WHY CAPITALISM IS BETTER THAN SOCIALISM (thread)

Many socialists characterize anti-socialists as reactionaries who are fooled by billionaire propaganda into rejecting policies that would help them or that we don't know what socialism really means.

Let's start by defining terms.

Both capitalism and socialism are ECONOMIC SYSTEMS. We do not have enough things to satisfy all of our wants. Socialism and capitalism are both institutional ways to allocate those scarce resources.

There are only 3 economic systems:

1. Barbarism-
This system is the state of
nature. If there is a resource
that is desired by 2+ people,
the way barbarians choose
who controls the resource is
by fighting for that right.
(also true of animals)

2. Capitalism-
This system is based on the
principle of property rights.
Scarce resources are assigned
an owner. This owner has the
right to decide how they use
their property with no outside
constraints- other than respect
for property of others.

3. Socialism-
Socialism says that 𝘀𝗼𝗰𝗶𝗲𝘁𝘆
should be responsible for
allocating scarce resources.
𝗗𝗲𝗺𝗼𝗰𝗿𝗮𝘁𝗶𝗰 socialism says
that the method society
should use to allocate
scarce resources is voting.

All other economic systems (feudalism, slavery, mercantilism, Keynesianism, fascism etc) are just unique combinations of capitalism, socialism and barbarism.

Critics of capitalism have these major concerns:

1. Capitalism is chaotic. There is no central authority to plan. Lack of economy-wide coordination create inefficiency.

2. Because capitalism is not centrally planned, it allocates resources unevenly, which creates inequality.

3. Capitalism is undemocratic. Workers do not have a say about what actions people take with their property (this is most commonly discussed in relation to the employer/employee relationship)

4. Employer/employee relationship is coercive because workers rely on jobs to survive.

5. Capitalists do not account for negative externalities like damage to the environment.

Each of these concerns is easily refuted.

1) Capitalism is inefficient.

Ludwig von Mises showed clearly why capitalism is more efficient than socialism in the essay below. https://mises.org/library/economic-calculation-socialist-commonwealth

Mises' argument was simple: prices contain essential information about consumer preferences (when the prices are based on voluntary trade). Without prices/profit/loss calculations, socialist planners are unable to know where resources should be allocated.

Mises was proven correct. Central planners have been notoriously inefficient. Both in socialist countries and in socialized industries within capitalist countries (like the NHS, Post Office, Military, Fannie Mae and the Federal Reserve)

2) Capitalism creates inequality

Capitalism does create conditions for inequality. This is a good thing. If there is a job that is especially unpleasant, risky or requires difficult training, it is efficient that those jobs would receive higher compensation to entice workers.

It is also not obvious that socialism will produce more equality than capitalism. The fact that "society" is allocating resources does not automatically mean society will allocate them evenly. In fact, the opposite is more likely.

The most likely outcome for planned economies is for those with the most influence over the planning process (and those they like) to get access to the most resources.

Look at the lifestyle of Hugo Chavez (and his family) vs. the average Venezuelan for evidence of this.

3. Capitalism is undemocratic.

This presupposes that democracy is an end in itself. To the extent that democracy is good, it is because it protects civil liberties, prevents violence and promotes prosperity. The most that can be said of democracy is that it is a means to an end.

Many socialist regimes say democracy is valued. But they rarely are democratic. This is because voting on every economic decision in an economy is impractical. Power quickly centralizes. If citizens don't like the decisions of central planners, they can't simply change employers.

Economic planners cannot change course every time voters change their minds, so democracy and socialism are incompatible long-term.

4. Capitalism is coercive.

Socialists say that employers are more powerful than employees because employees rely on payment to survive. The working class can only sell their labor to the capitalist class, so businesses are MONOPSONY buyers of labor and so are too powerful.

This monopsony argument is ridiculous on it's face. Saying "I can only sell my labor to businesses, therefore businesses are a monopsony buyer" is just as silly as saying "I can only buy my groceries from a store, therefore stores are a monopoly."

It is a misapplication of class analysis. Businesses do all belong in the same class (according to Marxist class analysis) but that does not mean they are all the same thing or that they do not compete for labor.

Under socialism, the central planners, are IN FACT monopsony buyers of labor. Workers do not have the option to choose another employer or start their own business if they are unhappy with central planner's decisions.

5. Capitalism creates externalities.

Again, there is no obvious reason that central planners would value the environment higher than capitalists. Some of the worst ecological disasters took place under the direction of central planners.

The biggest flaw with socialism: the ideal of "society" choosing how resources are allocated seems appealing. The only problem is that "society" cannot make a choice.

Only people can make choices. Socialism is in itself, an impossible ideal.

Because socialism is impossible, once it eliminates property (an essential ingredient to capitalism), the socialist state quickly devolves into barbarism. It is no coincidence that Cambodia, China, N. Korea and the USSR were all notoriously brutal.