Broadly
speaking, capitalism starts with two simple principles – risk and reward and
competition. Hard work and good decisions are rewarded financially; poor
decisions mean that your competitors will succeed instead. This approach uses
the invisible hand of the market to ensure efficiency and thus creates a
sustainable and effective economy. In other words, people vote with their
wallets and everyone gets what they want.
Let’s take
shoes as an example. Company ‘A ltd’ starts making shoes. They don’t fit very
well and are pretty expensive, but, as they are a necessity, they are bought. This
makes ‘A ltd’ a lot of money and makes other people interested in making shoes
too.
