Capitalism versus socialism

Is Socialism really “good in theory but bad in practice” ? Is capitalism a bad system ? First let’s define the terms.

“Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned”.

Socialism is the economical consequence, and a subset, of statism. Statism is “any system that concentrates power in the state at the expense of individual freedom”. Socialism is a form of statism which advocates collective or governmental ownership and administration of the means of production and distribution of goods.

Capitalism is based on the right to property. Property is acquired thru trade, which is an exchange of values.

Capitalism is the only system which does not deprive the individual of his rights. The right to life and its derivates, the rights to liberty, property, the pursuit of happiness, are all fulfilled in capitalism. People are free from the use of unearned force by the government, free to acquire and keep property, and to live in an ethical way.

It is also the only system which allows progress thru the value of work.
Productiveness is the virtue of creating material values. In a free market, such a virtue is a necessity, to trade.

Competition is dependant on being the best, and therefore indirectly on the progress of competitors. Without productiveness, no progress is possible because progress is part of the development of the product. Progress is a product in itself.

Socialism is a system which is defined by governmental ownership of property. But how can this come to be ? The government can only own property if it takes it away from its rightful owner.
Hence the use of unearned force to take this property away from its rightful owner (this is usually called theft : in the case of the government, backed up with the police force, it is called “income tax”) and redistribute it to the needy. This creates a “society of beggars” because the distribution is in favour of failure (which entails needs) and not in favour of success.
This is because the redistribution of wealth must be made on a certain basis. Since we usually find in socialism and other statist systems the need that everyone be “equal”, we usually find that the redistribution is made on the basis of need.

Thus we find that socialism is against all basic rights : by using unearned force on its citizens, it removes from them the right to property. By using force and forbidding them to use this property, it therefore also affects the right to liberty. All rights are interrelated : they form a whole, and by supressing one you supress all. The basic mistake is to differentiate between human rights and property rights, for one cannot exist without the other. Denying property rights is basically reducing people to being the property of the state, because the fruit of man’s labour, which is property, is necessary for one’s life.

We see that even in theory, socialism promotes the destruction of basic rights, and the twisting of the social fabric into a game of needs and “push and pull”. Furthermore, the socialist system is actively against progress.

As we have seen, progress comes thru production and competition. But those two concepts become completely irrelevant under a socialist economy since :
1. one’s profit and property is taken by the government, and as such there is no incentive to progress.
2. one’s needs are met by social programs, so work becomes a superfluous, unneeded burden.
As such, there is no incentive for progress, and such a thing is not possible under a socialist economy.

On the objection that the communist countries of yesterday were an abuse of the system and that a true socialist country would not be so tyrannical : a little power corrupts, and as the maxim says, “absolute power corrupts absolutely”. That is why cultism, tyranny, and such, are an almost necessary occurance in socialism. The government, controlling the entire population, has free rein to exploit it. We already see this tendancy in America, which has become a fascist (government control over property) mixed economy.

About some of the things that are usually argued against capitalism :

poverty : capitalism is often accused of creating a lot of disparity between social classes, causing more poverty. But is this a valid concern ?
The socialist solution to poverty is a short-term solution, in the sense that social programs do not bring lasting value to the individual.
Instead, the capitalist system of no redistribution of resources does not help poverty in short term but by making social conditions improve by progress (more jobs, wealth), it helps to eradicate poverty much more efficiently. The long term answer to poverty is creating jobs and a better standard of life thru technology. On the other hand, socialism stops progress, which means that social conditions cannot improve.

To resume, the problem is that going towards socialism implies taking more and more money from the individuals, which makes more poverty. Then the logical reaction is to solve this poverty by taking more money again, which makes more poverty, etc. Socialism cannot solve poverty. The only way to improve conditions of life is by progress, which can only be accounted for in capitalism. Indeed technological and societal progress helps poverty, this can be seen by comparing conditions of life from merely the last century to today. All that socialism can do is create a society of poverty and beggars.

greed and money : it is often argued that capitalism puts the emphasis on greed, which is supposedly a bad thing. The only problem with this argument is that money is our measure of value, and without a standard of value, the value of work cannot be measured for the reward to be given.
Furthermore, greed (the love of money) is the mechanism thru which people work harder and therefore produce more (which is, for gain). This is the motor of progress. Without human greed, the desire for property, no progress would be possible.
What are we to think of a system that condemns greed when it is about one’s own fortune, yet hypocritically does not condemn it when it is about taking the money of others ?

injustice : based on a twisted notion of justice, people accuse capitalism of being unjust and unfair. Defining justice as “giving to everyone, whenever they earn it or not”, they proceed to decry capitalism for producing poverty. Besides the fact that poverty is better eradicated with capitalism, it can also be said that justice is better served. The notion of justice is based on the earned : basically, you get what you earned. This is seen in our judiciary system. If you earn to go in prison (thru the use of force in criminal activities), you go in prison. If you earn to be free, you are free. The same thing applies to wealth : if you earn wealth (thru trade), you get it. Only the capitalist system allows for justice. Also, the point of view that all men are equal and therefore deserve the same is patently false – it is obvious to any observer of human nature that, besides the fact that we are all human, we are far from being equal. This is the false moral basis of socialism – a pretense of equality and fraternity, which disguises a total control scheme.

slavery : The work trading system is often called “wage slavery”. Therefore, goes the accusation, capitalism should be decried as the system that brings about slavery and exploitation. Let’s examine this argument.
What is slavery ? When we say someone is a slave, we mean that someone else owns and controls him. We can politically define slavery as “a state of effective loss of self-ownership”. Self-ownership is an inherently circular right – it is the fact that one owns and controls one’s body (and mind). As explained in “A Republic”, the rights of action and property are directly derived from the right of self-ownership, and are in fact one and the same. Therefore different degrees of slavery are possible depending on the level of control one has on another person.
A slave cannot trade with other people – he has to obey and do what he is told. He cannot choose what to do, or own. In short, he has no control over his own body.
The previous may sound a bit exggerated, but this is basically the situation we find ourselves in a purely socialistic country. Rights are not recognized and the individual is merely a sacrifice for the “good of the state”. The individual can be more adequately described as a “slave of the state”. However, the capitalist system is a system where all rights are respected. “Wage slavery” is merely the derogatory way for people do describe the process by which we freely trade our time and work to someone else, in exchange for monetary value. No coercion or control is possible in a state of free trade.

ADDENDUM: Real-life considerations and studies (written in a discussion context)

Anyone who supports communism is ignorant of the deductive and empirical data against centralized planning.

Freedom is commonly defined as the right to own oneself, and the consequences of this ownership. Only capitalism (i.e. an economy where everyone is free to trade and own) is compatible with such an outlook. Furthermore, it is shown statistically that economical freedom is proportional to higher level of prosperity (consult Heritage Foundation or Fraser Institute’s surveys, the only ones I know which calculate economical freedom, and the statistical results).

“Capitalism has brought us nothing”. The capitalist outlook of the Founding Fathers of the US has led to a century of unprecedented progress which has given Americans the greatest standard of living in the world (and, might I add, stopped the necessity of us working 7 days a week in factories full of soot – which is only done in non-capitalist, undeveloped countries).

Now even a poor like me (not even living in the US, might I add) has access to a television, a radio, central heating, computers, all things which did not exist a century ago and which came to exist and propagate thanks to capitalism and semi-capitalism. Continents where capitalism was never implanted, or where tyrants still have free reign (such as the middle east and africa) have the lowest standards of life in the world.

Capitalist measures everywhere have shown themselves to be superior to their centralized alternatives, because of the inherent inferiority of centralization, non-competition and non-accountability. One needs only look in the United States and compare private and public schools (tuitions in private schools being half that of public schools), or charity systems (the US government requires 13$ to produce 1$ of charity output). I defy anyone to show me, besides the basic functions of government (and some public goods that require high technology, such as private ownership of roads or sea), one domain where the private sector is worse than the public sector.

“Communism works in theory”. How is coercion supposed to work in theory ? Everywhere where trade reigns, everyone wins, because everyone acts in his best interest. If you take that capacity of trade away, you take away the self-interest, and therefore the advantage. What do you replace it with ? Political motivation, just like we see today. Those who piss on self-interest, intend to piss on the free market, and promote destruction.

There is nothing that justifies communism except fallacies. “Why must we be governed by the rich ?”. This is a confusion of capitalism with corporatism. A capitalist system is not “governed by the rich”, but rather promotes equal freedom for all – voluntary action is all-inclusive, only force and slavery (which communist systems are based on) are not inclusive.

And before you complain, “what about the poor ?”, the common retort, a study by Roemer & Kay (Harvard Institute for International Development) has statistically demonstrated that the income of the poor rises proportionally with average income. I have not found any worldwide study like this one that showed any contrary result.

“When one observes the nightmare of the desperate efforts made by hundreds of thousands of people struggling to escape from the socialized countries of Europe, to escape over barbed-wire fences, under machine-gun fire — one can no longer believe that socialism , in any of its forms, is motivated by benevolence and by the desire to achieve man’s welfare.

No man of authentic benevolence could evade or ignore so great an horror on so vast a scale.” –Ayn Rand (Virtue of Selfishness p102)

On one last note, even a future society where resources would be extracted and produced by machines would require capitalism, because of at least one resource which cannot be produced : space. There will always be a limited amount of space, and this requires at least one market to be always active.