U depending how well we do among others of the same age group or classification. Once we elevate to the national level, there is a national tournament once a year where all the top fencers meet to compete. The top finishers earn points. These points are accumulated over the years and the top 3 or 4 fencers in total points are chosen to represent the country in the World Championships.

All this sounds very reasonable. How does this teach us about capitalism?

1. Capitalism is a free and open system, very similar to the pool of people in our country. Each person has the freedom to choose what they want to do.

2. The system is set up as one of competition. Once a person decide to do something, he is pitted against others who are in the same boat. In this case fencing.

3. Each individual has the freedom to work as hard or as little in training. Or spend as much for coaching...or buying equipment...

4. When he enters a competition, he expect to win against his opponents and there by win ranking. In the business world, he wins by creating something others want and that is the best of breed.

5. When he wins, he is given all the accolades and stands at the podiem to accept his medal. In business, a person wins by making money and gaining a reputation.

6. The motivation for someone to do what they do, train hard, eat a good diet, and spend money is to receive the awards that goes with these sacrifices. And, the knowledge that I am the best in this category.

7. Next year, you will work even harder to improve and beat your competition.

Sounds familiar!

Now imagine what would happen if the socialism ideals are in effect.

1. Every one is equal in every way.

2. Competition exists but the outcome is not counted. We don’t want to keep scores. We don’t want anyone to feel bad.

3. There is no point to train hard... everyone will be treated equally.

4. The incentive is just not there. No matter how hard you work, the reward is the same.

5. That is why things will not improve. It will stay the same or degrade over time. People get lazy.

Extending This Idea to A Company

Suppose we now think about a person who wants to start a business. He decides to open a Fencing Club. He would need to invest in some resources, like renting a place, fixing it up with strips and scoring machines, and lighting and all sorts of practice material, like uniforms and weapons and masks...

He would need to pay utilities, and insurance and a host of other monthly expenses. To raise the money to pay for these items, he starts a class with students. He charges each student a fee as a member of the club and for individual lessons. If he is lucky, his income will surpass all his expenses and he can report a profit, and must pay taxes.

While he is doing this, others are thinking of doing the same thing. Other clubs open around him. They are competing for the same students. In order to retain the students, he needs to excel and be better than the rest. Again competition drives more efficiency and produces better products. That is how capitalism work in a nut shell.

Alternatively, if we apply socialism principles, what will we expect.

1. The club would be open to all people regardless their ability to pay.

2. The club would be the same as every other club around. No need to compete for students.

3. The quality will suffer and the money will run out and the club will close due to lack of funding.

Summary

In this short and simple article, I am trying to teach about the virtue of Capitalism vs. the destructive nature of Socialism.

What are these basic principles.

1. Free market

2. Competition

3. Profit motive

4. Success and failure...

5. Reward incentive

Please give me feedback in the comment section below. Let me know how I did, if I succeeded or failed to convince you.

© 2019 Jack Lee

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    • William F. Torpey profile image

      William F Torpey 

      6 months ago from South Valley Stream, N.Y.

      Exactly, Jack Lee: Who determines how much a janitor is worth? The truth is that if the janitor doesn't show up the execs would soon be working in three feet of garbage. The same with all those people who serve hamburgers or run machines (all those who do the labor.) If they don't do the real work the executives wouldn't make a dime. But, worse, the corporate execs (virtually all running illegal monopolies these days) not only give themselves far more than they are worth -- and then stock options and even buy back their own stock making them multi-millionaires (not from work but from financial gymnastics.) The system is broken -- that's why our country is having so much trouble. The millionaires and billionaires have so much money they buy our politicians and make the laws that favor them. How many poor people do you know that have any kind of say in our political system? (Oh, yeah, they can go to the polls and vote (and look what we get from that: A total idiot in the White House who takes from the poor to give to the rich !!!) All the big corporations today are monopolies that should never have been allowed to merge and acquire smaller businesses to wipe out competition. Where are the Teddy Roosevelts today to sue them and break them up? The system is broken !!!

    • jackclee lm profile imageAUTHOR

      Jack Lee 

      6 months ago from Yorktown NY

      William, but that is just it. The value of their work is based on supply and demand. It is the only “fair” way to do it. Labor and management is a contract. The job has a pay grade established by the number of people available to do that job and the demand for that job. If the supply exceeds the demand, the wages go down.

      In a free enterprise system, a person can take a job or reject it. He can go out and get a better education and trained for a higher paying job. Or if he excels, he will be promoted by his employer and get a higher salary. What is the alternative? Who decides how much a janitor should make?

    • William F. Torpey profile image

      William F Torpey 

      6 months ago from South Valley Stream, N.Y.

      No, Jack Lee, I do not suggest any redistribution of money from the wealthy to the poor. What I do suggest is that corporate law (created by the wealthy for the wealthy) needs to be drastically changed so that all workers (from the janitors to the laborers to the office staff to the junior execs (and the board of directors and departments heads and president each be remunerated in relation to the value they are to the enterprise (not to the value of the stock.) Sadly, that is not done today in any corporation (where, by law, the value of the stock must be the primary directive.)

    • jackclee lm profile imageAUTHOR

      Jack Lee 

      6 months ago from Yorktown NY

      William, your scenary is true to a point and we have developed laws to counter some the issues you raised. For example, anti monopoly laws...humans do have those tendencies however, they also have compassion and donate to charities like Bill Gates and his foundation. Your contention about Bezos is unfair. He has made a lot of money but most of that money is tied up in the stock of Amazon. He cannot just liquidate it to give to the poor as you say. It is a myth that the income redistribution will do anything. It will not wipe out poverty.

      You are being unfair to wealth creators. Just because they made a lot of money, they can’t possibly spend it all, they should just redistribute them. You forgot about the basic principles.

    • William F. Torpey profile image

      William F Torpey 

      6 months ago from South Valley Stream, N.Y.

      Your analysis of capitalism, Jack, is accurate as far as it goes. However, the problem with capitalism is that it goes beyond what you've written here. The real problem begins where you left off. When you've done all you say here then you've achieved success -- and a lot of money. This is where the problem with capitalism starts. Once you have accumulated lots of money you then invest that money in stocks, bonds, gold, art works, currency or whatever. Then the monetary success you achieved by using your talent and hard work ends and then you begin making huge sums of money simply by watching the value of your investment increase (maybe dramatically.) At this point you are accumulating huge sums of money without working. Your stock value increases, your gold, silver and/or art work, et al, increases significantly in value while you are out playing golf or enjoying trips around the world (at the same time becoming richer and richer not by working but merely from your "investments." Meanwhile millions of people who are doing the real work are surviving on minimum wages or a small salary. The corporations where your money is invested is raising their prices and cutting labor costs (and buying back stock) to keep your stock prices as high as possible. At the same time you contribute money to the politicians who are making laws that you like (because they help raise the value of your stocks, et al. The politicians make sure the laws and regulations help the corporations (where you have stocks) keep making more money every quarter -- quarter after quarter. To make sure you keep your investments with them they merge with other corporations and acquire small competitors to keep their quarterly reports going up and up and up. Now you not only accumulate millions of dollars but billions of dollars (that you could never spend.) Example: Jeff Bezos (just as an example) has accumulate way over 100 billion dollars -- at one point he reportedly had 160 billlion. That is so much money that he could never spend it no matter what he does. Just think of it. Consider this: He could literally wipe out poverty in the U.S.with 100 billion dollars and still have tens of millions to get along with. In short, the capitalist system is broken. Capitalism does not work in the long run.

    working

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