In this second article in the capitalism series, I intend to expose flaws in a competing philosophy – socialism – by highlighting how the system’s architecture is defective, as well as answer socialist objections to capitalism.
Since the word “socialism” can refer to a spectrum of economics beliefs, the working definition I’ll be interacting with is an economic system that replaces the free market with centralized decision-making as well as attempts to create monetary equality among the workers. Not everyone claiming socialism fully adheres to these principles, but a definition must be chosen for the purposes of this discussion.
I begin my critique by pointing out that whereas capitalism trusts the welfare of many into the hands of the many, socialism’s central planning trusts the welfare of the many into the hands of a few. Such a system dictates the production, distribution and prices of goods from bureaucrats above rather from at the level of the people.
Two of the problems with this set-up: It doesn’t behoove the decision-makers to act in the people’s best interest, and even if they do, they aren’t capable of maintaining the same level of economic progress. The few making economic decisions not only lack the same incentive to watch out for the workers as the workers themselves have, but it’s grossly unrealistic to expect that even the best-intentioned decision-makers will provide as a good decision in every nook and cranny of the market as the individuals who are in those nooks and crannies.
Socialism’s tenet of income equality is also erroneous, taking money away from those who’ve worked hard to earn it and thus de-incentivizing workers. Because money is a motivator for jobs such as a physician or engineer, giving their money to others chips away at the motivation to do the work to hold those jobs. If your professor told the class he’d average out everyone’s final grade, you wouldn’t study as hard, and if you’re a straight “A” student, that mandate would be greatly upsetting. The sorry consequence of aiming for income equality and removing incentive for work is a society where people lack the drive to get up in the morning to give it their best.
I had an interview with Young Democratic Socialists of America Vice President Connor McClelland, in which he stated, “There should be caps on how much you can make.” He was referring to extreme examples of wealth life Jeff Bezos, much of whose money, accordingly, could be distributed to others.
But if this policy were implemented, wouldn’t people lose the incentive to become the Jeff Bezos of the next generation? And wouldn’t that result in fewer business start-ups? Now that Amazon has changed the world, Bezos is reaping the rewards of entrepreneurship. If we let people like him retain what they’ve earned, we keep the line of entrepreneurial visionaries stockpiled.
As to the objections to capitalism, a common one is that it generates inequality. While this is true, this objection fails to acknowledge both that capitalism elevates the poor, and that some people indeed deserve more than others. Those who excel in school land high-paying jobs; risk-taking entrepreneurs become billionaires; and while the rich get richer, the poor get richer too. An analogy I like for this phenomenon is the knowledge inequality between professors and students. Though the inequality is usually very great (in my case at least), the professors help the students acquire knowledge more than anyone else.
Another objection to capitalism is that it’s an inherently greedy system, designed to be predatory and exploitive.
“Often we see capitalism conflated with freedom, but those are not the same,” McClelland argues. “Capitalism doesn’t end servitude and slavery; it just lets you choose your master.”
In response, I want to point out that greed is not a symptom of capitalism but just part of human nature. Unlike socialism, capitalism acknowledges greed and integrates it so that it benefits others, as I wrote about in my previous article.
Though socialism may claim to give people more dignity, it can never eradicate greed from the human heart. One system recognizes greed and uses it to form the best economy it can, while the other system turns a blind eye to it only to find the economy eroding because of a wrong assumption. It would, however, be accurate to level the accusation that socialism is inherently envious, as people demand what others have earned. As Winston Churchill said, “Socialism is a philosophy of failure, the creed of ignorance and the gospel of envy.”
Socialism’s failure to eradicate greed is seen in socialist governments themselves, acting as businesses trying to make the most profit – except this business is a monopoly.
McClelland cited issues with the Soviet Union, saying, “Even in a centrally planned economy. … You have this problem of ‘state capitalism,’” trying to “keep labor costs low, keep production costs low, keep resource costs low and make as much profit as possible.”
Thus, greed and self-interest cannot be purged even in the epitome of socialism, leaving people at the mercy of the monopoly rather than free to find business elsewhere.
