Friday, April 10, 2009

Capitalism is Socialism

Capitalism, Socialism, Communism, Fascism …. isms everywhere. We frequently use these terms to denigrate each other, but do we really understand what they are? Were the Soviets communists? Are we capitalists? Before we start yelling at each other, we need some definitions we can work with.

Capitalism is not the opposite of socialism, but rather a form of socialism.

It’s easiest to explain this through a comparison with political systems. First an important distinction: Political and economic systems should not be defined by their goals, but by their methods. We’ve seen many leaders who came to power with altruist goals, but ended as brutal dictators. A dictator is a dictator no matter his goals.

Political and economic systems must be defined by decision making; who makes the decisions. Using the commonly held concept of left and right, we will look the ends of the scales. The ends of the scales are just theoretical systems, but we need to understand the limits.



The left end of the political scale is Democracy: All political decisions made by the people as a whole through an equal ballot. The right end of the scale is the king, a Monarchy: One man makes all of the political decisions.

Under Democracy, everyone in the United States would vote on whether to repair the pot hole at Sixth and Green streets in Champaign, Illinois. At the other end, the king would decide. Neither of these ideas could really work, so we have modified systems. In the United States, we’re a Republic: The people, as a whole, elect a small number of leaders who make the political decisions. The Soviet Union was a Plutocracy: A small self-perpetuating group of leaders who made all the decisions.



Economic systems are analogous to political systems. They’re based on who the decision makers are.

The left end of the economic scale is Socialism, the economic form of Democracy: All economic decisions are made by the people as a whole through an equal ballot. The right end of the economic scale is the same the right end of the political scale, the king: One man makes all of the economic decisions.

Again, the ends can’t really work. We can’t rely on the population to decide on what automobile to produce, how to price it, how to market it, etc. So, we have modified systems. The Soviets had a Plutocratic Central Control Economy: A small number of self perpetuating leaders making all the economic decisions. Of course, when this small group is wrong, the results can be catastrophic. The Soviet Union collapsed, in large part, due to horrible decisions made by a few people that destroyed the entire economy.

In the United States, we nominally use a self perpetuating economic system we call Capitalism: Economic decisions are made by the people as a whole through an unequal ballot. Unlike pure socialism, each person has as many votes in capitalism as he has dollars, with each dollar representing one vote. If a product is popular and at the right price, people will pay (vote) more for it, and the product perpetuates. A lack of purchases causes a product to disappear.

Under capitalism as in socialism the people make decisions as a whole. As properly defined by the methods of decision making, capitalism is a form of socialism.



Communism (Marxism) is a marriage of democracy and socialism: All the people, through an equal ballot, make all the political and economic decisions. Of course, such a system can only work for a small cooperative group such as a monestary.

Fascism (Totalitarism) is just like the king. Fascists act like kings, but come to power through revolution rather than succession.



There is a danger lurking in our capitalist system. Central control economies inevitably fail. Too few make decisions for too many, so when the decision makers are wrong, their decisions have too great an affect on the economy.

When insufficiently regulated, power in a capitalist system coagulates. A few develop overreaching decision-making power. The system converts from capitalist to a Private-Sector Central Control Economy. An unelected, self perpetuating, group make the critical decisions. Private-sector central control can be just as dangerous as public-sector central control.

The auto industry is a great example of central control. The basic theories of capitalism mandate hundreds of auto manufacturers, rather than the few that we have. Functional markets must have so many players that decisions made by any one cannot affect the market as a whole. Poor decisions made by the few players in this market have the auto industry on the brink.



If the people want greater regulation, such regulation fits with capitalism. On the left side of the scale the people determine what form their economic system should take.

6 comments:

mybestfreevideos said...

Gilbert Keith Chesterton (1874–1936), poet and essayist, said:

"both capitalism and communism rest on the same idea: a centralization of wealth which destroys private property."

"For communism is the child and heir of capitalism, and the son would still greatly resemble his father even if he had really killed him."

"Capitalism and Communism are so very nearly the same thing in ethical essence, that it would not be strange if they did take leaders from the same ethnological elements"

Anonymous said...

Your definition of "fascism" does not jive with the traditional definition of a convergence of (big) business and the state.

Also, adopting either a Hayekian or Cheungian perspective, Communisum really is a system with no personal property rights, wherein everything is owned by the state. In other words, "Communism = One Gigantic Firm," wherein the leaders of the firm (what you would call either a plutocracy or a totalitarian (i.e., revolution-based) regime) make all the decision for all people or corporations in society. In other words, under Communism no individual has the right to control even his/her own productive inputs or outputs. The government tells you what to do.

From a Hayekian perspective, one might want to consider the spectrum from an "information flow" perspective.

Crocodilian said...

The notions that "capitalism" is a system and that it has some natural constituency on the American right are each a little odd.

One finds eighteenth and early nineteenth century references to "capitalists" -- a term which was used roughly in the way we use "industrialist" today-- "capitalism" ends up getting defined by people who don't care for it. . . the most notable being Karl Marx.

The economic "right" in the American debate are as loosely attached to the free market as are socialists-- they just prefer government intervention for one set of purposes, rather than another.

One other observation about the right: they are much more attached to _property_ rights than they are to competitive markets.

Drew said...

I have never seen a political spectrum explained like this, but I find it interesting. I find common ground with you on many points in your definitions of the ideologies, but I see the spectrum differently. I see the political spectrum as a horizontal line as well, but it breaks off in certain spots, like a tree branch and works from absolutely no government up to massive totalitarian government. It starts on the right, with an individual, and this is pure “anarchy” with no government. The spectrum works its way leftwards, the larger and larger the government gets. I see this as the progressive movement, for example, Europe and the United States were progressive in the 1900s with politicians like FDR or Hoover in office in the US, and even today in politicians like Barack Obama, Nancy Pelosi or Hillary Clinton (major US officials). The ‘progressive movement’ encompasses the mixture of democracy and socialism that you were talking about, and the US has been led by progressive leaders many times in the past. Even further to the left, the spectrum breaks into three ideologies, socialism, communism, and theocracy. All of these governments are obviously very large, and in most cases are very oppressive of the people and engage in the most human rights violations even when stating that they are for “the people”. For example, North Korea with their very strict restrictions on political and economic freedoms, China most recently with the demand for censorship of the internet for people living within the nation, Russia with countless cases of political prosecutions and “mysterious” murders of media members talking badly about the government, and we could write a novel on Socialist Germany in the 1940s.

GreyTheory said...

Be careful Drew ... Don't allow the enemy to define your world for you.

No matter what they called themselves, Lenin was never a Marxist; Stalin wasn't a Communist; The Nazis weren't Socialist; etc.

Al Qaeda is not Islamic, but its own lunatic offshoot, similar to David Koresh's version of Christianity.

Anonymous said...

Where exactly does anarcy come in? Isn't anarcy the right and a King is a form of government?