Why George Bailey, not Mr. Potter, is the true capitalist of it’s a Wonderful Life ?

It’s not anywhere near the Christmas season (unless you really, really like to get you shopping done early, but that’s for another time and another column) but with the issue of banks and financial institutions being at the forefront of international news, I too often witness capitalism getting the blame for the world’s woes.

This is tragic, especially when it is the exact opposite.

One of the reasons why is because there are images that are so intertwined with the word that it can be hard to separate them. We all know the iconic stereotypical capitalists.One of the more famous and well known is the Monopoly game mascot Rich Uncle Pennybags, whose black suit and top hat, along with his distinct moustache, gives him a superior air that is easy to associate with wealthy individuals who profit at the expense of others.

Another figure who I often hear used as an example of capitalism is Mr. Potter from it’s a Wonderful Life,a 1940’s film by Frank Capra that has become a Christmas classic.

In the film, George Bailey, the main protagonist, runs a small building and loan to help people in his small town of Bedford Falls afford a home, all while trying to hand the business over to someone else so he can pursue higher career aspirations in the world.

Meanwhile, Mr. Potter is an elderly man who owns a number of businesses in town, including the department store and the bus lines, as well as shacks that he rents out to the majority of people in the town.

Unlike Bailey, who is seen as a man of the people and remains in the business primarily to help the residents, Mr. Potter is cruel, mean, nasty, greed, and selfish. Throughout the entire film, he attempts to run Bailey out of business or buy him out, all to no success. Finally, when he accidentally receives $8,000 from Bailey’s building and loan, he steals it, knowing it will put Bailey out of business.

Mr. Potter is often used as an example of a capitalist, and the film an attack on capitalism. Regardless of whether this was or was not the director Frank Capra’s intent, to think Mr. Potter is at all capitalistic is to infer a gross misunderstanding of what capitalism actually means.

Capitalism, in its basic essence, is the free exchange of goods and/or services between two private parties. That’s it. And whenever there is a third party interfering in the exchange, it is no longer purely capitalism.

In reality, George Bailey is the true capitalist (though not a pure one) of the film, while Mr. Potter is what I would refer to as a small town socialist.

A small town socialist is defined as someone who runs a business in a small town, but loathes competition and seeks to hold a monopoly to keep prices high so they profit at the expense of the customer, who has no other place to go. They also rely on protectionism through government to protect their business from competition.

Mr. Potter fits this description perfectly. Because he lives in a small town like Bedford Falls, he does not have to worry about someone competing with him, because there is not a big enough population to support another similar business. As a result, he is able to charge outrageously high rent for his shacks. The source of his wealth, therefore, is the direct result of the absence of competition.

This is where George Bailey comes in. He is a competitor to Mr. Potter by offering the residents of Bedford Falls the opportunity to own their own homes, rather than pay rent to Potter, at a cost that is near to what they pay for their rent.

The difference in their attitudes is that Bailey sees the people as customers whereas Mr. Potter treats them more like feudal villeins, people who could not legally leave their lord’s land without his permission.

In order to beat Mr. Potter, Bailey doesn’t appeal to the city, to the county, or to the state to pass a law or ordinance that would negatively affect Mr. Potter’s rent racket while benefiting his own building and loan.

Instead, he beats him in a capitalistic way by offering a better service. He allows them to buy homes, however modest, which then become worth twice as much as it cost to build them. Bailey is able to do this because, unlike Mr. Potter, he knows he can’t possibly compete if he demands the same salary, so he keeps very little money for himself.

From there, the outcome is both obvious and inevitable. The residents flee Mr. Potter’s rented homes and flock to Bailey’s residential homes. This is demonstrated in a scene where Mr. Potter’s rent collector explains to him in a very blunt manner that his business model can’t sustain itself, because it is clearly inferior to Bailey’s.

Mr. Potter’s reply is telling. All he can say in return is that Bailey isn’t becoming rich off of it. In no way is he unwilling to change his habits.

In reality, he has two options. One is to act like a capitalist by acknowledging the business model is poor and amend it. But that would mean his income would be hit substantially, and even with all his wealth, he isn’t willing to surrender a dime.

So, instead, he tries to buy Bailey out by offering him a huge salary to work for him, which Bailey is smart enough to see will only be temporary. He also understands that Mr. Potter’s superior position is also fleeting and won’t last forever.

Unable to beat Bailey in any other way, Mr. Potter has to resort to theft, which even then is thwarted at the end when the residents come to Bailey’s aid.

There are also several scenes that indicate Potter uses political connections to gain favors and advantages. When Mr. Potter is listening to his rent collector, his receptionist informs him a senator is waiting to see him; Mr. Potter, of course, tells her the senator can wait, which infers he owns the senator and probably bankrolled his campaign.

On the other side of the coin, Bailey looks at it from an entrepreneurial perspective. When he inherits the building and loan from his father, he actually hates working there. But he understands it has an essential purpose by providing the people of the town with an alternative to Mr. Potter, i.e. competition so he cannot raise his rent even higher.

Very much like Walt Disney, who only started to make an actual profit from his company in the 1960’s after numerous decades in debt, Bailey puts all the revenue the building and loan receives into further investments. This allows him to offer homes at affordable prices.

This isn’t to say Bailey is a good businessman, which in many ways he isn’t. Like most people during the late 1920’s, he relies too much on artificial credit, gives risky loans, and puts his building and loan way too far in debt. When the town bank comes to collect its money during the 1929 Stock Market Crash, they’re forced to hand over everything dime they have, all while in the midst of a bank run in which everyone comes to the building and loan to pull out their money.

Yet, even when faced with the consequences of his poor business decisions, Bailey takes personal responsibility for it. He doesn’t expect the government to bail him out or foot the bill. He takes $2,000 he intended to spend on his honeymoon and gives it to the building and loan so it can remain solvent; he also does it to prevent his customers from selling their shares at artificially low prices to Mr. Potter.

Too often people equate capitalism with greed and selfishness, i.e. a person’s attitude, not their business practices, is what makes them a capitalist or not.

To quote Adam Smith, It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

What makes a person a capitalist is not their attitude, but how they engage in business. George Bailey may not be the best example of how to run a business, but Mr. Potter is certainly not a good example of what capitalism is all about.

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Written by TJ

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