Capitalism vs. Socialism

I've recently gotten into quite a spat on the forums here at HubPages. Nothing too bloody, I assure you, but indeed a task.

A recent forum post discussing socialism and it's merits and follies has gotten quite a response. I wanted to discuss it quickly here in this article.

What is Socialism, What is Capitalism

Capitalism is quite easy to explain and define. It is simply when a person's property is his to do that which he wants. If I own something, I'm allowed to choose how it is used so long as such a use does not interfere with someone else's property. This definition matches the results I've found in the search engines I've used.

Simple enough... liberty is usually easy to explain.

Socialism, on the other hand, has numerous definitions. I still have yet to find two socialists who agree on a definition.

Walter Block (a laissez-faire economist) defines it two different ways, "Government control over the means of production", or "to each in accordance with his ability, and to each according to his needs". The first of these definitions is what I have been told that socialism means - when the people, i.e. the democratic government, controls how things are operated. The second one is a bit more along the lines of "I produce as much as I can, but I use as much as I need", which sounds... strange, but I guess it's an OK definition.

Other definitions include the following

1. socialism (a political theory advocating state ownership of industry)
2. socialism, socialist economy (an economic system based on state ownership of capital)

(Both of these are from Princeton)

1. Any of various political philosophies that support social and economic equality, collective decision-making, and public control of productive capital and natural resources, as advocated by socialists.
2. The socialist political philosophies as a group, including Marxism, libertarian socialism, democratic socialism, and social democracy.
3. (Leninism) The intermediate phase of social development between capitalism and full communism. This is a strategy whereby the State has control of all key resource-producing industries and manages most aspects of the economy, in contrast to laissez faire capitalism.

(These come from wiktionary)

So... I suppose we've defined socialism, even though, apparently, there are still other definitions; one of these 'extra definitions' which was used on the forums, I will show is actually, amazingly, capitalism.

More On Socialism

OK, so even though we have numerous definitions of socialism, I'll use the friendliest ones for this argument here - The first definition from Wiktionary.

Let's think about this - if the public controlled the productive capital and natural resources, this would be manifested in some sort of stock-ownership society where everyone owned everything inside the "company" that is the state. It would be like trying to run the entire economy of the state in a democratic method. It would be insanely inefficient.

Some people would proceed to argue (using, again, a different definition of socialism than the 5 I've included) that socialism doesn't have to be state-wide. A worker would have a voice in how the company he worked for was run, and thus it would be a sort of socialism-Company.

To this I simply say that capitalism completely and in every way allows this. This definition of socialism (which has been used in the forums) is in every way allowed under capitalism. "Indeed," say the people who use this definition, "this type of company already exists around the world!". I agree, this system does indeed exist. But I fail to see how this is in any way different than the system of letting workers own shares of the company's stock. Until anyone can explain to me how these two systems are different, I will continue to point out that the people who use this definition of socialism are actually arguing for stock-option salaries under capitalism.

If they, for whatever reason, keep their definition of socialism, but deny what I've written in the last paragraph, then they are necessarily advocates of "bone-head capitalism". Why is it "bone-headed"? Well, let's imagine a scenario - other than stock-options scenario I just wrote about - where a worker would have control of his company in some way. For example, if Jim decides to take his $30,000 and create a company, and then he proceeds to hire 29 people, and then wants his company to be socialist (in the definition described in the past two paragraphs), he would then allow all 30 of them to have a say in how to spend the $30,000...

then...

...poor Jim would be an idiot. Why the hell would anyone allow other people to decide how to spend his own money? This would never happen, except in extreme cases. This shows, quite clearly, that socialism (under this definition) won't work - you're asking humanity to go against its nature.

But Capitalism is Evil!

Everyone seems to think that Capitalism is evil.

I always point out to these people that every single example of Capitalism-related-evilness was actually a governmental failure. I challenge each and every reader to give me one example of a Capitalist-Market Failure that has NO tie to government whatsoever - it just won't happen. Monopolies, cartels, 'unfair competition' (whatever that means), cannot exist without government support.

When this challenge doesn't work out (generally the socialists just ignore it and change the subject), I try to explain that it's impossible for capitalism to be evil: how can "allowing people to choose how to spend their money, as long as it doesn't interfere with others" be evil?

When this doesn't work (people are just hell-bent in their ways), I point out that socialism is evil! Imagine: Bill Gates revolutionized the world, brought unbelievable efficiency to the world, and then proceeded to make everyone's life more wondrous through the magic of computers...

... then the government just about took his company away from him and said that he was participating in 'unfair business practices'. Luckily, Gates gave in and started paying the piper. I concede that government theft of property is not necessarily socialism (even though, by Princeton's first definition, it is), but it sure as hell ain't Capitalism.

Indeed, just about every problem with Capitalism that was listed in the recent Michael Moore movie "Capitalism: A Love Story" was either 1- completely inaccurate, or 2- actually a problem with government intervention. You name the issue he mentioned, I'll tell you how the government caused it!

Oh, and did anyone else notice how, after the government idiotically gave the auto industry billions of dollars, they suddenly began attacking Toyota? Even though just about every other auto company had numerous recalls at about the same time? Toyota had to pay... how much was it? $1.6 Billion? That'll teach those damned Toyotanians to make cars for people to use and enjoy!! Those bastards!!! .... ... ... *cough*...

The Follies of Socialism

Besides the folly I stated in the previous section, there are numerous other follies that exist in socialism. They are a bit more complicated, and I've discussed them in a different article. But it seems that the "HubPages" community didn't bother to read it! On the forums people still regularly demand that socialism is the best thing that could ever happen to people.

Here is a brief overview of my previous article. It relies heavily on Ludwig Von Mises' utterly vicious and unerring attack on socialism in his books Human Action and Socialism.

The first and most important reason why socialism can not work is that there is no system for property rights. According to the majority of our definitions, socialism requires the abolition of private property rights. This utterly destroys just about every incentive there is to invest and produce things.

The second critical folly of socialism is that there is no profit structure; prices can’t exist if there aren’t property rights. Without prices, how can anyone know if a trade is beneficial? Prices help people ration out goods in a logical and reasonable way, and without prices chaos would ensue: it would be impossible to know what would be a good investment or a bad one.

To illustrate this folly, let's imagine 10 orange-juice-makers. If they each worked hard all day, and were each able to produce 10 glasses of orange juice each day, then they would normally make 100 glasses of OJ. But, if everyone owns everything that is produced, and if you had a claim to own what was produced even if you slacked off, then we can easily show that slacking off will ensue. If one of the OJ producers were to be lazy and take the afternoon off, then he would gain 50% leisure time at the cost of the production of 5 glasses of OJ. This would mean, he got to be 50% lazier, but he would have only lost 5% of the product: 9 people produce 10 glasses, and he produced 5 glasses. He gains 50% and everyone loses 5%.

The third critical folly of socialism is known as the tragedy of the commons. For example, if there were a big bowl of cereal, and ten hungry people were each given a spoon, each person would try to eat as much as possible without regard for anyone else. With socialism, this would take place in every market and every industry - there would be wanton waste of resources simply because there would be no private property or prices.

Socialism Tends to Lead to Death

This section is just a quick note to point out that the vast majority of attempts towards true socialism (this would be the Princeton definition) have almost always led to horrendous deaths. North Korea, Socialist China, Soviet Russia and it's satellite countries, East Germany, and Cuba all went Socialist on a wave of death. It is estimated that more than 10 million people died in the USSR from the economic policies of Socialism and about 75 million people were killed from the policies of Socialist China. The numbers for the other countries aren't as specific, but, rest assured, there were deaths and misery.

Socialism is Unconstitutional

I already know that no one cares, but socialism is unconstitutional. The 10th amendment declares that any power not specifically granted to the federal government, nor denied to the state governments, are delegated to the state governments or the people themselves.

There is nothing in the Constitution that allows the federal government to take control of any industry or market. And, before you give me the "General Welfare" argument, realize that if the "general welfare" section of the Constitution were to conform with "anything our elected officials agree to", please note that the Founding Fathers were very specific with the powers granted or denied: they specifically grant the federal government the power to create and establish post (office) roads! Why the hell would any of the founding fathers say that the federal government can do anything allowed if it is in some way good for the "general welfare", but then specifically state that it has the ability to make post office roads --- not roads in general, but only post office roads?!?! Why? because general welfare clearly doesn't mean what people think it means.

Always Remember the Unseen

And for my final argument, remember that everything that the government pays for or regulates in some way is paid for through theft, and at the expense of something else.

If the government pays for a new road, it has to take money from it's citizenry through force -- you go to jail if you don't pay your taxes. And if you resist arrest, they tend to shoot you.

But this isn't the end to the problem. For each dollar that the government spends on asphalt or concrete or whatever the case may be, that's one less dollar's worth of asphalt or concrete that a private citizen can buy. When the government buys things, it raises prices; not only does the government make people poorer by taking their money directly, it then raises prices by buying things and competing for the scarce goods of the citizenry.

That means that each dollar taken by the government is not only one less dollar that could have been spent on something that people actually wanted, but it is one less dollars worth of resources that people can buy.

"Public Goods," the Socialists wail, "are projects that the free market wouldn't bother investing in, and so we need governments to take control of some of the means of production!". I protest this passionately.

How could a private entrepreneur completely ignore something that the public wants? If something like "water delivered to my home" is in demand, then how can we even assume that the private sector wouldn't take care of this? Thar's gold in them thar hills! Indeed, it is profitable to deliver people's mail, there are profits to be made in defending private property, there are profits to be made in saving people from fires. If there is a demand for a service, there are profits to be made; if there are profits to be made, there is a way to make profits without coercion (taxes).