On Saturday atLibertyCon, I thoughtElisabeth BrünigvonDie Washington Poston “Capitalism versus Socialism”. Here is my opening statement.Here is hers.
"Capitalism" and "socialism' What do these words even mean? One could simply say that capitalism is the economic system of countries like the United States and socialism is the economic system of countries like the former Soviet Union. In that case I would say that at least capitalism is fine while socialism is hell on earth. Maybe my opponent would even agree! However, it is more fruitful to treat capitalism and socialism as positions on the ideal economic system. Something like: The capitalist ideal is that the state plays a very small role in the economy - and the socialist ideal is that the state plays the leading role in the economy. In this case I am saying that capitalism is great and socialism is terrible.
What's so great about the capitalist ideal? It is a system based on individual freedom and voluntary consent. You can do whatever you want with your own body and your own stuff. If others want to cooperate with you, they have to convince you; if you want others to cooperate with you, you have to convince them. Can consent really be "voluntary" when some people have a lot more to offer than others? Absolutely. Some people are far more attractive than others, but that doesn't detract from the freedom of dating. Under capitalism, how people use their freedom is up to them; They can try to get rich, they can relax, they can help the poor, all three or none.
Consensual Society: Capitalism is such a compelling moral ideal that I am tempted to end my case now. But there is a doubt: is capitalism one of those ideals that sounds wonderful but works horribly in real life?
How can we even begin to answer such a broad question? It's simple: first, look at the most capitalist countries that actually exist. Next, weigh the likely implications of the key policy reforms needed to bring these countries in line with the capitalist ideal.
According to usual rankings, Hong Kong and Singapore are the most capitalist countries in the world; other examples are the UK, Canada and the United States. By world and historical standards, all are incredibly rich and comfortable countries. That wasn't true of Hong Kong or Singapore in 1950, but after decades at the top, they are two of the wealthiest and most comfortable countries on earth. All of these countries still haverelativelyPoor people, but there is very little absolute poverty. In fact, the poor in these countries have such a good life that people from all over the world eagerly immigrate there to work in tough, low-skilled jobs.
The reason is clear. Free markets channel the basic human desire to better themselves in socially productive ways. If you can offer a product that people like at a price they find attractive, you'll get rich. This not only leads to mountains of cheap, great products. It also leads to constant innovation, a ceaseless striving to do more with less. Of course, most of us aren't great successes in business. However, as companies compete for both customers and employees, most of the benefits ultimately go to us. Amazon has got to be the best store in human history, offering a cornucopia of great, convenient deals. But his lifetime winnings total only a few billion.
To reiterate, none of the most capitalist countries in the world actually live up to the capitalist ideal. But they still provide a useful benchmark. How is the status quo likely to change as the role of the state drastically shrinks? I only have time for the highlights:
1. Even the most capitalist countries severely restrict immigration. Non-citizens need a government permit to live and work there – and such a permit is almost impossible for most of humanity to obtain. If these laws were repealed, there would be massive international migration. People around the world would move from countries where their labor produces little to countries where their labor produces much. A common long-term estimate is that this would double the world's production - while drastically reducing global poverty and inequality.
2. Even the most capitalist countries strictly regulate construction, especially in high-wage areas. If these laws were to be repealed, there would be a massive surge in housing supply in the country's wealthiest areas, soon to be followed by massive internal migration. Standard estimates evenmodestHousing deregulation says it would boost US GDP by 10% - while significantly reducing poverty and inequality.
3. Even the most capitalist countries engage in massive involuntary redistribution. Curiously, however, this redistribution is not concentrated on the poor, but on the elderly. If these laws had never existed, the vast majority of people would have simply taken care of their own retirement - and the taxes would be so much lower that saving wouldn't be difficult. What about the minority who cannot take care of themselves? It would cost so little compared to the status quo that leaving it to private charities is not unreasonable. If that sounds like wishful thinking, you should simply keep a small welfare state for poor children and the severely disabled.
4. Even the most capitalist countries heavily subsidize education. In my new bookThe case against education, I contend that the main effect of these subsidies is not to prepare people for good jobs, but to induce fruitless credential inflation. If those laws were repealed, we'd still be literate, but independent and self-sufficient years earlier. what about poor kids Again, my preferred answer is private charity; but if that's not enough for you, then a means-tested voucher program solves the problem.
What is so terrible about the socialist ideal? It is a system based on state authority and coercion. Democracy is a decent way to mitigate the mass murder and slavery of socialist dictatorships. But even in democratic socialism the individual is at the mercy of popular opinion. And popular opinion is not nice. Just look at the shameful way American democracy treats peaceful immigrants like criminals - to popular applause.
Socialists like to compare their ideal society to a family. But in real families, you don't have to support your siblings if you don't want to. In fact, you don't even have to support your parents who gave you life. Why should your moral obligations be stronger towards total strangers? The idea that the rich have a moral obligation to give away whatever they don't need until poverty is overcome has a superficial appeal. But objectively, almost all of us have way more than we need, especially considering the market value of all our free time. I detest hyperbole, but if a socialist government enforced the obligation to give away all your surplus to the poor, you would be a literal slave.
But once again a doubt arises: is socialism one of those ideals that sounds terrible but works beautifully in real life? To solve this, let's go back to my same two-step process. First, consider the most socialist countries that actually exist. Next, weigh the likely implications of the key policy reforms needed to bring these countries into alignment with the socialist ideal.
By usual rankings, the most socialist countries in the world are North Korea and Venezuela. No decent socialist upholds these hellish states as ideals, and I certainly don't blame my opponent for that. There are many laudable ways of bringing relatively socialist countries into line with the socialist ideal, beginning with: stop murdering and imprisoning people to keep the ruling plutocrats in power. But as long as the North Korean and Venezuelan governments play the dominant role in their economies, they will remain impoverished and oppressive societies. How would democracy fix this other than abandon socialism? To be fair, if I were a socialist I would start with Sweden as a benchmark - and work from there. But this is crazy; By most standards, Sweden is only slightly less capitalist than the US.
Socialists are often ridiculed for insisting that "true socialism" has never been attempted. I won't say that because I don't think "true capitalism" has ever been attempted either. But if we want to predict the effects of the true version of either system, it still makes sense to start with the closest existing approximations and then analyze the likely effects of aligning their policies with the ideals. When we do that, we see that capitalism is a wonderful ideal that is likely to work beautifully in practice, and that socialism is a terrible ideal that is likely to work terribly in practice.
FAQs
Which is better for the economy capitalism or socialism? ›
Capitalism affords economic freedom, consumer choice, and economic growth. Socialism, which is an economy controlled by the state and planned by a central planning authority, provides for a greater social welfare and decreases business fluctuations.
What is the difference between capitalism and socialism in economics? ›Capitalism is based on individual initiative and favors market mechanisms over government intervention, while socialism is based on government planning and limitations on private control of resources. Left to themselves, economies tend to combine elements of both systems.
What are 2 clear differences between capitalism and socialism? ›A Capitalist Economy is a system where private entities control the factors of production like labour, natural resources or capital goods. A Socialist Economy is an economic system where the factors of production like labour, natural resources or capital goods are under the control of the government.
Why is capitalism better economy than socialism? ›The difference in this is that capitalism rewards individuals for success and progress by allowing them to grow that wealth through investment and other actions within the market. On the other hand, socialism allows the opposite by stripping away that wealth to be redistributed throughout the economy.
Which economic system is best? ›Capitalism is the best economic system since it provides so many advantages and possibilities to people in society. Producing money and innovation, improving people's lives, and giving people power are only a few of the advantages.
What are 4 major differences between capitalism and socialism? ›| Basis for Comparison | Capitalism | Socialism |
|---|---|---|
| Basis | Principle of Individual Rights | Principle of Equality |
| Advocates | Innovation and individual goals | Equality and fairness in society |
| Means of Production | Privately owned | Socially owned |
| Prices | Determined by the market forces | Determined by the Government |
Some nations combine elements of both capitalism and socialism and are called social democracies, while their combination of capitalism and socialism is called democratic socialism.
What are 3 disadvantages of capitalism? ›- Unequal distribution of wealth. ...
- Could result in costs to the environment. ...
- Propensity for industrial unrest. ...
- Labour could be under-valued and exploited. ...
- Capital could reside with a few people.
The United States is actually referred to as a mixed market economy, meaning that it blends characteristics of both capitalism and socialism.
How is socialism worse than capitalism? ›Socialism is most often criticized for its provision of social services programs requiring high taxes that may decelerate economic growth. Capitalism is most often criticized for its tendency to allow income inequality and stratification of socio-economic classes.
Why is capitalism good for the economy? ›
Capitalism, undoubtedly, is a major driver of innovation, wealth, and prosperity in the modern era. Competition and capital accumulation incentivize businesses to maximize efficiency, which allows investors to capitalize on that growth and consumers to enjoy lower prices on a wider range of goods.
Which characteristics differentiates socialism from capitalism? ›One of the most fundamental differences between the systems of capitalism and socialism lies in the scope of government intervention within an economy.
Why socialism is the best economic system? ›Advantages of Socialism
According to the socialistic system, each person is guaranteed access to basic goods, even those who are not able to contribute. As a result, the system helps to minimize poverty levels in the society.
By assuming the autonomy of the individual, capitalism grants dignity to the poor. By affirming people's right to their own labor, regardless of their position on the economic ladder, capitalism offers the poor the means to improve their own well-being.
What are 3 advantages of socialism? ›Additional benefits of Socialism: Nationalization of key industries, redistribution of wealth, social security schemes, minimum wages, employmentprotection and trade union recognition rights.
Which type of economy is best and why? ›Market economies have little government intervention, allowing private ownership to determine all business decisions concerning how a business is run. This type of economy leads to greater efficiency, productivity, and innovation.
Which system gives you the most economic freedom? ›Country Rankings of Economic Freedom
2, 2022, Singapore, with its extremely low tax rates, minimal regulations on businesses, and highly capitalist system of economics, ranks first, being 84.4. % economically free. 1 Switzerland ranks a close second at 84.2% free, followed by Ireland at 82.0%.
Mixed Economy Definition. The mixed economy definition is an economy where both the private market and the government control the factors of production. It is the most common form of economy that exists in the world today.
What is the main difference between socialism and capitalism quizlet? ›Capitalism is a system in which the government controls production, but socialism stresses production by private businesses. Capitalism is a system in which people pursue their own self-interests, but socialism stresses an equal distribution of wealth.
What is a significant difference between socialism and capitalism Brainly? ›SOCIALISM is a political system where in power rests within a few elected represtantive through democracy and thir main aim is welfare of the people. CAPITALISM refers to power vests within a2 or 3 people who are not elected and thier motive is thier own profit.
Is fascism capitalist or socialist? ›
In terms of economics, fascism incorporates elements of both capitalism and socialism. Fascist economists advocate for self-sufficiency and individual profit, but promote government subsidies of corporations.
What are three major criticisms of socialism? ›Some of the primary criticisms of socialism are claims that it creates distorted or absent price signals, results in reduced incentives, causes reduced prosperity, has low feasibility, and that it has negative social and political effects.
Do socialists believe in capitalism? ›Democratic socialists argue that capitalism is inherently incompatible with the values of freedom, equality, and solidarity and that these ideals can only be achieved through the realisation of a socialist society.
What is the biggest problem with capitalism? ›Capitalism has been criticized for establishing power in the hands of a minority capitalist class that exists through the exploitation of a working class majority; for prioritizing profit over social good, natural resources and the environment; and for being an engine of inequality and economic instabilities.
Who benefit from capitalism? ›Individual capitalists are typically wealthy people who have a large amount of capital (money or other financial assets) invested in business, and who benefit from the system of capitalism by making increased profits and thereby adding to their wealth.
What are the 5 problems with capitalism? ›In short, capitalism can cause – inequality, market failure, damage to the environment, short-termism, excess materialism and boom and bust economic cycles.
Is China socialist or capitalism? ›The CCP maintains that despite the co-existence of private capitalists and entrepreneurs with public and collective enterprise, China is not a capitalist country because the party retains control over the direction of the country, maintaining its course of socialist development.
What are 3 socialist countries? ›| Country | Since | Party |
|---|---|---|
| People's Republic of China | 1 October 1949 | Communist Party of China |
| Republic of Cuba | 24 February 1976 | Communist Party of Cuba |
| Lao People's Democratic Republic | 2 December 1975 | Lao People's Revolutionary Party |
| Socialist Republic of Vietnam | 2 September 1945 | Communist Party of Vietnam |
Japan Is a Socialist Country
Indeed, Japan has had capitalis-along with the United States, the United Kingdom, Germany, other European countries, and Korea. Japan was affiliated with the Western capitalism during the cold war and when confronted with Eastern socialism.
“The problem with socialism is that you eventually run out of other people's money.” This famous line by former British Prime Minister Margaret Thatcher reminds us that while government handouts may sound good, someone still has to foot the bill.
What are 5 advantages of socialism? ›
- Equitable distribution of resources.
- Absence of exploitation.
- Jobs and employment for the citizens are more guaranteed and secured.
- Equitable distribution of income.
- Prevention of private monopoly.
- Monopoly power. Private ownership of capital enables firms to gain monopoly power in product and labour markets. ...
- Monopsony power. ...
- Social benefit ignored. ...
- Inherited wealth and wealth inequality. ...
- Inequality creates social division. ...
- Diminishing marginal utility of wealth. ...
- Boom and bust cycles.
Arguments for capitalism tend to hold that it's beneficial to society for there to be incentives to produce, own, and use capital goods like the magic wand, or that it's wrong to forcibly prevent people from doing so.
What are 3 benefits of capitalism? ›- More efficient allocation of capital resources.
- Competition leads to lower consumer prices.
- Wages and general standards of living have risen overall.
- Spurs innovation and invention.
- Good Health. Thanks to the benefits of capitalism, every man, woman and child has the opportunity to eat fresh, wholesome foods every day. ...
- Social Contribution. ...
- Professional Services Choice. ...
- Healthy Competition. ...
- Personal Freedom. ...
- Ownership and Opportunity.
A capitalist economic system is characterized by wage labour, accumulation of capital and competitive markets. Socialist economic systems are marked by state ownership and control of factors of production (Gale Group, 2010b). In such a system, the economy is managed through cooperative enterprises.
Why is socialism better for the economy? ›Advantages of socialism related to economic planning include an ability to makegood use of land, labor and resources, as well as avoiding excess or insufficient production.
Is capitalism better for the economy? ›Capitalism, undoubtedly, is a major driver of innovation, wealth, and prosperity in the modern era. Competition and capital accumulation incentivize businesses to maximize efficiency, which allows investors to capitalize on that growth and consumers to enjoy lower prices on a wider range of goods.
Why is a socialist economy good? ›Advantages of Socialism
According to the socialistic system, each person is guaranteed access to basic goods, even those who are not able to contribute. As a result, the system helps to minimize poverty levels in the society.
According to classical Marxist and social evolutionary theories, post-capitalist societies may come about as a result of spontaneous evolution as capitalism becomes obsolete. Others propose models to intentionally replace capitalism. The most notable among them are socialism, anarchism, and degrowth.
Do Socialists agree on the economy? ›
Socialists do agree that capitalism is deeply flawed and damaging to human nature and society. Therefore the agreement is more significant than the disagreement, which focuses on the alternatives. clearly comes down on the side of agreement.
What is the problem with socialism? ›“The problem with socialism is that you eventually run out of other people's money.” This famous line by former British Prime Minister Margaret Thatcher reminds us that while government handouts may sound good, someone still has to foot the bill.
Why is capitalism good for the poor? ›By assuming the autonomy of the individual, capitalism grants dignity to the poor. By affirming people's right to their own labor, regardless of their position on the economic ladder, capitalism offers the poor the means to improve their own well-being.
Who benefits under capitalism? ›Individual capitalists are typically wealthy people who have a large amount of capital (money or other financial assets) invested in business, and who benefit from the system of capitalism by making increased profits and thereby adding to their wealth.
Is China a socialist country? ›The CCP maintains that despite the co-existence of private capitalists and entrepreneurs with public and collective enterprise, China is not a capitalist country because the party retains control over the direction of the country, maintaining its course of socialist development.
Does socialism cause inflation? ›In the long run, inflation is caused by an increase in the money supply. Therefore, socialism will only cause inflation if the policies include increases in the money supply. If, however, the money supply is controlled by a central bank, then socialist policies will have no long-term impact on inflation.
What countries are socialist? ›| Country | Since | Party |
|---|---|---|
| People's Republic of China | 1 October 1949 | Communist Party of China |
| Republic of Cuba | 24 February 1976 | Communist Party of Cuba |
| Lao People's Democratic Republic | 2 December 1975 | Lao People's Revolutionary Party |
| Socialist Republic of Vietnam | 2 September 1945 | Communist Party of Vietnam |
Some nations combine elements of both capitalism and socialism and are called social democracies, while their combination of capitalism and socialism is called democratic socialism.
What is a good replacement for capitalism? ›Direct democracy, radical municipalism and the commons. Democratic socialism and socialism in the 21st century. Alternatives to shareholder capitalism.
What's a good alternative to capitalism? ›To illustrate nonviolent alternatives to capitalism, in this chapter four models are examined: sarvodaya, anarchism, voluntaryism and demarchy. Each of these satisfies most or all of the principles, but they are different in a number of respects.