Capitalism built on trust, credit, and trust in the imagination

Capitalism built on trust, credit, and trust in the imagination


Money was essential to building empires and promoting science. But is money the ultimate goal of all this, or is it just a dangerous commodity? It is not easy to grasp the true role of the economy in modern history. But to understand modern economic history, there is only one word you need to understand. The word 'growth' is.


For most of human history, the economy has remained largely the same size. All of this has changed in modern times. What can explain the tremendous growth that cannot be understood only in numbers?


The modern economy is a tribute to the amazing power of the human imagination.


All businesses are built on trust in an imagined future. (More than 90% of the currency in the world exists only on computer servers.)


The modern economy is the emergence of a new system based on trust in the future. Within this system, people agreed to allow a special kind of money called 'credit' to represent an imaginary good. Credit allows us to build the present at the cost of the future. Credit is based on the assumption that future resources will be much more abundant than present ones. Credit is the difference between today's pie and tomorrow's pie.


The advent of the concept of scientific revolution and progress,


Progress is based on acknowledging one's ignorance and realizing that one can get better by investing resources in research. Anyone who believes in progress believes that geographical discoveries, technological inventions, and organizational advances can increase the total amount of human production, trade, and wealth.


Over the past 500 years, the idea of ​​progress has made people increasingly trust the future. Trust created credit, credit grew the real economy, and growth strengthened trust in the future and paved the way for more credit.


In today's world, trust abounds. Thanks to this, governments, businesses, and individuals can easily borrow large amounts of money that far exceed their current income at low long-term rates. The belief that the Earth's pie is growing has eventually become a revolution.


​


The selfish human desire to increase personal income is the basis of community wealth.


Adam Smith says that greed is good and that if I get rich, it benefits everyone, not just me. Selfishness is called altruism. Smith says to think of the economy as a win-win situation. My interests are yours as well. The logic is that not only can we both have bigger pie slices, but my pie slices need to get bigger so that four can get bigger as well.


Smith denied the traditional confrontation between wealth and morality and opened the gates of heaven to the rich. Being rich meant being a moral man. In Smith's theory, people don't get rich by stealing from their neighbors, but by increasing the size of the whole pie. Bigger pica benefits everyone. Therefore, the rich are the most useful and compassionate people in society. Because he is a person who turns the wheel of growth to benefit everyone.


A key part of the modern capitalist economy was the emergence of a new ethic, in which profits must be reinvested in production. Reinvestment brings more return, which is again invested for production, resulting in more profit, and the process repeats indefinitely.


“Profits from production must be reinvested to increase production.”


This is why capitalism is called 'capitalism'. Capitalism distinguishes 'capital' from simple 'wealth'. Capital refers to money, goods, and resources that are invested in production. Wealth, on the other hand, is either buried in the ground or wasted in unproductive activities. The pharaohs who pour their resources into unproductive pyramids are not capitalists.


Capitalism began as a theory of how the economy functions. The theory was both descriptive and normative. The theory explained how money worked and promoted the idea that reinvesting profits into production would make the economy grow faster. But capitalism gradually became something beyond economic doctrine. Capitalism now contains an ethic. Among them, the most core tenet is that economic growth is the best good or at least a substitute for it. Because justice, freedom, and even happiness depend on economic growth.


If we wait a little longer, let the pie get a little bigger, we're going to get a thicker piece for everyone, the capitalism swears. It will never be an equal distribution of performance, but it will return enough to satisfy all men, women, and children. Even the Congo.


But can the economic pie grow infinitely?


Every pie requires raw materials and energy. Dark-ending prophecies warn that Homo sapiens will soon deplete the Earth's raw materials and energy.


What will tomorrow's earth be like?

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