In Part 1 we discussed how important it is to be able to define a term. This is really for two reasons:
- So you truly understand it yourself. You’d be surprised how many people tell me they are absolutely, totally and undeniably against Socialism . . . and then in the next sentence tell me their socialistic program that is going to fix our country.
- So you can logically discuss an issue with another person. If the two of you are discussing a certain concept — such as the one in this article — which you both define in different ways (without each other knowing it) than there is simply no way you can ever come to a legitimate agreement.
Remember the phrase, “Even the most logical argument — if based on a false premise — can never lead to a correct conclusion.”
And a correct premise begins with a correct definition.
So, let’s define Capitalism and Socialism:
Capitalism: An economic system in which land, labor, capital and other resources are owned, operated and traded by private individuals as opposed to through government control and/or central economic planning. Property is privately owned and goods are privately produced. Also referred as the Free Enterprise System. The individual has all rights to his/her possessions.
Socialism: An economic system in which labor, capital and other resources are owned, operated and traded by a central government and/or central economic planning as opposed to private individuals. Property is publicly owned (italics Burg’s) and goods are publicly produced. The individual has no rights to any possessions because he/she doesn’t actually own anything.
The italic is because “publicly owned” means the government actually owns and controls it 100 percent. The “public” (individuals who supposedly are the owners) have no say in the matter in any way, shape or form.
*Before we go on, please recall the fact from Part One of this series that the U.S., while at one time relatively close to being a pure capitalist society, is no longer such.
Let’s now look at the defining characteristics of each of these terms:
Capitalism:
- Voluntary trade as opposed to force. Business can only take place through cooperation since, in a truly capitalistic society, one person cannot be forced to buy from another.
- Value rules. If the seller does not provide an equal or greater amount of value than the financial cost of whatever he or she is selling, the prospect probably will not buy.
- Businesses will be rewarded (by the consumer) for doing things right and punished (by the consumer) for doing things wrong.
- Government’s only legitimate functions are to protect the citizenry against force and fraud.
Socialism:
- Force as opposed to cooperation. Since the government controls everything, they decide who buys from whom, what they buy, what they pay, etc.
- Value is . . . well, not valued. It’s not important for a producer to focus on providing value when it’s not up to the consumer as to what they can or cannot consume.
- Business will typically not be rewarded or punished by consumers; they will be dealt with by bureaucrats and politicians however they see fit. Good for the consumer and good for bureaucrats/politicians are not necessarily the same thing.
- Government’s legitimate function is . . . everything. This, of course, probably means they are good at very little . . . except using force to keep the people in line.
Results:
- In truly capitalistic societies the standard of living is far better for the masses. The poorest in a capitalistic society is considerably better off than their counterparts in socialistic societies.
- There is a much larger middle class in a capitalistic society than in socialistic societies, where there tends to be, percentage-wise, a tiny amount of extremely wealthy people, a larger but still small middle class, and a huge amount of poor and desperately poor. (Unfortunately, this is exactly where our increasingly socialist society appears to be taking us.)
The key point — THE premise: Capitalism is based on cooperation while Socialism is based on force.
Sub-point — Any program (via legislation) that results in one person being forced to give up what he or she has earned in order to hand it to a centralized government which then re-distributes it to another is a socialistic program. Let’s not discuss here whether that is good or bad; let’s just agree that that is what it is, according to what you have read above.
In Part 3 we’ll look a bit deeper into this and see where some dangerous misunderstandings about these two concepts come into play.
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So when “we” came to the “US” (and of course, at that time, we were not the US, yet) to get away from unfair taxes, and knowing that taxation without representation is truly tyranny, we allowed ourselves to be trapped again into believing that the government could do for us what we could not do for ourselves, and NOW the government wants to completely take over healthcare.
In 1995, I gave a speech against the government’s involvement in healthcare. 99% of the people listening to the speech began with the belief that the government needed to be involved MORE and MORE in healthcare to save the masses.
I started the speech, holding a can of beans.
Can you see me now, Bob? I’m holding a can of beans. I’m convincing people how much this can of beans will cost, how difficult it will be to buy, and how the quality of these beans is going to spiral downhill because of the government’s imagined escalated involvement in the sell of this can of beans.
When my speech was over, not one single person was for the government’s continued involvement and control of healthcare. And many of those people were poor and without insurance wondering how they could get healthcare any other way. (And that was a teaching experience…because many of them did not KNOW about the free clinic they could go to, manned by volunteer doctors, dentists, nurses…giving their volunteer time, trying to keep the government out of healthcare).
I’m not anti-government. So, please don’t think that…The government’s place could be so much better than what it is today.
I think that many of us are like the people hearing me talk about a can beans, not knowing what else can be done, not realizing there is a better way, and even if they do know there is a better way (and I’m not just “talking” healthcare and beans, now), not knowing how to get from point A to B…because the powers that BE are too powerful and people feel totally powerless, hopeless, and helpless.
See? I can get on a soapbox, still!
I look forward to part 3!
Pamela
You are so “right on” Pamela. Yes, most people don’t realize that before the U.S. government began meddling into the very successful and “healthy” market-based system we once had, our health care situation was excellent. And the poor were inded taken care of much better than they are today or ever would be under socialized medicine. It’s only through government meddling and taking over of the system that it has spiraled to where it is today, where so many people cannot even afford insurance.
And, of course, people blame the Capitalism for this problem when in fact Capitalism was no more at fault for this then it was for the recent banking and housing catastrophe; again, caused BY government meddling and interference, not a lack of it.
In a future article I will go through the health care situation and again ask people to simply go back and “check their premises” to see what actually caused our current problems and – just as importantly – how we can get it back to where it was.
I loved your explanation though. And, your being involved in the health care profession and having seen what you’ve seen, you provide great credibility to this discussion.
Thank you! . . . and please stay on your soapbox. You’re an excellent communicator!
Hi Bob,
Really good article, a lot of people are trying to get their minds wrap around what has been happening lately and what the future could hold you give a good prospective on it.
The ponzi scheme comment about Madoff and the Social Security is so true. I just a discussion yesterday about Madoff and brought up the same thing. I guess it’s ok for the government … look at the fist word SOCIAL Security.
Have you thought adding a share it button to your blog, you have written a lot of good stuff that could be syndicated out to other blogs and networks. Hope you add on in the future.
Whish you the best.
I agree that a free market system in theory is better. However, how do you reconcile the fact that the biggest winners in the free market system (Wall St bankers) have been given billions of dollars from working class citizens in massive government bailouts? If we had a TRUE capitalist system these companies should have been allowed to fail. They were not allowed to fail because of the catostophic damage their failures would have done to our National economy and the global economy. Therefore, at the end of the day, the socialists had to bail out the capitalists.
P.S. I am sure that all the 62+ year old capitalists are happily cashing their Social Security Checks every month.
Hi Mike, I appreciate your posting a response. Please scroll down so I can respond to your thoughts individually . . .
Mike wrote: I agree that a free market system in theory is better. However, how do you reconcile the fact that the biggest winners in the free market system (Wall St bankers) have been given billions of dollars from working class citizens in massive government bailouts?
Bob responds: Mike, if you read the article, you saw that I made the point (both in part 1 and part 2) that we are NOT in fact living in a true Capitalistic society, but a mixed economy. When you ask, “how do I reconcile this, there are two things: First, is that, The bankers were absolutely not participating in a free-market system. There was absolutely nothing about the banking crisis that even remotely resembled free enterprise. Please go back to the end of part 1 of this series and click on the link where the cause is explained. And, of course, the billions of dollars in bailout with money forcibly taken from working class citizens also has NOTHING to do with free enterprise.
So, when you say, “a free market system in *theory* is better, my suggestion is, again, just as I’m suggesting in the article, please check your premises. A free market system is not only better in theory; it is better in practice. However, we currently are not operating under that type of system. Does that explanation make sense?
Mike wrote: If we had a TRUE capitalist system these companies should have been allowed to fail.
Bob: Of course. At the same time, had we had a TRUE capitalist system, these banks wouldn’t have made the outrageously stupid loans they did. So, again, the premise is that we are NOT operating in a true capitalistic system, thus, your first sentence about free market system only being better *in theory* doesn’t jibe. As you yourself said in the comment above, “IF we had a true capitalistic system…” Of course, we don’t, so how can one say it doesn’t work on a practical basis?
Mike wrote: P.S. I am sure that all the 62+ year old capitalists are happily cashing their Social Security Checks every month.
Bob: Not sure “happily” is the correct word, since they didn’t get nearly the return on their “forced investment” as they could have on their own. Aside from Social Security being totally unconstitutional, it is a “pay as you go Ponzi Scheme” that even rivals Madoff’s Ponzi Scheme for the hubris involved. I’ll do a full article on this in the future.
Thank you again for writing.
Hi Donnie,
Thank you for your kind words regarding the article and for your insights, as well.
Yes, Social Security is a Ponzi Scheme in it’s truest sense. Actually, one difference between the government Social Security Ponzi Scheme and one’s like Madoff’s is that – with the government one, everyone is FORCED to participate. And, like most government programs, it actually ends up hurting the very poeple it is most intended to help. Again, I’ll post a full article on that in the future.
Thank you for your question regarding adding a “share it” button. I’m not the most technically astute person in the world so I’ve already taken the first step by emailing my tech person and asking her about it. Thank you for your suggestion.
Best regards,
Bob
Also note that capitalism is not a unique economic system but a *range* of economic systems that vary in other dimensions. For instance, its private land ownership and capital formation may be rights held by everyone, or they may be privileges accorded to only a few. *Free* market capitalism is the form in which markets are open to everyone (that, not dog-eat-dog anarchy) is what makes them free).
Failing to recognize the range of variation in capitalism leads to further talking past one another: Libertarians envision the free, enlightened, unrestricted form while talking, but lefties “hear” archaic, oppressive, mercantilist aristocracy.
Thus, when we laud “capitalism”, it helps to point out that we’re *not* trying to restore a reactionary aristocracy, but that we’re hoping to establish a liberal, universal capitalism for the masses. In this universal capitalism, unlike any form of redistributionist socialism, anyone can become his/her own boss, create his/her own working conditions, and keep *all* of the profit from his/her own labor.
Thank you, Jeffry. Indeed, when the word “Capitalism” is used in this series, it is within the context of “Free Market Capitalism.” Thank you.