Capitalism mindset (IM 745)

The trust in the future is what enables bank and the entire economy to flourish. Before 18th century, credit system didn’t exist and hence, they economy was undervalued. The people back then didn’t have the trust in the future. They thought that the future can’t be better than the present.

But as the scientific and industrial revolution took place, the mindset changed. People started to trust in future, which gave rise to credit. Credit was then used to pay the workers and contractors, which increases the productivity. Increase in productivity increased profits. The increase in the profit built more trust in the future.

This trust in the future created credit, credit brought real economic growth; growth strengthened the trust in future and opened the way of even more credit. And the cycle continued.

In 1776, Adam Smith published The Wealth of Nations, the most economic manifesto of all the time. In the eighth chapter of its volume, Smith made the following novel argument: When a landlord, a weaver, or a shoemaker has greater profits than he needs to maintain his own family, he uses the surplus to employ more assistance to further increase the profit. The more profit he has the more assistance he can employ, which follows increase in profit , wealth and prosperity.

Smith said that greed is good, and by becoming rich one can benefit everyone not just oneself. He said, “If I’m poor you will be poor too since I cannot buy any products or good from you. If I’m rich, you will be enriched too since you can now sell me something.”

This capitalism mindset is what is driving the economy of the world. The credit on the other hand is increasing the pace of economy.

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