Open thread 1 on poverty: Socialism vs Capitalism
Much of the slugfest centered on the contest between socialism and capitalism, with GUYK and WEBS05 arguing about the definition and relative merits of each. Although I am capitalist I think the distilled version of either ignores some important realities…
It is possible to screw up ANY kind of economy: capitalist, socialist, or communist. But I think it would be fair to say that the odds of successful communism are rather poor. You can get people to work by threatening them, but if you want extraordinary effort or innovation, they need to feel a stake in the outcome. Communism offers no such stake.
I wish it was January instead of July, because a great deal of heat was generated by the conflation of socialism and communism. While both are easy to screw up, and both are heavy on the social programs, there is one extremely important difference: under communism you cannot get rich. Even if by some miracle you found a way to motivate people to work hard, produce a superior product, and get it to market, under communism it’s all the government’s from the very beginning. Your top pay is set by a government pay-scale. You are level 7, so your pay is this much. Since there is no ‘private’ industry, high-performers are stopped at the limit of bureaucratic imagination.
Under socialism you will pay higher taxes as your income goes up, but there’s a maximum tax rate. This, too, is hard to set correctly; the Beatles’ Tax Man wasn’t exaggerating when it said “That’s one for you, nineteen for me”. But even under that system, the Beatles still got fabulously wealthy. Nevertheless, Thatcher’s reforms brought much-needed cleansing to a runaway pattern of government subsidy.
Socialism is about counting people as part of the country’s infrastructure. A good rule of thumb is to subsidize people, not industries or corporations. (Note in the next section I don’t think that subsidy should take the form of cash payments. Rather, I prefer a strong supporting infrastructure for people to grow in, along with the opportunity to fail without utter disaster.) Socialism has a lot to learn from ruthless capitalism as to the most intelligent way to go about doing this. But capitalism has a lot to learn from socialism about keeping the engine running. A capitalist economy runs best on the strength of healthy, educated people.
Notes: see also