Capitalism: The Importance of Competition Formation

Perhaps the most extreme form of entrenchment Capitalism is Socialism. Here, the currency Sovereign owns the major means of production, and these production units never have to go bankrupt. New players, even if allowed, have little chance of winning the market, as the existing units are guaranteed to 'succeed'. The existing units are, virtually unchallengeably, entrenched.

The design of a Capitalist economy could be predominantly private sector, yet it might be no better in terms of entrenchment as a Socialist one. If the private players have to just make sure that they do not fall separate from other players they 'compete' with, and they will be saved in the event of failure as an economic sector, that is bad enough. Worse is continuous support to business entities and existing Capital as a means of preserving the employment. It actually diminishes the importance of a talented employee and his capabilities and contribution.

True Capitalism is about giving fresh Capital, therefore Competition, formation at least an equal shot as the existing Capital.

That means several things:
1) Taxation of work and professional income, from where new Capital will emerge, be taxed at no higher rate than any kind of Capital Gains or Residual income (Dividends) from business.
2) Very little paperwork towards incorporating a new Business.
3) Little or no ongoing compliance paperwork requirement towards regulations.
4) In the event of any necessary bailout of a business entity, the bailout is not inclusive of its Management or Owners, or even Bondholders, rather it is of the entity.

Formation and Entry of Competition and departure of those that lost their magic, both business entities and individuals, is the key to an Achievement Society and a vibrant Achievement Capitalism.

Support towards retraining upon unemployment and providing retirement programs is different, but Entrenchment Capitalism (artificially maintaining businesses and individual employment as-is) is no less individual-demotivating than Socialism.

Reducing tax rates while removing differential treatment between income types (work, capgains, dividends) and spend types (deductions); and broadening the tax base, while cutting procedures, paperwork and procedurecracy; are all great ideas towards individual freedom and formation of Capital and Competition. Further towards this objective, the age groups that are going to see reduction or complete breakdown of some of their entitlements could be given additional compensatory tax break in the entitlement taxes here and now. The entitlement tax break need not be in the same proportion as the dilution in payouts to them that the system is headed for.

It's a different World out here now than when Adam Smith wrote his manuscripts. The Professional and the Worker today is the Capitalist just a few years down the road -- if only the system could begin to treat his earnings as Capital&Competition-in-formation, the hotbread of Individual Acheivement Capitalism.