Socialism And Capitalism

You might remember the old saw “If you are not a liberal at 25, you have no heart. If you are not a conservative at 35 you have no brain.” Even if it wasn’t pretty obvious who benefits from that one, it’s never been true in practice anyway. I don’t think I need to list extremely smart people who are liberal or lefter than that, nor the shall we say less gifted out there who use their conservatism as counterfactual proof of their intellect. I will simply say that I have reason to believe I am not a moron, and as time goes by and the injustices produced by our various (but not terribly varied) current systems become harder and harder to miss it pushes me further into the guillotine-sharpening camp – and that is from someone who did an MBA so any claims that I do not understand business or capitalism in general are not going to hold a lot of water.

I have noticed that very often, indeed to the point where I can’t bring a counter-example to mind (provide one below if you have it, please!), every time I see someone hating on socialism it’s predicated on not actually knowing what socialism is. There’s a common myth in America and America-influenced places that Capitalism means “freedom to do business”, full stop, and Socialism means either “authoritarian dystopian centrally-planned economy” (this is Stalinist or Maoist communism) or if slightly less informed “BAD BAD BAD! ANTI-FREEDOM!”. Both of these are essentially wrong; in fact both of them are more a group of economic systems rather than one in specific. The following is a few observations on the comparison of (oligarchic as currently practiced) capitalism and (market-based democratic) socialism.

Both capitalism and (this variety of) socialism have largely free markets, and the freedom for participants to enter into contracts and do business. In practice both kinds of markets are regulated, though this was not always true; pure unregulated laissez-faire capitalism left the door open to all sorts of harmful practices that wound up poisoning or defrauding the populace, which is why even the most capitalism-worshipping countries today have regulatory agencies covering certain sales.

Neither capitalism nor socialism inherently define a way to deal with taxation or the structure of a government. These are economic philosophies, and both can exist coupled with direct democracy, republicanism, monarchy, or a dictatorship. They will both create pulling influences on the government structure and vice versa, of course. Socialism does tend to require some sort of taxation and public coffer, though so will any but the most anarchic or laissez-faire forms of capitalism.

The primary difference, philosophically, is who should be the winner in disputes. Capitalism favors businesses and expects people to fend for themselves; socialism favors the people and recognizes no duty to make things easy for a business’s profits.

Both capitalism and socialism consider labor valuable and believe that people should be allowed to sell their labor and receive compensation for it. Both encourage a notion of work as virtue (which has good and bad parts, beyond the scope of this entry); in fact both encourage workers to show loyal solidarity to someone on the basis of their labor – but capitalism demands loyalty to one’s employer while socialism encourages solidarity with one’s fellow laborers, and not only necessarily in the same company.

And finally, both capitalism and socialism consider that it is right and just to grant money or other resources to a class of people who do not earn it via labor! However, where that money comes from and where it goes are very very different. Socialism considers that the classes who deserve this largesse are either those who cannot reasonably work (elderly, disabled, etc) or possibly absolutely everyone to at least a reasonable survival extent, and it comes from the public coffers which in turn comes from taxation of those who can afford it. Capitalism considers that the class who deserves this largesse are those who own the means of production or worse the necessities of life (shelter, for example), and this money must come from the people who have to sell their labor to get any resources at all.

Capitalists, in my experience, get angry at this framing. I don’t see how it can reasonably be denied, however; rent-seeking, being paid for merely owning something, really is the principle that sets capitalism apart from other economic systems. In this age of pandemic when the world has not ended but stopped, the ‘apausecalypse’ if you will, it has become very clear that the owner classes expect to be given money even when there is no way for the laborers to earn any. It lays bare the amorality, if not immorality, at the center of any system that favors the right of owners to be given profits over that of the laborers to eat and have somewhere to sleep.

I can only hope that the current situation will encourage a shift in the global consciousness, even a small one, to realize that while you can have an economy without rent-seekers, you cannot have one without value-producers, so it’s time to prioritize the well-being of the laborers or else everything will just… collapse.

So far, my quest to write a short blog with non-silly-art-conent remains a dream. But at least it’s something!


  1. Bruce says

    It might also be said that socialism is what to do when capitalism isn’t appropriate.
    Who has water piped to their home by several competing water companies? How can it make sense to say anyone with money can dig up and build their own network of water pipes to everywhere in town, to give a free choice?
    Clearly, there’s no direct way to have meaningful capitalistic competition on the final Mike delivery of water in any town. So we can’t let free market greed exploit the town when there is no free market competition.
    Every service and product should be evaluated similarly.
    Six different folks could set up different hamburger stands down the street, if they follow health, labor, and zoning laws. This is a viable outlet for capitalism.
    But if there’s only one fiber optic cable dug in your street to your house, where is the option for equal capitalism? Does every competitor get equal space on this cable, or get an equal chance to dig and plant their own? If so, then it’s a capitalism situation. But if the town subsidizes one company and prohibits other cable companies, then socialism is needed for fairness. Otherwise, you have a private monopoly cable co that can raise prices to whatever they want with no requirements. How is that free enterprise competition?
    When someone sick comes to urgent care without insurance, who should cover the cost? If it’s free enterprise, then you’d let them tell the sicko to go away and die so you can make more money! Who wants that system, other then corporate tools?

  2. brucegee1962 says

    Good point, Bruce. (Nice name, too.) You could argue that the government already indirectly controls utilities by licensing them; if the government just takes direct control (through a state utilities board) that just means they can be run for the benefit of the taxpayers/ratepayers, rather than the benefit of the stockholders. In our state, these stockholders have spent so much lobbying the statehouse that they are now guaranteed profits — if the utility makes money, they make money, and if the utility loses money, they still make money. Nice work if you can get it! And all that lobbying is paid for by my utility bills, for power that I can’t choose to buy from someone else.

    Rural hospitals are another good example

  3. says

    There’s a common myth in America and America-influenced places that Capitalism means “freedom to do business”, full stop, and Socialism means either “authoritarian dystopian centrally-planned economy” (this is Stalinist or Maoist communism) or if slightly less informed “BAD BAD BAD! ANTI-FREEDOM!”.

    In Europe people generally imagine that socialism means free healthcare in state owned hospitals, free kindergartens, free university education, unemployment benefits for those who have recently lost their jobs, and monetary assistance for those people who cannot work due to disabilities or old age.

    At least in Latvia we have plenty of politicians who call themselves “socialist.”

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