Capitalism Vs Socialism: The Free Market or Centralized Government Control
Aside from barter, mercantile, or feudal systems which are inefficient and have all but disappeared as world economic systems, the various systems of the world have been described by various terms such as capitalism, market economies, socialism, communism, planned, state capitalist, mixed, and crony capitalism.
However, in reality, the systems can be broken down into two systems.
One is free-market capitalism and the other is socialism. This post will try to define both and determine which is better.
Capitalism, which, in its pure form is called, "Laissez-faire" (French for 'allow to do') and is free from intervention from centralized government or special interest intervention.
The Merriam-Webster Dictionary describes Capitalism as "an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market".
Every other system, falls under the category of socialism, including those systems in which the word "capitalism" is applied to it's description (Crony Capitalism, State Capitalism), due to the fact that in every other system, the government, often in cooperation with special interests, which are granted special privileges within the system, have a hand in the centralized control of those systems.
Socialism is an economic/political systems in which the means of producing and distributing goods or services is owned collectively by a centralized government that often plans and especially controls the economy or social program to one degree or another. In theory, the government controlled aspect of the economy and other state-controlled entities, such as the education system or healthcare industry are "owned" by the proletariate or common citizen. However, in practice, everywhere socialism has been applied, the elite oligarchical planners of the centralized government hold all or nearly all of the power and the common citizens hold almost none.
This socialist centralized government control is the anthesis of individual freedom.
When socialism is implemented in the economy, the idea of collectivism seeps into all areas of our lives. Socialism is eventually also applied to the very fabric of society. Individual freedom is lost to the collective body. You no longer have your free will.
In a capitalist system, the power belongs to the individual consumer. If a product is undesirable, the customer will reject it and the company that provides it will improve the product or go out of business. Every time we make a purchase we are essentially casting a vote for one product over another.
Therefore, capitalism helps to ensure individual liberty.
“In a capitalist society, all human relationships are voluntary. Men are free to cooperate or not, to deal with one another or not, as their own individual judgments, convictions, and interests dictate.”
— Ayn Rand
In a socialist society the government decides what and how much you get, even if it is inadequate, which it usually is. They also determine the price, even if you feel the product is not worth the asking price. When the elites control enough of the economy and/or social programs, which eventually happens in every socialist country, those elites lose accountability and can dictate even more of your life than you thought you were allowing.
“They [socialists/communists] want to substitute totalitarian government control for the market economy. No longer should individuals by their buying or abstention from buying determine what is to be produced and in what quantity and quality. Henceforth the government's unique plan alone should settle all these matters. ‘Paternal’ care of the ‘Welfare State’ will reduce all people to the status of bonded workers bound to comply, without asking questions, with the orders issued by the planning authority. Neither is there any substantial difference between the intentions of the self-styled ‘progressives’ and those of the Italian Fascists and the German Nazis.”
— Socialism: An Economic and Sociological Analysis by Ludwig von Mises
The elements of socialism in otherwise free-market societies are the very things that drive those economies down.
When the government controls too many aspects of your life, your freedom is jeopardized and you lose any leverage you have to guarantee your basic rights.
“In order for men to advocate anything, they must in the first place be able to earn a living. This already raises a problem in a socialist society, since all jobs are under the direct control of political authorities. It would take an act of self-denial whose difficulty is underlined by experience in the United States after World War II with the problem of “security” among Federal employees, for a socialist government to permit its employees to advocate policies directly contrary to official doctrine.”
— Capitalism and Freedom by Milton Friedman
Socialism is essentially a form of slavery where the government owns most everything and the individual owns nothing. therefore, the incentive to go beyond mediocrity is lost.
“A person who can acquire no property can have no other interest but to eat as much and to labour as little as possible. Whatever work he does beyond what is sufficient to purchase his own maintenance, can be squeezed out of him by violence only, and not by any interest of his own.”
—The Wealth of Nations by Adam Smith
Milton Friedman said it another way.
“When everybody owns something, nobody owns it, and nobody has a direct interest in maintaining or improving its condition.”
— Free To Choose: A Personal Statement by Milton Friedman, Rose Friedman
In a socialistic society where everybody gets equal pay regardless of their job duties, no one would do the difficult and unpleasant jobs without coercion. Therefore, individual freedom must necessarily be taken away for such a society to exist.
Even the UK under socialism assigned jobs in the 20th Century following WWII. It was a dismal failure but if it happen before, it can happen again, anywhere socialism is tried.
Likewise, there would be no incentive to work hard at any profession because the competition to receive higher pay increases are the only incentive for employees in a work environment. Pay increases would be non-existent to non government employees in a full fledged socialistic society.
“So far as can be judged there is no convincing reason for supposing that labour under Socialism would be more productive than under Capitalism. On the contrary it can be asserted that under a system which provides no incentive to the worker to overcome the irksomeness of labour and to strive his utmost, the productivity of labour must inevitably decline.”
— Socialism: An Economic and Sociological Analysis by Ludwig von Mises
“Socialism knows no freedom of choice in occupation. Everyone has to do what he is told to do and to go where he is sent. Anything else is unthinkable.”
— Socialism: An Economic and Sociological Analysis by Ludwig von Mises
It has to be this way in a planned society because it is too difficult to plan a society when everyone is making their own choices. With all of the choices in the hands of a few who have no idea what skills or interests each citizen has, A person with the aptitude to become a doctor ends up digging ditches and a 7 ft tall person with the skills of a basketball player ends up folding linen. You work where they tell you and you are paid the same no matter how challenging or important the job. Someone who defuses bombs gets paid the same as the person who arranges flowers, even if you both do a bad job.
So called Democratic Socialism is a myth. This is because the more control the government has less liberty the citizens have.
“a society which is socialist cannot also be democratic, in the sense of guaranteeing individual freedom.”
— Capitalism and Freedom by Milton Friedman
On the other hand, capitalism creates competition and innovation. The business owner has to compete with other business owners to supply the best product possible, while also making that product affordable, in order to convince the consumer to purchase the products. Because of this, the business owner has to try to retain the best employees by paying them competitive salaries and providing solid benefit packages. In turn, the employees have to compete with other employees to prove that they are the most worthy of the better wage increases. Technology, innovation, and state of the art mechanization also plays a roll to provide high quality products. It is a winning system for all involved and products available to the consumers are steadily improving.
Capitalism has not only made the rich wealthier, it has made the poor wealthier. Only in societies where capitalism is practiced have the lower income citizens been pulled up to enjoy luxuries never seen in previous generations or enjoyed by all but the most affluent in today's non-capitalist societies.
Unfortunately, there are already elements of socialism present in the United States that need to be eliminated or we are doomed as a free society.
The most notable are education, healthcare, and agriculture. When the government owns those, they own you. It is time to wrestle those aspects of our society back from the government or freedom is lost forever.
Government needs to step back and let free-market businesses work to improve our lives.
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