Socialism v. Capitalism

I am a Capitalist. Now that’s out of the way.

Socialism is defined as a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole. (Dictionary.com)

Capitalism is defined as an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth. (Dictionary.com)

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15 responses to “Socialism v. Capitalism

  1. I think it is natural that we are in it for ourselves. But I think that compassion comes natural for most people, and there is nothing wrong with helping someone, regardless if they caused their problems themselves. The only thing I see that is wrong is forcing people to help someone. But of course, there is a difference between people. Some work hard, some do not. Some are born under better circumstances than others. Some make stupid choices. But as long as everyone remembers that the responsibility for their choice is theirs, I think that most of us wouldn’t mind giving a helping hand if that was needed. The only ones who I will never help are those who claim that my money did not come from ability – but instead from luck or me being “unfair” or “ruthless”.

    And I do not disagree with you about the Depression – government interference is not the only problem, far from it. There were probably many causes to the Depression, but I think most people can agree that “The New Deal” and all that surrounded it did not make things better.

    I think credit is what people make of it. The important thing is that people take responsibility for their actions, which includes both people who end up going bankrupt, and banks that don’t get their money back. Their choices to take/give credit makes it their responsibility to take the consequences. On an additional note – banks should clearly state what they actually do with the money they get through deposits. Although this is of course volountary from their side, could banks go bankrupt I think it would be a hallmark of good banking to make it public how your money is managed.

    Whether or not the inflation that will occur sooner or later (right now the inflation is pushed back by lower demands = lower prices) was a plan all along is something the future will tell. Right now I am content with believing that it is only due to ignorance. The thing that scares me most is that there are two reasons for inflation – increased amount of money, or decreased amount of value. If the world goes into a value decrease (some countries are already showing negative growth for 2009), it is even more important to keep inflation at bay, because if you release “cheap money” (lowering interest rates for example…) when we have a value-decrease situation, this will create even more bad investments, and then it might become a very bumpy ride towards …. well, something less pleasant than society today. But now I am talking a bit ahead of things – capitalism and markets are stronger than people think, just look at the 70’s.

    As for price controls – I think the governments of the world would do it in a second if they thought that it would benefit their goals. Right now – it isn’t, so they don’t. But that, as well as “bailouts”, “artificial interest rates” and “government takeovers” are just parts of the same “everything goes”-policies that we seem to have to get used to. There are no ideals left – economists are pragmatists who try to squeeze everything into the model this world inherited from John Maynard Keynes, and when it doesn’t fit, they try to alter reality to make it fit. No one talks about the moral implications behind all the things the governments are doing to the economy right now. Except possibly a loudmouth like myself.

    I will agree that people think short-term, especially if you are elected to a position of power for a certain number of years. And economy seems to lag somewhat behind (which isn’t that weird if you think about it – a change in policies will often have “ripple-effects” in the economy, and the full effect isn’t seen until a few years have passed), so its always easy to try and take credit for someone elses success. I think this is also one of the inherent problems with teaching people about economy – because its so easy to refute something with short-range measurements of what “seem” to happen. One should try to use cause-and-effect, not time-based empiricism when watching economies evolve.

    A tip for an important piece of legislation : The 1995 amendment to the Community Reinvestment Act, that tought banks that CRA-rating is important, security on mortgages is not. Happy legislation-hunting, don’t drown in it though 🙂

  2. My experience is that most are in it for themselves and lack compassion for those less fortunate because they think the less fortunate caused their own problems.

    There were many causes of the Great Depression, not just government interference in the market.

    It is my opinion that credit is a bad thing, that it allows people to buy that for which they have not worked or saved. Then, the bills come due and they are not any more in the position to buy that which they already bought than they were when they bought it.

    I don’t like the bailouts because there is no penalty for making poor choices (either the consumer or financial institution). If there is a safety net (bailouts), people will do risky things because Uncle Sam will catch them.

    I do not agree that the “economic stimulus package” is one step from government forcing price control; unless you are contending that the government added the money to the economy in order for inflation to occur so they could step in and control the prices. I don’t think there was that much foresight involved, but that political leaders thought “it worked for Reagan, why won’t it work for us?” People forget about the difference between short term and long term solutions. That’s why they credit Reagan’s economic plan to Clinton.

    Giving tax breaks could stimulate the economy, like the Reagan tax cuts that made Clinton’s economy strong. Clinton subsequently hiked the taxes and now we are starting to reap the consequences of that.

    I thought it would be interesting to look up the federal funds rates (and the mortgage rates) during the Reagan era compared to now. It seems that the rates during most of Reagan’s presidency were in the teens, and that the rates really started dropping into single digits after Reagan left office.

    I’m doing some research of the interest rates and federal funds rates and research into the legislative changes that relaxed the credit rules. I am also looking at some of the policy that the goverment enacted before and during the depression. If we don’t know exactly what caused the depression, now would be the time to figure it out before it’s too late.

    I would love to see the government step out of the market and let it self correct, I’m just not sure that it will if everyone is in it for themselves.

  3. No worries, respond when you have time.

    //hpx

  4. Greed is the relentless pursuit of enrichment to the detriment of others.

    I don’t have time right now to respond or discuss but didn’t want you to think that I’d dropped out of the discussion.

  5. Don’t let the ugly political powers of the world make you a cynic when it comes to mankind. If we do not believe in ourselves, then all is lost. And the word “greedy” is a misused concept. In my world, greedy means the wish to constantly make your life better, more pleasent and more enjoyable. If this is greed, then I am guilty.

    What many people forget is that most of us do not wish to live in a world with poverty, war and misery. And this is what induces us to give to charity, our wish that this world was better. Even if I am content with my own life, I will never be content with the state of the world as it is now.

    And as for the US, things look pretty bleak if there would be a great depression. There are voices out there that will speak up of what was done wrong last time, yet right now the government does not seem to be listening. On the current government shit list is :
    – Again lowering the interest rate
    – Nationalizing banks (which gives them even more control of the economy)
    – Buying out auto companies that are no longer competitive, and will keep running at a loss

    You will know that the shit has truly hit the fan when the government starts handing out freshly printed money so people can spend it to “stimulate the economy”. Thats one step from forcing price control and creating government jobs that consist of digging holes and then filling them up again.

    The problem as it looks today is that there is a misalignment between the amount of money and credit in circulation versus the amount of value that is produced. The only thing that can be done in such a situation is to let all those who do not produce enough go bankrupt, while cutting government spending and raising interest rates to reduce the amount of credit floating around.

  6. I’m afraid that I’m more of a cynic than you are and do not believe most people will give willingly to charities.

    My own personal opinion is that most (not all) people are greedy and will not give voluntarily.

    If the country enters another Great Depression, what do you think would happen to the goverment, would it become more socialistic? Are there ways to correct a depression without government interference?

  7. What do you propose to do about insuring funds deposited in banks?

    [Nothing, because government insurances of your funds is a fraud. Putting your money in the bank means you trust the banks capacity to be able to give them back, should you require them. I see no problem in taking a “capital” insurance in another institution, but this merely adds another layer of safety, should both institutions fail you will not get your money back anyway. What I am trying to say is – there is always a risk. In a free banking system, any good bank would adequately present its risktaking with your money – and finding an “almost 100% safe”-bank wouldn’t be a problem, should people want it (this kind of bank would probably choose to invest your money in gold and other commodities instead of loans, stocks, bonds, etc.) In the current system, the government is taking this risk, and leveraging it with your tax money. To simplify – the government is insuring your money with your tax money]

    Also, who is funding the public broadcasts if not the goverment. If stations are required to run the broadcasts (without compensation for the airtime), who is requiring it? Goverment?

    [The public broadcasting is not necessary – it was simply a detail I added to explain how governments could make the transition “smoother”, if they so wished]

    I’ve heard the arguments that the goverment has no constitutional right to tax our income.

    [Probably depends on where you live. The main point here is that people are so used to taxation (and not the minimal kind that is needed for a minimal state) that no one even seem to question it any more, and there is definitely a lack of discussion around the moral implications of taxation]

    Regarding taxes, what provisions would you make for those living in poverty? If they are not earning (due to layoff, injury, illness or any legitimate reason) how can they pay taxes?

    [This is one of the things I despise most about socialism. Socialism tries to make people believe that the government is the only one who can, or will, care about those in need. The moral implications of this is that people are ugly, vile creatures that would never volountarily give away their money to those in need, so the state has to force them.

    The truth tells another story – look for instance at Bill Gates. I am not saying that everyone will give away their fortune to help those in need, but I am saying that anyone who believes in mankind should believe that people will care about eachother – even if no one forces them. A small fraction will probably not give anything ever – but this is a freedom I see no problem with, because we all get to do our prioritizations.

    But why don’t we all start with ourselves? Would you be willing to give away the money that the money currently forces away from you – were it volountary? And if so – why would you think that everyone will be less generous than yourself? There is no problem with privately funding charity for those in need. Also – almost all of these situations can easily be avoided through insurance. I do not see a problem with lay-off insurance, injury-insurance, illness-insurance and so on. Of course, insurance companies can go bankrupt (like stated above) but I am confident that private charity will more than cover those who are “outside the system”.

    The two most important details however is this – if charity is privately funded, it will go to that which YOU think is most important, and the total effect of this is that we as a society will act charitable towards the causes WE think is important. Secondly – the appreciation for the charity is given where it is due – to the donor, and not to the government.]

    I do not like that there are some that use and abuse the system and our taxes go to support those who will not (not cannot) work.

    It’s not always true that you have to be a friend or part of the goverment to be wealthy. If President Elect Obama raises the taxes on the wealthy, it sort of defeats the principle.

    [The government likes to raise taxes on the wealthy because 1) As a minority, the wealthy are likely to be defeated by the majority, should they protest. 2 ) It is easier to commit evil acts against people that the majority is jealous of 3 ) The government gets to glorify itself as “bringer of equality”

    But what I am referring to mostly is lobby-groups. If you have enough friends in the government, you can steer how rules and regulations are formed, and make sure they give your business an unfair advantage over your opponents business]

    I know states that pay for their new roads/bridges by making them toll ways until they pay off the bonds. It seems a wise decision if taxpayers aren’t paying for it twice.

    If roads are maintained by private individuals, how do you make sure there isn’t any price gouging especially if they own a road that someone must take? Lack of competition would allow much higher tolls.

    [If someone gouges prices, I guarantee you that someone else will build another road and steal his customers. This is the best thing about capitalism – when the price taken by a supplier of a good or service reaches a certain level – he cannot raise it anymore without risking being driven out of the market. Also, I can similarly guarantee that any business or group of businesses operating in an area will take measures necessary to make people be able to get there to work/shop/loiter]

    What about education and healthcare for children who’s parents are too poor to provide for it or for wards of the state? Who would provide it if not the tax payers?

    Also, who would take care of the children who are wards of the state?

    [Private charity. I know it is a great injustice that some are born with very few possibilities, but is the solution really to force this responsibility onto everyone else? And the horribly inefficient mess you see in public schools today – where many students don’t even seem to be there to learn something – do you think this would exist if students knew that their parents (or private contributors in case of poor parents) had to pay direct money for it? Once again – I have to stress the fact that I think that most people would willingly contribute to giving children born less fortunate a fair chance here in life. The problem with tax-funding is not only that it is done by force – it is also a very blunt instrument, which removes the incitement of competition on behalf of the public schools – and removes the incitement of living up to what you have been given by students (because not many people actually consider what they get from the government a gift)]

    I thought about the idea that people could elect to pay taxes on certain things and only participate in the programs they contributed to.

    [I think it is a great idea, and a good step in the right direction. This would enable a step-by-step decrease in government size, and would also give a realistic picture of what people actually think is important]

    //hpx83 Save Capitalism

  8. What do you propose to do about insuring funds deposited in banks?

    Also, who is funding the public broadcasts if not the goverment. If stations are required to run the broadcasts (without compensation for the airtime), who is requiring it? Goverment?

    I’ve heard the arguments that the goverment has no constitutional right to tax our income.

    Regarding taxes, what provisions would you make for those living in poverty? If they are not earning (due to layoff, injury, illness or any legitimate reason) how can they pay taxes?

    I do not like that there are some that use and abuse the system and our taxes go to support those who will not (not cannot) work.

    It’s not always true that you have to be a friend or part of the goverment to be wealthy. If President Elect Obama raises the taxes on the wealthy, it sort of defeats the principle.

    I know states that pay for their new roads/bridges by making them toll ways until they pay off the bonds. It seems a wise decision if taxpayers aren’t paying for it twice.

    If roads are maintained by private individuals, how do you make sure there isn’t any price gouging especially if they own a road that someone must take? Lack of competition would allow much higher tolls.

    What about education and healthcare for children who’s parents are too poor to provide for it or for wards of the state? Who would provide it if not the tax payers?

    Also, who would take care of the children who are wards of the state?

    I thought about the idea that people could elect to pay taxes on certain things and only participate in the programs they contributed to.

  9. Removing the governments from the market isn’t as hard as you think. Start by lifting regulations. You can do it step by step, and give people time to adapt to their new regulation-less existence, you can have public broadcasts that “you may now wish to check the policy of your bank before deciding to put your money in it” etc. etc. Once you start getting somewhere here it is time to lift the central-banks monopoly on money. Let whoever wish start a bank. Let anyone who wish print their own money (not counter-feit of course – but their own currency). You’ll here see a brief period where investors who are not careful enough see their money disappear as unserious banks go bankrupt, but that will just leave the solid banks and people will learn quickly which institutions to trust (I would argue that this is one of the main failures of regulated markets – it falsely tells people that they are safe no matter what they do with their money).

    Around here, you start selling of different parts of the government. Anything that isn’t truly central to a working state should be sold of, and left to stand for itself. If no-one is interested in it, then that part will disappear in bankrupcy quickly, otherwise people will volountarily pay for it. A good transition here would be making taxes for everything but the central parts volountary. Of course – only someone who payed taxes for something may afterwards use it.

    And you are right – people and companies should be responsible. But in this holy mess that is called western governments no-one is responsible, so everyone has to pay. Especially if you are one of those persons who find out what you are good at, and dedicate a lot of time and energy on it (people I would call real capitalists – because they capitalize their ability). It seems, this system punishes those who create. To get wealthy you have to be either
    1 ) Friends with a government
    2 ) Part of a government-protected enterprise (like todays banks)
    3 ) A loud enough proponent for wealth-distribution (if wealth redistribution is so great – why don’t everyone who joins a socialist party start at home? Statistics say that people who do NOT believe in wealth redistribution give ten times more to charity than people who do.)

    I am currently trying to decide if I am going to cut back on working hours when my paycheck reaches the official “do not earn more money than this”-limit, so I don’t earn enough to be punished for being good at what I do. People constantly try to make me feel bad for earning more money than them – so I guess I should stop? Nevermind that it brings down the total production, and reduces tax revenue. Lets just all sit on our asses and not work too much, because then you will be punished by your government (this was me being sarcastic – I will work as hell and never accept the thesis that this makes me a bad person)

    The government never had any money, except for that which they stole. Have you ever wondered what RIGHT governments have when it comes to taxes. As far as I know, the government of any country could, theoretically decide on 100% taxes. In a democratic country. Simply because 51% of the population feel they have the right to live of the other 49%. I am not saying democracy is bad – but it has its flaws. These should be removed by blocking them at a constitutional level.

    Finally, I do not believe that any free-zones would remain as such for very long. It doesn’t take long for people to join together because they realize it increases their possibility to survive. However I do believe that a symbolic area of land could be kept as “free” or “ungoverned”, simply to allow whoever wished to not be governed the opportunity to leave society.

    P.S Roads can be private, and you will have to pay a small fee for using someones road. The more you use the road – the more you pay – just like it should be. Doesn’t it seem strange that today people who do not own a car still pay for road maintanence? It does to me …. D.S

    P.S 2 Great Britain is for sale, and I have outlined how you can buy it 😉 D.S 2

  10. Also, who would be responsible for civil maintenance? (ie roads)

  11. Pingback: Interesting Discussion « Cotton Clippings

  12. I agree the government is inefficient.

    In response to your statement that it IS possible to remove the government from the market: do you have ideas about how you would remove government from the market, except for the very narrow scope of law enforcement, without causing the economy to collapse?.

    The government has a finger in every pie, it seems, and in light of the financial crisis, the government presence is growing. How do you suggest that we resolve the financial crisis without the government stepping in?

    I find that my belief that people and corporations should face the consequences of their poor choices is unpopular.

    In theory, the assets the government holds belong to the people, but we have no right to do what we want with them, except by electing people who will change the way the assets are managed.

    If you did have these so called “free-zones” would some sort of self government come into existence to manage the freeness?

  13. No. The government should exist, strictly for upholding the law. This is a personal opinion of mine, which is contrary to what many libertarian believe. I believe in minimized government, they believe in no government.

    And as for the assets the government holds, they are always stolen. As for the people they employ, their jobs will always cost more and produce less than would a free market alternative. The reason? No one is allowed to compete with the government for their services, and thus the government can spend any amount of money on anything, regardless if any bum could to it for a penny.

    So, my answer would be “It is possible to completely remove the government from the market”. And then I think most people would agree that paying a few percent in taxes (exact figures depends on country right now) for having police, courts and defence . In an optimal solution people would be allowed to leave this society if they so wished – since being governed should be volountary. Unfortunately there is no-where to go really, since there are no “free-zones” available. However, if all countries chose this solution, you would probably be free to apply for citizenship in any state/country, and could thereby choose the one which you felt best suited your wishes in regards to policing and such.

    I haven’t elaborated my ideas completely in regards to state and government yet, mainly focusing on economics right now. But feel free to ask away, and we can always have a blog-debate 😉

  14. I dislike large government, but the goverment does employee people and hold assets, thus the reason for “chiefly” instead of “strictly.” Would it be possible to completely remove goverment from the picture and not have anarchy?

  15. Just one remark – I do not think it should be “maintained chiefly by private individuals or corporations”, but rather “maintained strictly by private individuals or corporations”

    //hpx83 Save capitalism