Capitalism v. Socialism - Which Do You Choose?
If you’ve noticed, the country is divided. Some Americans want to move to a more socialistic, government-controlled country under Obama’s leadership, and others want to remain a capitalist state that relies less on government control and more on individual rights under McCain’s leadership. There are many differences between the two, and volumes of books have been written about both. Being a PF blog, I’m going to focus on the difference it makes to your financial situation.
What does it all mean?
Capitalism, according to Wikipedia, is the economic system in which the means of production are distributed to openly competing profit-seeking private persons and where investments, distribution, income, production and pricing of goods and services are predominantly determined through the operation of a market economy.
Meriam-Webster defines it as an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.
The opposite of capitalism is statism, or as it’s better know, socialism.
Wikipedia offers three descriptions of statism: 1) Specific instances of state intervention in personal, social or economic matters; 2) A form of government or economic system that involves significant state intervention in personal, social or economic matters; and 3) The belief that a political group should maintain a monopoly on the use of force in a given geographical area.
Meriam-Webster defines statism as concentration of economic controls and planning in the hands of a highly centralized government often extending to government ownership of industry.
What’s the difference?
The fundamental differences are risk, motivation, and control.
In capitalism, motivation to excel professionally and fiscally is strictly up to the individual. You can be as broke or as wealthy as you want to be, and that’s because control is placed in the hands of the individual. Each individual controls his or her own destiny and is only held back or propelled by his or her own motivation. To succeed, one is expected to overcome inabilities, prejudices, and personal situations. Because you control your own destiny, risk is a major issue. You risk losing everything you ever worked for through poor decisions or a panic-driven reaction (think current market).
In socialism, control is placed in the hands of the government. Because individuals lack control, motivation is a non-issue. Private property does not exist. Equality is artificially forced into the masses, so no matter how hard you work or how lazy you are, you get what the government considers your “fair share”. Because you get the same lot in life regardless of how motivated or unmotivated you are, risk is virtually nil. But at the loss of risk, individual rights and the ability to excel go with it. So we’re all put on what the government defines a “level playing field”, but it hardly matters because you’re ability to excel is severely limited.
I want to be rich, how come I’m not?
That’s the trade-off. In our capitalistic society, you can have the ability to make choices that may be bad for you. In other words, you are given the right to make mistakes and learn from them.
Is capitalism perfect? No, of course not, and an honest capitalist will tell you this. What about socialism? Socialists believe that following a socialistic paradigm will ultimately lead to a Utopian society. It’s a major flaw to think your social stance is perfect. It didn’t work for Nazi Germany, Fascist Italy, and Soviet Russia. Socialism is far from perfect, but no socialist will tell you that.
Is it unfair that, for example, all three of Bill Gates’ kids do not have to worry about their future, that their college, house, cars, and retirement are all paid for before they’re even out of high school? If you answered no, then you must know that Gates was one part of a group of people who built a company from the ground-up and earned his billions and it’s his right to set up his kids’ futures. If you answered yes, then I can say two things about you with great certainty: 1) You think rich people are either evil or greedy, and 2) You think that if you had just a little more money, just a break, then you could solve all sorts of your problems.
But aren’t you anti-greed? Anti-consumerism?
I believe greed is a festering sore on the face of Western society. I think greed is the doorman to many other sins. But I think that socialism as an answer to greed is ineffective. To overcome greed, it must happen through free will. It cannot be forced. All socialism does is enhance greed of the government.
It’s your call, for now
That’s the beauty of our current capitalistic republic. If you think I’m way off base and a socialist USA is the way to go, you can vote the first socialist into office. But realize that once you give up freedoms you cannot get them back without a fight. Think American Revolution. Think Civil War. So while you vote for it this time, you might not be given the opportunity next time.
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Shan is the author and founder of The Apostle of the Turtle.
Interesting article. You put forth a very sobering take on the decision as well - one with which I agree. I feel that once the government starts to exert too much personal control on its citizens, it’s very difficult for its citizens to take back that control for themselves. Maybe that’s not a correct assessment on my part, but it does seem like this path towards socialism is a one-way street (and things get ugly when you try to drive the wrong way on a one-way street)
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