If you were given the choice as to which economic system you would choose to live under, which would you pick, socialism or capitalism?
Socialism is defined as public ownership of the means of production, while capitalism is when the means of production are owned and operated privately. Most people preach and believe in one system over the other, when the reality is that each system has its own pros and cons. In his book, Paul exemplifies the problems with socialism and does his best to dissuade his readers from its implementation.
The reason why socialism has become a popular term in the West today is in opposition to the problems encountered by late-stage capitalism, i.e. income inequality. In capitalistic enterprises, owners have always made more income than employees. However, while that ratio is comfortable when it is 2:1, 5:1, 10:1, or even 20:1, it is now, in many cases, 200:1 and even as grandiose as 350:1. Indignation seems appropriate, and the people have turned to socialism as an alternative, although perhaps they don’t fully understand what this means.
If you read your history, it is true that pretty much every attempt at socialism by humanity has failed. Mao’s cultural revolution; Stalin’s worker’s utopia; even the Nazi’s were socialists—the political party brought to mainstream by Hitler was called the National Socialist German Worker’s Party. While these are empirically true facts, the type of socialism practiced by these regimes is not the kind of socialism often referred to by today’s political lefties. Yes, Mao and Stalin took the helm of the means of production, but they did it with force, eliminating anyone who didn’t go along with the program (ultimately hundreds of millions). Hitler infused his socialism with antisemitism and a desire for European domination. These examples of socialism are tainted with totalitarianism.
While capitalism does exacerbate inequality, it is also true that it’s tide has risen all boats. The rich are much richer than they ever were, but the poor are also much richer than they ever were. People in poverty in the United States still have homes with running water and a television. I have seen many homeless people in my home state of California who have cell phones. Poor people in Africa, who have not lived in a capitalist economy, still live in dirt shanties without plumbing or shoes. Capitalism gave humanity airplanes and the polio vaccine. It is why we in the West spend so little time cleaning our clothes (thanks, washing machine), whereas that chore used to take an entire day. Capitalism has created wealth for everybody, albeit distributed unequally. The people opposed to capitalism have a legitimate grievance: income inequality has gotten way out of control. Yet, it is also true that “Mao and Stalin and Hitler didn’t come to power promising tyranny. They came to power promising equality.”
Socialism, in the form of Maoism, Stalinism, and Nazism, is perhaps not a fair comparison because those men were power-hungry dictators bent on creating their own version of utopia. When military force is necessary to get the citizenry to adhere to your laws, you’ve got bad laws. So, many people on the political left point to Scandinavia as a place where socialism has worked and prospered, but Paul shows us that in fact, they are not traditional socialist countries. Many of them have open markets and private property and were in fact free market economies for decades. Sweden boomed from 1870 to 1950 “as a capitalist Mecca.” During this era, “Sweden was famous for defending property rights and free markets and enjoyed unprecedented economic growth.” It was only because of this cushion of capital that the Swedes were then able to support the welfare state that came into being after the 1950s. Do they have free college and universal health care? Yes. But also, anyone currently making over $60,000 pays about 60% of their income in taxes, while the truly rich pay closer to 80%, (with Denmark and Norway practicing very similar taxation). If you want to keep more of your hard earned money, you’ll want to live in the United States.
The desire for equality is a tricky thing. As the philosopher and economist Friedrich Hayak once argued: “from the fact that people are very different it follows that, if we treat them equally, the result must be inequality in their actual position, and that the only way to place them in an equal position would be to treat them differently.” So, for example, if you give two different people one hundred dollars, they will spend it differently. If you want them to spend their money the same way, you would have to calculate the correct amount to give each in order to instruct their spending (and then hope for the best, or, as history has repeatedly demonstrated, simply use force and make them spend it on what you want). Personally, I would argue that a utopia of equality is not something that we should ever truly want, for what would happen if we ever actually achieved it? Humans need something to strive for, and achieving a perfect utopia, or end state, would be the greatest death to any sense of purpose anyone could ever have.
Paul’s arguments against socialism are sound. For example, when the means of production are governed by one central government, the opportunity for corruption is tremendous. Fidel Castro, the leader of Cuba for 50 years, publicly pretended to be a man of the people while he was secretly worth hundreds of millions of dollars and claimed ownership of many immense properties, luxury vehicles and private planes. For another example, a common practice in socialism is when the government fixes commodity prices below the market value in order to make it more affordable for everyone. What ends up happening, however, is that producers stop creating and selling those commodities because they cannot make a profit. This in turn creates a black market encouraging violence, economic deceit, and eventually societal destruction—just look at Venezuela.
On the other hand, Capitalism can also cause some of these same problems. It is no secret that the wealthy elite in the United States literally avoid punishment for financial crimes to the tune of billions, while poor people ration the fruit and vegetables they feed to their children. The reality is that both systems create inequality, albeit in different ways. Swapping one for the other will not solve the inequality problem because the money and power in any system always concentrates at the top.
So, the case against socialism stands on firm legs: it is not a good way to organize an economy. But, ultimately, neither is capitalism. Both create inequality and mass societal issues, mostly effecting the poorest citizens. Capitalism may have the slightest edge, because it encourages innovation, but I don’t believe that either system is the ‘final solution.’ Hopefully, there is a synthesis of the two ideas that will emerge sometime soon and help alleviate both the societal problems we all face and also the calls for socialism.