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Property Rights Promote Investment Property rights extend to all forms or property – not just land. They provide protection from unjust or unlawful actions by other people or parties, not just the government. That matters because, when people “go for wealth” by starting or investing in a business, they are taking risks with their money . They are committing their hard-earned wealth to a venture. If people feel uncertain about their property rights or their ability to protect their property and enforce their property rights, they will not risk their money on investments, such as starting or growing a business, or investing in a venture. That inhibits the growth and development of commerce. Property Rights Promote Social Stability Private property rights require the construction of institutions and laws designed to protect those rights . Property rights are promoted and protected by laws governing commercial transactions, and by a reliable justice system with courts to enforce those laws. Clear and enforceable property laws, coupled with a fair and accessible judicial system, provide social stability and predictability. That gives people the confidence to take risks and go for wealth by starting businesses, making investments, exploring, inventing, and innovating. Socially, politically, and judicially unstable countries do not attract investment. Property Rights Cross the Pond The rights guaranteed by the Magna Carta came to America with the British settlers. When the British were shown the door in 1776, the new nation tossed aside any notion of a monarch, but retained the rights and liberties of the Magna Carta in the form of the U.S. Constitution. Feature 2: Operation of Business for Profit The second key feature of capitalism is that it is all about making a profit – the more the better! Under capitalism, businesses are operated for profit , and business owners have the right to determine how income and profit are distributed . Operation for profit has some fringe benefits for consumers and the economy, all of which contributed to the explosion of commerce in the West. Profit Promotes Innovation Innovation is perhaps the most fascinating and remarkable benefit of the right to operate a business for profit. It’s no coincidence that the Industrial Revolution, one of the most innovative periods in history, began in England. Those inventors and innovators were motivated by profit just as they are today. In a capitalist economy, there is built-in pressure to generate new products and processes, and improve old ones . Companies whose products don’t stay relevant, fail. Innovation leads to new and better products and services, better production, design, and marketing and, frankly, to the advancement of society. The right to pursue and retain wealth in the form of a sweet profit has always motivated innovators, explorers, and inventors. SLIDE 7I PRODUCT PREVIEW
115 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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