There seems to be an ever increasing tide of bias against capitalism. People are increasingly becoming of the view that capitalism doesn’t work. But what they don’t realise is capitalism has allowed people on benefits today to have a better quality of life than the richest man on earth 100 years ago. Think about this for a second. When capitalism took over communism as the default world economic mechanism we saw an unprecedented amount of technological and productivity improvement. Without capitalism we probably wouldn’t have cars, planes, mobile phones, the internet, costa coffee or much else that we love.
When people talk against capitalism, they don’t mention the benefits it has brought but instead focus on how it has chained them to theirs jobs and made the owners rich in the process. But I’m here to tell you that capitalism can set you free. If you understand how it works, it can transform your life. Capitalism is here to stay and you need to embrace. By thinking differently, you can use capitalism to your advantage and transform yourself from an employee to an owner.
People have began to fret upon capitalism due to changes that have been made which they don’t like. Take the job market for instance. There seems to no more be any safe and stable jobs. A company can decide to get rid of you even though you didn’t seem to do anything wrong. The excuse of “you have lost your passion” is given by the company and thus would not be retained. There is a changing nature of the informal social contract in society. One of the reasons why some people look back upon the 1950s, 1960s, 1970s, 1980s, and 1990s with fondness is because it represented an economic era in which you could put together a good life for yourself if you had a strong work ethic, showed up, and didn’t screw things up.
Let’s look at what is happening to jobs to understand the route of the problem. There are two main shifts taking place in many western economies that are causing growing pains.
there are two main shifts taking place in many western economies that are causing growing pains:
- The notion of employment without possessing specialised skills will become increasingly scarce. It is going to be increasingly difficult to maintain a job that you can keep while being “on autopilot” for three or four decades. Even Unilever and BT are slashing jobs in the UK. The ability to automate processes thanks to technology and the desire to satisfy shareholders is going to put substantial pressure on the ability of individuals to find cushy £40,000-£60,000 jobs with benefits that do not require you to be on the top of your game. If you have an employer, the “what have you done for me lately?” mentality is going to become more and more likely to pervade the workplace. This, by the way, is why I advocate dividend investing with surplus capital: it allows you to become a part-owner of a company and frees you from having to answer to an employer. The CEO of BP isn’t going to take your 500 shares of BP and say, “You’re fired because you don’t fit in with company culture” because he works for you the shareholder.
- The middle-men are being cut. This was predicted by Peter Drucker two generations ago. He argued that technological innovation in the west was going to wipe out the middlemen in the economy and allow the producers of goods to reap outsized profits going forward.
With the above two trends taking shape, it looks like the scarcity of ‘nice cushy jobs’ will only increase as the years gone by. So the question is ‘ If I’m going to lose my job, what should I do’?
If you do not like being financially dependent upon the whims of an employer, you have two options, both of which involve become a business owner of some sorts.
- The first option is to actually take ownership of a business yourself. Run the local fish shop. Buy a small supermarket. Pick up a car wash. And so on.
- The second option is to become an owner of common stocks which allow you to outsource all of the work to others and reap a share in the business profits that you receive in regular intervals. If you buy 5,000 shares of Royal Dutch Shell, you get £6,000+ in annual income that is not subject to the whims of an employer. A stock cannot fire you. You’re the part owner, and as long as people buy oil and natural gas at a price that allows the producers to generate over 10% returns on equity, you’re going to have a little oil well pumping deposits into your account on a regular basis. That is the best way to take advantage of a shifting global economy.
From an employment perspective, it is frustrating to see how individual companies are able to keep doing more and more with less, because hey, you’re gonna want your kid to be able to find a job someday. But from the perspective of a shareholder, you’re going to be generating more and more wealth because there will be more profits to distribute to shareholders as a result of this efficiency revolution. The key here is to slowly shift your life from being a worker to being an owner.
The second option is why I love capitalism. It allows you to take stakes in the best businesses in the world. You let the management and the employees of that company do all the hard work. You simply sit back and let the profits and dividends roll in.
This is exactly what I am doing with my dividend growth portfolio. I currently have over £1000 in dividends hitting my account no matter what I do. The money is fully passive I have seen how capitalism works and am using its power to my advantage. My aim is to build enough dividend income to cover all my expenses. That way even if I do get fired from my job, I am not worried about where the next pay check will come from. Heck, once I make enough annual dividend income, I’ll quit my job and use the free time to pursue my passions. Whether it be travel or just lounging around, I will be able to chose what I get to do everyday. And capitalism will be the reason why I will have a free life.