This is a hot topic and many people have strong emotions when this topic comes up. Most people in the U.S. culture have strong opinions about the two basic economic systems upon which nations, societies and cultures are built and function. In general, conservatives see “socialism” as evil and to be avoided at all costs. In in like manner, liberals see “capitalism” as having many evils. Which position is correct? In other words, which system - capitalism or socialism - is actually better?
This article will examine that important question.
Let’s start by defining and understanding both terms.
“An economic system based on private ownership of property and business, with the goal of making the greatest possible profits for the owners” (Cambridge Dictionary)
“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” (Merriam-Webster Dictionary)
“An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.” (Oxford Dictionary)
So, from the shorter dictionary definitions of capitalism, we can see that it is an economic system where private individuals (as opposed to the people or “the state”) own or control the “capital” (meaning money, land, resources) and the mean’s to produce goods and services; and they use that capital to make a profit (to earn or take more money than it costs to produce and sell the product or service) which they can keep for themselves to use as they like.
Here is Wiki’s fuller description of Capitalism:
“Capitalism is an economic system based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.
Economists, political economists, sociologists and historians have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free market capitalism, welfare capitalism and state capitalism. Different forms of capitalism feature varying degrees of free markets, public ownership, obstacles to free competition and state-sanctioned social policies. The degree of competition in markets, the role of intervention and regulation, and the scope of state ownership vary across different models of capitalism. The extent to which different markets are free as well as the rules defining private property are matters of politics and policy. Most existing capitalist economies are mixed economies, which combine elements of free markets with state intervention and in some cases economic planning.
Market economies have existed under many forms of government and in many different times, places and cultures. Modern capitalist societies—marked by a universalization of money-based social relations, a consistently large and system-wide class of workers who must work for wages, and a capitalist class which owns the means of production—developed in Western Europe in a process that led to the Industrial Revolution. Capitalist systems with varying degrees of direct government intervention have since become dominant in the Western world and continue to spread. Over time, capitalist countries have experienced consistent economic growth and an increase in the standard of living.
Critics of capitalism argue that it establishes power in the hands of a minority capitalist class that exists through the exploitation of the majority working class and their labor; prioritizes profit over social good, natural resources and the environment; and is an engine of inequality, corruption and economic instabilities. Supporters argue that it provides better products and innovation through competition, creates strong economic growth, and yields productivity and prosperity that greatly benefits society as well as being the most efficient system known for allocation of resources.”
“Any economic or political system based on government ownership and control of important businesses and methods of production” (Cambridge Dictionary)
“Any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods” (Merriam-Webster Dictionary)
“A political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.” (Oxford Dictionary)
So, from the shorter dictionary definitions of socialism, we can see that it is an economic system where the government (in a democracy, theoretically the people themselves represented by their elected leaders) owns and controls the capital and means of production as well as the distribution of goods and services, with all the people sharing in the benefits of the production of goods and services, instead of private individuals gaining personal wealth from that endeavor.
Here is Wiki’s fuller description of Socialism:
“Socialism is a range of economic and social systems characterized by social ownership and workers' self-management of the means of production as well as the political theories and movements associated with them. Social ownership may refer to forms of public, collective or cooperative ownership, or to citizen ownership of equity. There are many varieties of socialism and there is no single definition encapsulating all of them, though social ownership is the common element shared by its various forms.
Socialist economic systems can be divided into non-market and market forms. Non-market socialism involves the substitution of factor markets and money with engineering and technical criteria based on calculation performed in-kind, thereby producing an economic mechanism that functions according to different economic laws from those of capitalism. Non-market socialism aims to circumvent the inefficiencies and crises traditionally associated with capital accumulation and the profit system. By contrast, market socialism retains the use of monetary prices, factor markets and in some cases the profit motive, with respect to the operation of socially owned enterprises and the allocation of capital goods between them. Profits generated by these firms would be controlled directly by the workforce of each firm, or accrue to society at large in the form of a social dividend. The socialist calculation debate discusses the feasibility and methods of resource allocation for a socialist system.
The socialist political movement includes a set of political philosophies that originated in the revolutionary movements of the mid-to-late 18th century and out of concern for the social problems that were associated with capitalism. In addition to the debate over markets and planning, the varieties of socialism differ in their form of social ownership, how management is to be organized within productive institutions and the role of the state in constructing socialism. Core dichotomies include reformism versus revolutionary socialism and state socialism versus libertarian socialism. Socialist politics has been both centralist and decentralized; internationalist and nationalist in orientation; organized through political parties and opposed to party politics; at times overlapping with trade unions and at other times independent of—and critical of—unions; and present in both industrialized and developing countries. While all tendencies of socialism consider themselves democratic, the term "democratic socialism" is often used to highlight its advocates' high value for democratic processes in the economy and democratic political systems, usually to draw contrast to tendencies they may be perceived to be undemocratic in their approach. Democratic socialism is frequently used to draw contrast to the political system of the Soviet Union, which critics argue operated in an authoritarian fashion.
By the late 19th century, after the work of Karl Marx and his collaborator Friedrich Engels, socialism had come to signify opposition to capitalism and advocacy for a post-capitalist system based on some form of social ownership of the means of production. By the 1920s, social democracy and communism had become the two dominant political tendencies within the international socialist movement. By this time, socialism emerged as "the most influential secular movement of the twentieth century, worldwide. It is a political ideology (or world view), a wide and divided political movement" and while the emergence of the Soviet Union as the world's first nominally socialist state led to socialism's widespread association with the Soviet economic model, some economists and intellectuals argued that in practice the model functioned as a form of state capitalism or a non-planned administrative or command economy.
Socialist parties and ideas remain a political force with varying degrees of power and influence on all continents, heading national governments in many countries around the world. Today, some socialists have also adopted the causes of other social movements, such as environmentalism, feminism and progressivism.”
So, in summary, the “capitalism versus socialism” argument is really about who controls the money/land/assets/resources and the means of producing goods (factories, etc.) and services (businesses). Capitalism advocates personal, individual, private control (ownership) of the resources and wealth and means of production, whereas socialism advocates some form of collective control (ownership) of the resources and wealth and means of production.
In reality – and I urge the reader to validate this truth – no nation is purely capitalistic or purely socialistic. The truth is that all “democratic” nations (where the people of the nation choose / elect their leaders) have both capitalistic features and socialistic features. To deny this is irrational. Furthermore, if you can admit the truth that all democratic nations have elements or features of both capitalism and socialism, then you cannot rationally hold that either system is “evil”. In other words, and for example, if you live in the U.S. and you dogmatically defend capitalism against the “evil of socialism”, you are not being rational since the U.S. has socialistic elements.
For example, all the government programs like welfare, unemployment payments, food stamps or Medicaid and Medicare are all examples of socialism. In other words, those programs are not based on private control of capital, competition or individual profit incentive. Those programs take from the overall society’s wealth (tax income) and distribute that wealth to those who need goods and services. Those programs are socialistic in principle and operation. As another example, non-profit organizations are, by definition, not capitalistic, and yet they exist and function in the U.S.
A purely capitalistic nation would have virtually no government, or at least a minimalist government that did not own or control one bit of wealth.
A purely socialistic nation would have no private business enterprises existing or operating within their nation's boundaries and no private individuals would own or control anything.
Again, the truth is no such nation exist.
The primary benefit or “pro” to capitalism is primarily work motivation. If I work harder than the other fellow, and I am more creative, clever or resourceful then the other fellow, then I should get “more” than the other fellow, whether that “more” is money or power/leadership. In other words, capitalism has the mechanism to reward the individual, and reward - unfortunately and especially money - is the most powerful motivator to the human spirit. Thus, capitalistic societies have produced more innovation than socialistic societies, since individuals are more motivated to innovate due to the reward component of capitalism. For example, the industrial revolution occurred among nations and societies who had primarily capitalistic economies.
The primary negative or “con” to capitalism is the fact that the motivation to be rewarded or to get more than the other fellow oftentimes becomes greed. Greed is the desire to have more without concern for its impact on others. If our human nature was basically good, then greed would not be a problem. However, our human nature is very much a problem and thus more often than not, greed does become the motivation for most in capitalistic societies.
This fact can be seen in countries like India. India has a primarily capitalistic system and the result has been billionaires living is palaces with millions of people eking out a subsistence living and living in slums in the shadow of the billionaire's palace. In other words, capitalistic societies will typically suffer from growing wealth inequality problems where the richer get richer and the poorer get poorer. Again, this is due to greedy individuals selfishly taking advantage of the benefits of the capitalistic system.
More and more billionaires on the earth arising in nations with capitalistic systems is a problem. Wealth distribution inequity is a problem. It always has been and always will be. To deny such is irrational.
The primary benefit or “pro” to socialism is primarily the desire to share the wealth among all people or the striving for equality. Capitalism is based on competition, and competition is the way of the jungle, meaning the strong and capable will ‘prevail’ over the less-strong and less-capable. That “prevailing” takes the form of the wealthy ruling class using the non-wealthy working class as it means to become more wealthy and powerful. It is good and right to want to help others less fortunate than ourselves. Compassion is perhaps what humanity needs most, and competition works hard against compassion, and capitalism is a competition-based economic system. Socialism is by its very nature, attempting to build “compassion” into the system…it is trying to ensure that individual’s greed does not have a place in the operation of the model and thus everybody is taken care of.
The primary negative or “con” to socialism is its removing incentive to work harder and to be innovative. If my human nature is wired to be motivated by being rewarded for exceptional work, then what happens if the reward I want is not available or is taken away? Well, what will happen is people will not be as diligent in their work or their innovation because they will not be rewarded for it.
There is a better system than either capitalism or socialism, and we will get to that in a bit.
Either capitalism or socialism can work well as economic systems for a group of people or a nation. In fact, to this author’s knowledge, all nations have some mix of the two systems. There are no pure capitalistic nations nor are they any purely socialistic nations.
Neither system will work if individuals are either greedy or lazy. Greed (or selfishness) and laziness are problems of human character, and human character is not fixed by economic systems.
For people to attack socialism as a knee jerk reaction to hearing its name, is to demonstrate ignorance and lack of understanding. The U.S. has socialistic components to its society and governance. To deny that is irrational. Fear and ignorance is a poor substitute for reason, and those who have a fear / defensive response to the word or concept of "socialism" are not doing well with reason. What those who preach against socialism typically do is to associate some tyrant or other evil or oppressive government who has socialistic features (or at least claims to) with "socialism" or "communism". This is the fallacy of hasty generalization or red-herring type fallacy and this error is often referred to as the "association fallacy".
So, for example, let's say a high school has policy of giving zero's for homework that is not completed, and the principal of the high school led the way to adopt that policy. Let's further say that that high school's principle is doing illegal drugs or is involved in illicit sexual activity and knows that other administrators are engaging in the same behavior but he 'looks the other way'. The principle is caught and the school makes the news for this. The fallacy of association is committed by the accusation, 'well, the 'give zero's-for-homework-not-handed-in' policy is bad and wrong because the evil principle implemented it'. No, the good and reasonable policy of zero's-for-homework-not-handed-in had nothing to do with the unethical behavior of the principle and other administrator. Neither is the 'give zero's-for-homework-not-handed-in' policy bad or wrong due to the person who thought it up or who advocated for it. In other words, a policy or principle was not the problem, rather corrupt leaders were the problem.
That same fallacy/error is often heard in this form - "socialism is bad and wrong because Stalin was a socialist". No, Stalin was an evil man and mis-used socialistic principles in his tyrannical reign. Socialism has nothing to do with misusing power or tyranny, just as capitalism has nothing to do with being anti-environmental, for example. In fact and in general, socialistic principles should prevent power being accumulated in one or few people.
The fundamental reason that both capitalistic and socialistic systems fail or do not function optimally, are human greed and lust for power. Human nature will usually be the reason for human failures, both for individuals (billionaires or political leaders) and for groups of people (nations or businesses).
Capitalism would work fine if people were generous and did not accumulate large amounts of wealth but instead paid the people fairly who are making them wealthy (the worker's producing their wealth) or would use their wealth to help people and fix broken systems. If everyone did that in a capitalistic system, it would work really well. In fact, a strong argument could be made that the best system would be generous, non-greed-operated capitalism. What that would mean would be that those who gained more wealth would use that wealth to help others and build better (fairer, more generous, more equitable) systems.
Socialism would work fine if the leaders of the group did not become corrupt (typically through greed or lust for power) and seek to enrich and empower themselves above and beyond their peers and fellow members / citizens. Socialism would work fine if people were motivated by helping other people instead of by helping themselves. But again, that internal motivation is not something an external system or external principles (like socialism and its associated principles) can provide. Rather, that must come from inside human beings.
Due to the failures of individuals (unjust or no-compassion wealth distribution) due to human nature in this realm of economic systems for nations, more and more people are looking for (or to be) authoritarian political leaders believing they can fix the problems. They cannot. They will become the next wave of tyrants.
The terms "socialism" and "capitalism" are interesting and similar to the labels chosen by those in the abortion issue. In the abortion issue, those who focus on and see the baby developing in the womb as a person and believe it is wrong to murder an innocent person take the label "pro life". Those who focus on a woman's 'right' to do whatever she wants with her body, ignore the developing human being in the womb and take the label "pro choice". In like manner, capitalism really should be called "Individualism" (and possibly Selfish-ism) in contrast to 'the other side' which takes the label "socialism". Socialism means essentially 'for the good of all', and is inherently a just and equitable concept. To avoid the clean antonym of "Individualism", advocates for capitalism stay away from the selfish connotation of the system (individualism) and instead focus on a non-ethical thing called "capital". Yet another clever and effective way to hide truth in relatively complicated terminology.
It is a true saying for we human beings that power tends to corrupt, and absolute power corrupts absolutely. That saying, however, is not true of our Creator or the Leader He sent.
For those that care, the best solution for a group of people is to have a perfect leader who does not lead by threat of punishment or lust for power or the exercise of power or to gain material wealth for him/herself, but rather who leads by love and truth and rightness. That person is the real, historical Joshua (or Jesus) of Nazareth. He knows that our efforts without making him our Leader, will largely or ultimately fail. We simply cannot lead other people well. Oh yes, better leaders arise every now and then, but the normal state of things on the earth is poor leaders, thus, the state of the human race.
If you are wondering, Joshua’s teachings generally support socialistic principles, not capitalistic ones. This does not mean he condones laziness or lack of effort. On the contrary, he asks just the opposite, that we try with all that is in us to make things better. He asks that our motivation not be greed or lust for power, but rather love for him, our Father and other people, the potentially strongest motivation that exists. He asks that we never put our own selfish desires or material things like money above the true welfare of other human beings.
The hypothesis of naturalistic evolution and capitalism are bed-mates for they operate on the same basic principles. Evolution has the doctrine of “survival of the fittest” as it primary driving mechanism. In other words, the stronger will destroy the weaker and will thus prevail. Capitalism is very similar. Its primary tenant could well be, “who has the most money/stuff when he/she dies, wins”, and that happens by one person grabbing as much for him/herself as possible...in other words, greed.
If you claim to be a follower of the real, historical Joshua of Nazareth, you will reject capitalism because you know people will never be able to overcome their greed unless they have Joshua as their Leader.
If you are a follower of one of the many ‘ jesus’ of Christianity, you will be offended by that truth and will instead defend capitalism or selfish-ism.
The real, historical Joshua of Nazareth does not teach us to compete with one another, looking to prevail over one another like the philosophy of capitalism encourages. Rather, he teaches us to help one another; to not look to take but rather to give to each other; in short, to love one another and real love shares and does not hoard or act selfishly.
Why not leave the society’s and economic systems of this world and instead join others who work for the only Leader that matters and who live for love and truth, not for money, power and lies?