I have gone through financial management course this last two weeks. Learning about money, capital, debt and other things that is so fundamental capitalism. The above question is the first question asked in the class by our professor. And yes, the answer is 'true'. But then, come up another question, is it right or not right?
I grew up as an Indonesian who idolize Soekarno deeply. And when I was a child, I always questioning why he talked about 'capitalism' in negative way, as if it has the same meaning with colonialism. Based on my limited english ability, I understand that 'capital' is not a negative word. It is just a word that people used to named something that is used to start or create business. Then why it became so negative in his mind? The perception at that time was capitalism is not right. But why?
The fundamental reason might be contained in that first question, maximizing shareholder's value. The negative effect that I can dig from that sentence is endless, but the first thing that popped in my mind was 'it is as if only shareholder value that is allowed to be acknowledged'. what happened if you are not a shareholder? what happened if you just a mere worker living on monthly paycheck and have nothing to do with the capital market? what happened when you work 10 hours a day with just a dollar wages per hour and suddenly the factory is shut down because the shareholder think it is not profitable anymore and won't give them increase in value? what happened to that worker? Then, can we say that capitalism is wrong?
But see it again from the perspective of entrepreneurship. If you are a common people with mind brighter than the sun, have an idea to create something so revolutionary that it might put a dent in the universe. How you make that idea massively adapted by the people? You have no money, you are no trust fund baby with positive huge balance waiting to be used in your bank account, what will you do? The safest thing is to save some money you have for God knows how many years, then make your idea reality. Slow, not entirely safe, but at least it is all your effort, live with it, die with it. Another way is to raise capital. You can bet your idea to people with no idea but has money. Offer them some share of your idea and promise them payback later with some premium, of course, in what financial theory called as dividend. That people who give you money to start has nothing to do with your idea, might be not involved in the development of that idea, but indeed you give that person share of retribution from your idea, is it right?
I think it through, keep asking myself what is wrong with capital? is it something's wrong? Do capitalism is bad? Should we go equalize everything all the way down to personal preference like what they do in communism? is that even the right thing to do?
But then I remember my father. He always taught me that money has no value until you use it. It is a tool to create something. Don't make the tool the goal, use the tool to achieve your goal. Capital after all is also money. It is a tool you use to achieve your goal, the real question is, what is the goal and how you use that tool to achieve that goal?
The fundament of capitalism is increasing shareholder's value, at least that is what the capital holder's think of. But the idea of business is about economic wealth. As people operating in business we can choose whose wealth we want to serve. It can be personal, capital holders, employees, public, a nation, etc, just choose. Every scientific theory including financial theory is developed under so many assumptions of the perfect world. When imperfection happened your conscience will guide you where to swing. Knowing and learning the system, in this case - capitalism, will help us in training our conscience. In the end, knowledge is always good and certainly better than ignorance.
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