Comparative Analysis: Socialism And Capitalism
“Socialism never seems to have any theory of wealth creation, only fanciful schemes for its reallocation,” so why do some economists favor socialism over capitalism if there has not been any sustainable wealth creation over the years and instead economic destruction. Whether or not socialism or capitalism is a better choice for society has been a longstanding debate. Many prefer socialism because governments can regulate ownership and allocate resources which helps promote equality and minimize economic failure. Whereas, those in favor of capitalism favor the free market aspect, allowance of choice, and incentives for innovation and economic growth. After reading these articles, three consistent themes that are found between them: socialism creates destruction while capitalism creates economic prosperity, free market, choice, and the pursuance of one’s self-interest is important, and the use of force in socialism.
As stated in Richard Geddes’s article, socialism has a bad track record in the fact that it contributes to “economic destruction, failure, and misery”. It advocates the use of force to achieve policy goals and does not give individuals the freedom of choice. This is where economies fail. “Socialism preaches envy and theft and delivers strife and conflict” which leads to a corruptive government. Because governments regulate and watch most of what goes on in this society, they fail to account for the allocation of income, price controls, and public opinions.
Through capitalism, it is the exact opposite. Individuals are free to make their own choices, it accounts for differences in opinions, and the incentives given by the government promote efficiency and entrepreneurship in society. Furthermore, the Index of Economic Freedom states that the freer an economy is the better their economic growth is. This is one of the many reasons why capitalism helps aid in sustainable economic growth. There is a strong positive correlation between economic freedom and prosperity and with a freer economy, individuals enjoy greater economic growth, higher GDP, amongst others. When economies are less free like Venezuela, a common example, they fall into the trap of socialism and nationalize sectors — essentially destroying the economy and country.
Furthermore, Adam Smith emphasizes the importance of a free market, self-interest, and the invisible hand. Those are aspects in which socialism lacks making it another common theme between the two sides. Adam Smith proposed the idea of the invisible hand encapsulating the fact that free markets and capitalism are the guiding force of efficiency. Because socialism “concentrates wealth and power” in the hands of the corrupt, the invisible hand encourages individuals to act in their self-interest to reap the personal benefit and better economic growth. A market economy allows each individual to pursue their own goals by employing the cooperation of others and is not bound together by a single goal, unlike a socialist economy. Further, the invisible hand guides supply and demand which is an aspect that is eliminated in socialism.
By having a free market or Laissez-Faire economy it inadvertently creates the best outcome for all rather than having complete regulation. One of the arguments raised in “Lets Never forget the Track Record Of Socialism” articulates the fact that the more meticulously socialism principles are implemented, the greater the human suffering. This argument stems from the fact that the stricter the government is on state ownership, the less freedom an individual has to do what they want, consequently leaving them to suffer the rules of the government. The Essential Hayek figuratively explains the argument. It explains the fact that human cooperation is extremely productive because free markets encourage individuals to specialize in learning different skills which they can do voluntarily. Moreover, it highlights the aspect that the more individuals act in their self-interest the better off they are which is more possible in a market economy.
Additionally, another common theme is the use of force. The socialism articles tell us not to choose socialism because of the use of force. The capitalism articles tell us why one should choose capitalism because it does not use force. Force gives you no opportunity to say “no and it can make you feel as if you are helpless and you are living in a communist world. Milton Friedman, an American economist, says “whenever we depart from voluntary cooperation and try to do good by using force, the bad moral value of force triumphs over good intentions” making the key notion of a socialist society fundamentally force. On the other hand, capitalism minimizes the use of force and although it does not “offer a vision of perfection and harmony,” it “combines freedom, opportunity, growth, and progress” with the hope of a prosperous economy. Capitalism ideas void the use of force by emphasizing the fact that force is not needed to achieve better mankind. Likewise, capitalism is more ideal because it believes in the people, promotes equality, and creates value all of what is eliminated when complete force is implemented.
In summary, although it seems as though socialism is the least favorable form of society that could exist, there is still substantial evidence that this society could work. Granted, it would not be ideal for it to work on its own but as a mixture with capitalism. The fact of the matter is, having a fully socialist society or a fully capitalist society is not the best for the economy because some regulation needs to be enforced and privatization of certain sectors must be evident. Having a society that includes strict regulations by the government, price controls, and fewer incentives for the people among other aspects cannot lead to sustainable growth and value. Additionally, a society with limited government spending, inequalities, and high risks of monopolies also cannot lead to sustainable growth. For this reason, with capitalism on one extreme and socialism on the other, we draw the line in the middle showing a balance.
