Home > Economics, Science & Technology > Open thread 1 on poverty: Socialism vs Capitalism

Open thread 1 on poverty: Socialism vs Capitalism

July 27, 2006

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

  1. Capitalism vs Socialism

  2. Education
  3. Health care
  4. Social programs
  1. July 27, 2006 at 21:25 | #1

    A capitalist economy runs best on the strength of healthy, educated people.

    Man this is what I have been trying to say for a very long time.  Now I have a great way to say it, “As the great Decrepit Old Fool once said…”

  2. July 28, 2006 at 19:55 | #2

    True capitalism is probably just as unworkable as true socialism..it has never been tried to find out although socialism has been tried and failed numerous times.

    The nature of humans..primarily greed..prevents either from working without some controls. In Ayn Rand’s world of true capitalism the laws of supply and demand ruled. However that other part of human nature we call compassion disrupts the laws of supply and demand because society demands that government take care of those who cannot take care of themselves.

    But, if we as a society take care of ourselves first then there will not be many left who cannot take care of themselves and society will not have much of a burden taking care of them. The problem comes when government starts determining who can and cannot take care of themselves. Once we started welfare programs for able bodied people we opened a can of worms that has gotten out of control and now eats up a big portion of state and federal budgets.

    I concur wth a strong infrastructure that will not only educate our people but help them find jobs. But, what do you do with the ones who refuse to get the education. what do you do with the ones who refuse to take a job because the only jobs they are qualified to do are “beneath them.”

    Our current outlook is to support them anyway. Now we have three and four generations that have refused to take advantage of the public education programs and live on government dole. My state, Florida has one of the lowest public school graduation rates in the country. Why? No one seems to know except that when we ask what social classes the non graduates are from we find that that is not a Politically correct question and are called racist or bigots.

    Is there an answer? Not really. Government dole has become an entitlement and a subculture has been taught that there is a free lunch. And as long as we keep providing the free lunch they will eat it. And the saddest part is that if we quit providing the free lunch the socialists will scream that the rich are taking advantage of the poor…

  3. July 29, 2006 at 12:02 | #3

    socialism has been tried and failed numerous times.

    You’re going to have to give at least one example to make that statement.

    The nature of humans..primarily greed..prevents either from working without some controls.

    This is exactly what I was trying to get you to realize in our orginal argument.  I couldn’t agree more.

    But, what do you do with the ones who refuse to get the education. what do you do with the ones who refuse to take a job because the only jobs they are qualified to do are “beneath them.”

    Easy, if they refuse, then they are choosing to be poor.  I have already agreed with you that those who choose to be poor deserve to be poor.  But when people have the choice of having nothing, and being able to provide for themselve I think they will choose the later.  And I agree with you there does need to be reform on welfare, and I personally think welfar should be changed entirely into a different kind of program, something I will write about more later.

    I actually do not scream that we need to protect those getting a free lunch.  And I think you will never hear a socialist scream for these people.  What we socialists scream for is to give them a chance.  By that I mean give them an education and an opportunity.  If they take it great, if not, well you can’t teach an old dog new tricks.

  4. July 29, 2006 at 13:49 | #4

    One example of socialistic program that has failed miserably is the French hiring/firing policy.  You hire someone, you’re stuck with them.  This is ‘job security’ that millions demanded except it didn’t come out that way.  What actually happened was that employers became very shy of hiring anyone and started outsourcing manufacturing to England, which has a more adaptable economy.

    Beyond the prevention of discrimination – an elusive goal – government has no business telling business who to hire or fire.  Government ownership of industries is very anticompetitive and needs to be on a case-by-case basis.  And helping individuals is risky because it is seriously demotivating as I explored further over in the thread about social programs.

    Good intentions run amuck…

  5. The Dude
    August 6, 2006 at 19:58 | #5

    Hey GUYK, you forgot the biggest welfare sucker of them all, corporate America. Do you really think that capitalism could survive without government money? Our tax dollars create markets. Who do you think paid for the all the sports arenas in your state? It certainly wasn’t the team owners. In my state we now have a JOBZ program that basically pays a corporation to eliminate the competition. You pro market, anti regulation assholes steal more money from the working man than all the welfare cheats ever have or ever will. Who’s really abusing the system? A welfare mother making $10,000 a year, or a company making millions?

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