I respectfully disagree with you Michael. As a biotech company founder who just closed a funding round of 28M, I think I have a fairly good concept of capitalism. Capitalism is a system of largely private ownership that is open to new ideas, new firms, new owners, and new funding instruments to generate new capital. Adam Smith advocated the capitalist free enterprise system over 300 years ago based on the belief that men are motivated by rational self-interest. He believed that individuals acting in their own self-interest would naturally seek out economic activities that provided the greatest financial rewards. There is nothing about "crowd funding" that violates any of these core principles. Rather it seems to be the novel funding mechanism of seeking economic reward that appears to upset you. However this too is part of the very essence of capitalism. Capitalism is not a static definition or process. It is a process characterized by dynamism, that is, innovations and, more subtly, its selectiveness in the innovations it tries out. "Crowd funding" is nothing more than a modern variant in the way capital is raised and value is created for its shareholders. In its most simplistic variant, Adam Smith asserted that when individuals make a trade they value what they are purchasing more than they value what they are giving in exchange for a commodity. If this were not the case, then they would not make the trade but retain ownership of the more valuable commodity. Here again, "crowd funding" fulfills this core principle. I would be remiss if I didn’t mention that the players who are innovating this space are genuine entrepreneurs, a role that economists such as Friedrich Hayek believed essential to the success of capitalism. He thought entrepreneurs are self-selected, aided by their particular experience and driven by their distinctive visions.
In summary, you may object to any or all of the attributes of "crowd-funding". But you are in a very small minority if you did not consider it capitalism.
Marty
