Defining Socialism and Capitalism

Wednesday evening Glenn Beck did a special called “Capitalism: A Warning from the Dead.” I don’t know how long it will be available without a subscription, but it’s worth seeing. Plenty of history and comparisons to our day.

Glenn Beck, during "Capitalism: A Warning from the Dead"
screenshot from here

Somewhere in there he reports on a recent poll:

In 2010, 68% of 18-29-year-olds had a "favorable" view of capitalism. By 2016, that had dropped to 57%. Two years later, the exact same poll indicated that only 45% viewed capitalism as "favorable." This is a death spiral! Younger people are completely abandoning capitalism because they don't really know what it is!

At the same time—the exact same decade in question—if you ask millennials about the free market, "being your own boss," and entrepreneurship, it has a 90%+ favorability rating.

So capitalism is at 45%, but free market entrepreneurship is at 90%? This shows that no one knows what they're talking about. This proves that no one knows what socialism is, what its goals represent, where it aims to take us, and the difference between socialism and capitalism.

That’s puzzling. They disapprove of the very thing they overwhelmingly approve of.

We need to define terms and do some teaching, which will involve some questions that use the concepts without the words, to see if that will get us better clarity on what people really want. It might turn out we have more agreement when we do that.

Socialism

What my old dictionary says:

1.    Any of various theories or systems of the ownership and operation of the means of production and distribution by society or the community rather than by private individuals, with all members in society or the community sharing in the work and the products.

2.    a) political movement for establishing such a system; b) the doctrines, methods, etc. of the Socialist parties.

3.       The stage of society, in Marxist doctrine, coming between the capitalist stage and the communist stage, in which private ownership of the means of production and distribution has been eliminated.

What young people think it means:

To be like Sweden or Denmark or places like that, where they get free healthcare, free schooling, guaranteed jobs, and stuff like that.

What I think it means:

A government interference with the free market. This can be a single socialist policy, or a wide array of such policies in an attempt to replace the free market with centralized economic control.

This means that I differ somewhat from many commentators who rightly point out that Sweden and other “socialist” economies are not actually socialist economies. They have certain segments of society, such as healthcare, that the government has taken over—and for which they charge very high taxes. But, beyond these specific segments, they still respect private property ownership. And they tend to move away from government control, toward free market, when the capital they were using for their projects becomes depleted. Some of these countries rate equally on the Heritage Foundation Freedom Index as the United States.

Just to be clear, socialism doesn’t have anything to do with being sociable. It claims to be “fair,” but it ignores individual input, such as work, preparation, cleverness, risk of personal assets, and instead looks mainly at equal outcomes regardless of inputs. Most people wouldn’t find that fair.

It comes from Marxist ideology. As I’ve said before, is an attempt to replace capitalism, along with the governmental systems that support capitalism. Instead of individuals making individual market choices, central planners—elite power wielders—make decisions, such as the price of goods, the choices of jobs, the products produced.

And I’ll add that the Marxist experiment always ends badly. If a country doesn’t do an about face and stop heading in the direction of more government control, and instead returns control to the people, the result is mass poverty, loss of freedom, and death. Take a look at the news from Venezuela this week.

Capitalism

What the dictionary says:

1.    The economic system in which all or most of the means of production and distribution, as land, factories, railroad, etc. are privately owned and operated for profit, originally under fully competitive conditions: It has been generally characterized by a tendency toward concentration of wealth, and, in its later phase, by the growth of great corporations, increased governmental control, etc.

2.    The principles, methods, interests, power, influence, etc. of capitalists, especially of those with large holdings.

Let’s add how the dictionary defines capitalist:

1.    A person who has capital; owner of wealth used in business.

2.    An upholder of capitalism.

3.       Loosely, a wealthy person.

What young people think it means:

Greedy corporations, in bed with corrupt politicians, taking advantage of the working class. So, it’s evil.

What I think it means:

Capital is the accumulation of work above and beyond what is essential, followed by careful use of it toward a good idea intended to result in even more surplus. Capitalism is a system for using capital (accumulated surplus wealth) to invest it in more wealth creation.

Capital comes from surplus work. So, capital is a representation of surplus work that is invested to find ways to produce more wealth. And wealth is defined simply as the accumulated results of labor.

Capitalism, in this sense, is never evil. It is, simply, the free market allowed to work its miracles at lifting people out of poverty.

However, what young people think it is, really is what we could call “crony capitalism,” or more accurately just cronyism. And that is a bad thing.

Cronyism has been around a long time—long enough to show up as a definition for capitalism in my 1980 dictionary. Long enough to be represented by the character Mouch in Ayn Rand’s Atlas Shrugged. 

Back in 1980 economist Milton Friedman spoke at a graduation ceremony at Brigham Young University (not mine, but I was there). He talked about the dangerous influence of big businessmen. “They aren’t promoting free enterprise when they ask for handouts and regulations and controls to avoid competition,” he said. And he added,

The two greatest enemies of free society are intellectuals and businessmen—for opposite reasons. Intellectuals want freedom for themselves but no one else. Businessmen want free enterprise for everyone else, but special consideration for themselves.

So, the millennials and I, we agree that cronyism is not a good thing. The problem is, referring to this bad sort of business/government collusion as capitalism leads people to believe actual capitalism—a synonym for free market economy—is bad. Still, that doesn’t exactly explain why those who misunderstand these words would then think a great solution is a whole lot more interference by government.

Moving forward, maybe we can just use more accurate words, like free-market and entrepreneurship. Or avoid the words they don’t understand and just get on with the concepts using concrete examples.

With that in mind, let’s try these questions:

·         When you earn money at work, who should decide how you spend it? You, or a distant central controller?

·         Who should decide how much you earn? You along with your employer, or a distant central controller?

·         Who should decide how you pay for your healthcare—whether out-of-pocket, with a health savings account, or with help of insurance that you’ve chosen for your needs—or a distant central controller?

·         Who should decide whether you want to try a particular medical method or therapy? You, or a distant central controller?

·         Who should decide what kind of car is best for you and your family? You, or a distant central controller?

·         Who should decide whether you can use your skills and efforts to start a business? You, or a distant central controller?

And then, let’s add these additional questions:

·         Who should pay for your housing? You, or your heavily taxed neighbor, who is coerced by government to pay it?

·         Who should pay for your healthcare? You, or your heavily taxed neighbor, who is coerced by government to pay it?

·         Who should pay for your childcare? You, possibly along with voluntary help from an employer, or your heavily taxed neighbor, who is coerced by government to pay it?

·         Who should pay for your advanced education? You, or your heavily taxed neighbor, who is coerced by government to pay it?

·         Who should pay charitable donations to those unable to sustain themselves? You, along with your church or other organizations in touch with those in need, or your heavily taxed neighbor, who is coerced by government to pay it?

We could go on, but you get the idea. Socialism means decisions normally made by free people are instead made by some distant controller. And whenever you get something “free” or “low cost” because of socialism, that means government is heavily taxing your neighbors—not just the rich—to make those payments.

Government doesn’t “give” you “free” anything. Government produces no wealth from which to draw those funds. Government is simply power. And any government powerful enough to coerce you to pay for your neighbor’s wants is powerful enough to take away your choices about what you produce, what you earn from work, and how you spend those earnings.

And if they’re powerful enough to control your life, maybe they’re powerful enough to take your life. At least that’s how it has turned out every time it’s been tried.