By Jesse Fisher,


Capitalism is the dominant economic system in the world, and has greatly improved the lives of untold millions, but it is not without its flaws. Before you pop an aneurysm, consider this: Capitalism is not the same as Free Enterprise.  Let me explain, and then we’ll see how cooperatives are a superior method of organizing Capital and Labor in the Free Market.


Capitalism and the Free Enterprise system are economic systems that are often used interchangeably, but they have distinct differences. Capitalism is where private individuals own the means of production, typically by buying stock in a distant corporation. The Free Enterprise system is created when governments allow businesses to operate with minimal intervention and encourage market competition and entrepreneurship. 


Capitalism is a method of doing business that prioritizes the accumulation of wealth and profits for Capitalists (those with surplus capital), while the Free Enterprise system prioritizes individual freedom and the opportunity to start and run businesses.  The Free Enterprise system sets up the playing field; Capitalism in one game that can be played on that field. There are others – cooperative enterprises for example!


From income inequality to environmental degradation, Capitalism has a range of negative impacts that can be addressed through the use of cooperatives. Cooperatives are businesses owned and controlled by their members, rather than by a small group of distant shareholders. By pooling resources and prioritizing the interests of their members, cooperatives can provide a market-based solution to the problems associated with Capitalism.

  • Addressing income inequality: One of the most persistent criticisms of Capitalism is its tendency to concentrate wealth in the hands of a few. In a cooperative, profits are distributed among members based on their participation in the business, rather than being claimed by a small group of shareholders. This can result in a more equitable distribution of wealth and reduce income inequality.

  • Reducing exploitation: Capitalism can often lead to the exploitation of workers, who may receive low wages and limited benefits while the owners of capital reap the rewards of their labor. In a cooperative, employees often have a voice in decision-making and can participate in the success of the business. This can lead to increased job satisfaction and reduce the potential for exploitation.

  • Promoting environmental sustainability: Capitalism can incentivize companies to prioritize short-term profits over long-term environmental sustainability, leading to widespread environmental degradation. Cooperatives often have a strong commitment to social and environmental responsibility, as they are accountable to their members and the communities in which they operate. This can result in more sustainable business practices and reduce environmental degradation.

  • Addressing market failures: Capitalism can result in market failures, where the market fails to allocate resources efficiently and effectively, leading to a sub-optimal allocation of resources. Cooperatives can provide a market-based solution to market failures, as they can pool resources and provide access to goods and services that may not be available through the traditional market.

  • Providing job stability: Capitalism can lead to unemployment and job insecurity, as companies may prioritize profits over the stability of employment for their workers. Cooperatives can provide job stability and security, as they are often motivated to prioritize the interests of their members and employees over short-term profits.

  • Stabilizing financial markets: Capitalism can lead to unstable financial markets, as investors chase profits and speculation can lead to financial bubbles that can eventually burst. Cooperatives can provide stability in financial markets, as they are owned and controlled by their members and are motivated to prioritize long-term sustainability over short-term gains.

  • Improving access to essential goods and services: Capitalism can result in a lack of access to essential goods and services, such as healthcare and education, for those who cannot afford to pay for them. Cooperatives can provide access to essential goods and services, such as healthcare and education, for those who may not have access through the traditional market.

  • Encouraging long-term thinking: Capitalism can incentivize short-term thinking and decision-making, as companies prioritize quarterly earnings over long-term investments and sustainability. In a cooperative, members have a stake in the long-term success of the business, which can incentivize long-term thinking and decision-making.

  • Reducing government corruption: Capitalism can result in corporate influence over government decision-making, as companies with significant financial resources can lobby for policies that serve their interests and not the citizens at large. Cooperatives are owned and controlled by their members, rather than by corporations, which can reduce the potential for corporate influence over government decision-making.  Co-ops typically are more interested in spreading their profits among their workers and patrons than they are interested in using government to stifle competition or gain marketplace advantages.

  1. Providing a social safety net: Capitalism can lead to inadequate social safety nets, as governments may prioritize low taxes and limited regulation over providing adequate support for their citizens. This can result in a lack of access to basic necessities like healthcare, education, and housing, leading to further inequality and poverty. In contrast, cooperatives often prioritize the well-being of their members and provide support in the form of benefits and services, helping to address some of the shortcomings of Capitalism and providing a more robust social safety net. 


In conclusion, cooperatives offer a market-based solution to many of the problems associated with capitalism. By pooling resources, prioritizing the interests of their members, and promoting long-term thinking, cooperatives can address issues such as income inequality, exploitation, environmental degradation, market failures, and more. While cooperatives may not be a perfect solution, they provide an alternative to the traditional top-down corporation and offer a more equitable and sustainable approach to doing business. By considering the use of cooperatives, we can work towards a more equitable and sustainable economy that benefits all members of society.

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