Socialism Vs. Capitalism

[Josh]

How is that “tribal”? Sounds like the same behaviour as the Dutch East India Company.

[Ken]

How is that “tribal”? Sounds like the same behaviour as the Dutch East India Company.

The sociological or anthropological definition of a tribal society is one organized around competing tribes each with its own chieftain in which the tribes are larger than family groups or clans, but smaller than nation states.

The gang society that is modern Haiti is more or less the modern version of that.

When and if the national government restores order and regains control of the country they might start rebuilding the necessary infrastructure for the resumption of capitalism. Who is going to invest in building say a new factory in the middle of Haiti right now. Would you?

[HondurasKeiser]

One has to be pretty careful about definitions in these sorts of discussions. I found the whole discussion of Haiti and Bolivia to be rather simplistic.

Capitalism isn't just free enterprise or private ownership. Societies going back to the dawn of time have had those characteristics. Capitalism is really more of a 17th or 18th century invention in which financial innovations like the invention of the corporation and other legal structures that made it possible for groups of people to accumulate capital and deploy capital as a means to control and acquire means of production. Prior to that time there was wealth in society and as well as free markets and private ownership but economies were really more controlled by hereditary monarchs and nobility as well as the church, rather than accumulations of capital. The means of production in feudal Europe was largely the land which was controlled by nobility and aristocrats through inheritances (the oldest son inherits the estate) and not generally subject to sale on the open market. The intent was more to preserve the aristocracy and political control rather than most efficiently build wealth.

By that definition, Haiti is really not a capitalist society, it is really more of an anarchy or failed state. People cannot effectively deploy capital in Haiti to any productive use because the legal and social structures to make that possible don't exist. There might be huge unregulated markets in Haiti but it isn't capitalist. Criminal gangs run the the place, not capital.

In any event, no modern and prosperous country is completely capitalist or socialist.

In the US, for example, we have a complicated blend.

Take health care, which represents about 1/5th of the entire US economy. We have the following different systems operating simultaneously:

• We have a sector with private ownership of both the health insurance sector and the health care provider sector. That is all of us who have private insurance or privately pay for medical care at private hospitals and clinics.
• We have a sector with public ownership of the health insurance sector but with private ownership of the health care provider networks. That is everyone who is on Medicare or Medicaid but uses their Medicare or Medicaid cards to obtain care from private hospitals and clinics.
• We also have a sector with public ownership of both the insurance sector and the provider sector. That is the VA health care system as well as all the public clinics and hospitals around the country that largely take Medicare and Medicaid patients.
• We also have both private and public investment in medical research and science because it is in the public interest to do so and simply relying on private investment and the profit motive to direct research efforts would leave massive gaps. Without public funding there would be no incentive to ever investigate cures for rare diseases, for example

Why do we do that? Because of "market failures". The free market does not effectively distribute health care to the poor or elderly. No insurance company is going to insure a 75 year old patient with multiple chronic health issues. Nor is the private sector going to insure those in poverty or wounded and disabled veterans. So the government has to step in.

Education is a similarly large component of the economy. But we have a complicated system of private for-profit "capitalist" schools and universities, private non-profit schools and universities (often owned by religious institutions not capitalists) and the largest sector by far is public schools and universities. Why do we do this? Because without public subsidy of the education sector large portions of the population would remain uneducated and that would greatly diminish the wealth and productivity of the nation. It would also massively increase crime and social dysfunction if large portions of the population lacked the skills for productive employment. That is essentially what you have in countries like Haiti. No "capitalist" can drop a semi-conductor plant or software engineering firm into rural Haiti because the workforce to operate it simply does not exist. Not to mention all the structures to protect and preserve that investment also do not exist.

Health care and education are just two examples of where free market failures make public investment and regulation necessary. Or "socialism" if you want to call public insurance like Medicare and public schools and universities "socialist"

There are endless examples of other sectors of the economy where free market failures necessitate public investment. Transportation is an example. We have public roads and public airports. We have public infrastructure all along our coastlines to aid in maritime navigation from the Coast Guard to public canals and harbors. Our GPS system which the entire transportation sector relies on is entirely government run or "socialist".

The environment is another area where public intervention is necessary to prevent private interests from spoiling our air, water, and lands. In the 19th Century private corporations just dumped their waste into our lakes and rivers and filled our skies with their pollution. The air in cities like Pittsburgh and Cleveland was unbreathable and polluted rivers were catching on fire. It took government regulation to end that. Capitalism wasn't going to do it on its own.

In all productive modern societies you have a blend of both private and public investment. You have private investment and ownership of the sectors where that works best like farming. And you have public ownership where that is necessary and most effective such as healthcare, education, transportation, and environmental protection.

I think this is a very good post explaining the development of capitalism as a system of wealth production.

[Ernie]

In all productive modern societies you have a blend of both private and public investment. You have private investment and ownership of the sectors where that works best like farming. And you have public ownership where that is necessary and most effective such as healthcare, education, transportation, and environmental protection.

Yes. I think the author of these articles is saying the same thing as you on this point.

Atnip writes,

For a country or nation, the best ground is a mixed
economy, neither hard-core capitalism nor hard-core
socialism. To be successful, a state may lean towards
socialism, like Sweden, or it may lean toward
capitalism, like the U.S., but economic models on the
far ends of the scale will have the most problems.
Governments are forced to establish a degree of
enforced socialism (through taxation) because of
inherent self-centeredness that tends to make people
either lazy (socialism—the government owes me
everything) or greedy (capitalism—I don’t owe
society anything). A mixed economy does not change
people’s hearts, but it does force them to share some
of the wealth with the needy while still allowing
enough selfishness to propel people to get out and
work.

[Josh]

Atnip’s writings fail to discuss if socialism needs to be implemented at a national or global level. Most of the “big government” liberal types claim it does. More conservative people prefer local control and local solutions, instead of just sending billions of dollars (stolen from working people via taxation) to the U.N. or to various faceless agencies.

Ultimately “socialism” should be voluntary - in a wholesome society, people will gladly help those in need, but can also assess when someone is lazy and doesn’t need more handouts. Government is notoriously bad at this, so we have tent cities in America with millions of homeless. They are fat, well fed, and have ample money to buy drugs and alcohol. This is the result of a “mixed economy”.

[Ken]

In all productive modern societies you have a blend of both private and public investment. You have private investment and ownership of the sectors where that works best like farming. And you have public ownership where that is necessary and most effective such as healthcare, education, transportation, and environmental protection.

Yes. I think the author of these articles is saying the same thing as you on this point.

Atnip writes,

For a country or nation, the best ground is a mixed
economy, neither hard-core capitalism nor hard-core
socialism. To be successful, a state may lean towards
socialism, like Sweden, or it may lean toward
capitalism, like the U.S., but economic models on the
far ends of the scale will have the most problems.
Governments are forced to establish a degree of
enforced socialism (through taxation) because of
inherent self-centeredness that tends to make people
either lazy (socialism—the government owes me
everything) or greedy (capitalism—I don’t owe
society anything). A mixed economy does not change
people’s hearts, but it does force them to share some
of the wealth with the needy while still allowing
enough selfishness to propel people to get out and
work.

Yes, although economists would not use the terms "greedy" or "lazy" or "selfishness".

All capitalism is inherently selfish and that is how it derives it efficiency. People "selfishly" buy the better or cheaper product and the less efficient firms must either improve or die out. Selfishness is the engine of competition. For example, people "selfishly" bought iPhones and Android phones instead of Blackberry phones with the small screens and tiny keyboards because they were better. And now Blackberry is no more.

Instead economics would talk about "market failure". Most of the state interventions into the free market in the US and other modern economies are to address areas of the economy where free market competition fails to achieve a social good, or even undermines it.

To cite just one example: Medicare was labeled as "socialist" when it was first introduced. The purpose of Medicare was to provide health insurance (and healthcare) to the elderly who would otherwise be unable to afford insurance or afford health care. The idea was very simple, you pay small Medicare premiums during your working life and then the program is available to you when you are elderly. Absent Medicare only the wealthy elderly could afford expensive medical care or the burden of their care would fall on their families.

Here is Ronald Reagan in 1961 claiming that passing Medicare will lead to a socialist dictatorship in the United States.



People made the same exact claims about Social Security when it was passed in the 1930s. Again, it was designed to solve another market failure. Namely that the free market was not providing a dignified retirement for the vast majority of working Americans and was not caring for the disabled. Were some elderly able to adequately save for retirement prior to the 1930s? Sure. But the majority were not. The poverty rate among the elderly was over 50% prior to the passage of Social Security. Today it is under 10%.

Absent government intervention (socialism) we would see massive "market failures" in many areas of the economy including: healthcare, education, transportation infrastructure, environmental protection, policing, criminal justice, basic science, agricultural commodity pricing, etc. etc.

[Josh]

Reagan was right: we have a socialist dictatorship when it comes to medical care; it’s both expensive, yet also costs a lot in taxes, and the care provided is poor.

We also have a socialist dictatorship in other ways where what words you can say are heavily policed much like in a Communist country. Say the wrong thing and you’ll be out of a job, out of school, and so on.

[Ken]

Reagan was right: we have a socialist dictatorship when it comes to medical care; it’s both expensive, yet also costs a lot in taxes, and the care provided is poor.

But it is the "capitalist" side of the health care system that generates all the high prices not the "socialist" side which is Medicare, Medicaid, and the VA system.

People on Medicare, Medicaid, or in the VA system aren't generally the ones going bankrupt due to egregious medical expenses. And they aren't the ones putting up GoFundMe pages to pay for their cancer treatments.

[Josh]

Reagan was right: we have a socialist dictatorship when it comes to medical care; it’s both expensive, yet also costs a lot in taxes, and the care provided is poor.

But it is the "capitalist" side of the health care system that generates all the high prices not the "socialist" side which is Medicare, Medicaid, and the VA system.

That is not correct. Medicare and Medicaid are a nightmare. I am dealing with Medicaid right now trying to help someone else get treatment. The basic answer is - Medicaid simply will not pay for a lot of things, so you are on your own to go and cash pay it.

People on Medicare, Medicaid, or in the VA system aren't generally the ones going bankrupt due to egregious medical expenses. And they aren't the ones putting up GoFundMe pages to pay for their cancer treatments.

That's also not correct. In fact many of the GoFundMes I've seen are obviously people who are Medicaid or Medicare eligible (over 65, or a family of 3 that obviously makes < $35k). It's really easy to qualify for Medicaid: simply become unemployed, and then your income is below the eligibility threshold.

"Medicare for all" sounds like a complete nightmare - forcing all of us to be stuck in a broken system.

[Robert]

All capitalism is inherently selfish and that is how it derives it efficiency.

I disagree. It is people who are greedy, but the system allows one to set a price they think is fair and they are willing to work to provide that service or product. That is not greed. That is freedom.

But it is the "capitalist" side of the health care system that generates all the high prices

Much of this price is caused by government regulation and reporting. Some doctors are opting out and going to a cash only and charging so much less.

You make a very complex issue sound so simple, but it is not.

I look at several societies that lean much ore socialist and you do not see the development of new drugs or technologies. There is little incentive, so they do not.