Are We Moving From Capitalism To Socialism?

Written by Sandy Stuart

There are two major economic systems at work in the world’s economy: capitalism and socialism. It used to be that if an American politician could be tainted with the “socialist” label, his or her career would be finished. Not today. Bernie Saunders, a Democrat who wants to be president, claims to be a socialist and he has a large following of mostly young people.

We live with Capitalism. According to Merriam-Webster, its definition is: “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.”

Opposing capitalism is socialism. Its definition is: “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods”. It is sometimes called a “command economy”. It is so called because the government dictates both production and distribution.

Some still think socialism ought to work. It sounds good. It is based on the premise, “to each according to his need, from each according to his ability”. Most folks who believe this system ought to work possess the positive view of humanity, that people are generally nice, good and willingly work for their fellow man. They must believe it because socialism requires it. Either that or the government must impose socialism on its citizenry with force that could border on brutality.

Capitalism consistently beats socialism. Why? Under socialism people tend to “need” more and more, and their capacity for work tends to decline, especially if it is not tangibly rewarded. In other words, we want more pay for doing less work. This tendency renders socialism ineffective.

On the other hand, capitalism plays right into human nature. Increased effort is normally rewarded. Sloth is not tolerated. And to put a positive spin on the situation, people like to be free. Liberty is good. With capitalism, we can exercise our liberty, working as hard as we want, hopefully with commensurate remuneration. If you want to paint a negative picture, you can call the motivation “greed”. I prefer liberty. Either way, capitalism is downright efficient.

Another major reason socialism doesn’t work is the law of supply and demand. This law is overarching the world’s economy. It must be served. Socialism tries to force demand but cannot. If demand is not there for a product or a service, it will not be purchased, (unless the government buys it and forces distribution to the people). With capitalism, the successful determine where there is demand and they set about satisfying that demand. Effective marketing may also stimulate demand for still greater sales.

There just isn’t time for a government bureaucracy to determine where and how much demand exists and then build the necessary production capacity. In the free marketplace, it happens almost instantaneously. Often the truly successful business person will anticipate demand and be there to meet it.

A current hot topic is that of “jobs”. It is here that capitalism is perhaps most brutal. There is a truism I heard that says, “In order for an economic system to be able to create jobs, it must be able to destroy them.” Governments that attempt to disallow layoffs will slow down their industry to the point it will be less and less competitive with countries with mobile job markets.  We who work within capitalism know we must keep our skills current. We must also keep them varied, so that we always have a fallback job in case the law of supply and demand eliminates our current job.

I wish I could say our capitalistic system is pure. It isn’t. Government frequently intervenes, almost always adding inefficiency to the market. In the past, government intervention followed the indirect model. I call it the “give-and-dictate” approach. The Federal government doles out financial aid (our taxes). After the recipient is dependent on that aid, the government starts dictating terms of the agenda it wants accomplished. The recipients can be schools, charities, businesses, industries and even states!

Lately, with the global financial crisis, government intervention in the financial sector has been direct. Is it socialism? Well, the government is starting to own, at least partially, companies. It is still far short of total socialism. Distribution is not controlled. Another thing to bear in mind is that all things are relative. We are in global competition with all other countries, most of which are way more socialist than we. It has been said that in the U.S., the government tells business what it is not allowed to do. In Europe, the government tells businesses what they are allowed to do.

I am convinced that the U.S. will continue to compete well. The less socialist we are, the more we will come out on top.