A valuable explanation of how capitalism works from Thomas Sowell. It has nothing to do with wishful thinking or “trickle-down” thinking:

Those who imagine that profits first benefit business owners — and that benefits only belatedly trickle down to workers — have the sequence completely backward. When an investment is made, whether to build a railroad or to open a new restaurant, the first money is spent hiring people to do the work. Without that, nothing happens.

Money goes out first to pay expenses first and then comes back as profits later — if at all. The high rate of failure of new businesses makes painfully clear that there is nothing inevitable about the money coming back.

I came across this on someone’s blog. A hat-tip is due, but I can’t remember where I saw it.  Sorry.

Read the full piece, here.

Image: CapitalismMagazine.com