If we're inclined to credit conservative pundits,
we're likely conditioned to think of socialism as an evil
system of government oppression, as exemplified by the
so-called People's Republic of China and the erstwhile Union of
Soviet Socialist Republics. Although socialism is
indeed a component of some totalitarian regimes, we'd be
sorely mistaken in assuming that socialism and
truth-denying, freedom-trampling totalitarianism are synonymous. If we do assume this, then
it's time for a reality check:
socialism: a
system in which the means of production and distribution are
under collective or government ownership and control.
capitalism: a system in which the means of production
and distribution are under individual or corporate ownership
and control.
Totalitarianism exemplifies only a radical distortion of
socialism. In its more typical forms, socialism is entirely
compatible with democratic systems, and works hand-in-hand
with free-market forces to meet the various needs and
demands of a freely producing and happily consuming public.
If we are right to be wary of government abuse under
socialism, we are equally right to be wary of corporate
abuse under capitalism. If as voters and leaders we
are wise, we should be able to avoid serious difficulties by
keeping the two in some degree of balance, applying each as
appropriate to the situation in question. This isn't
just theory; many prosperous and stable democratic nations,
including the United States, operate successfully under such
a balance between private and public interest, with the
general level of citizen well-being serving as a rough
gauge of optimal balance.
It isn't a
question of whether capitalism is good and socialism is bad,
or vice versa. Each system tends to be better than the
other at doing some things, and less good at doing others.
Agriculture, textiles, manufacturing, and retail tend to be
more productive under capitalistic free-market
conditions. National defense, law enforcement, courts, and public roads
are more workable under a socialistic approach.
Arguably, both private and public education can work well
(or badly), and can coexist, each serving in its own way the
general interest of producing a literate, numerate, and
informed populace.
Under a democratic form of governance, we choose
whichever system we think best for a specific purpose.
Socialism's
advantage is that it can be used to perform necessary or
desirable tasks that have very high start-up costs, that
have high risks and low or negative prospects for profit, or
in which a profit motive would likely be detrimental to
the public interest. Socialism's disadvantages are
that it offers little natural (material) incentive, that it
tends to promote mediocrity and to discourage innovation.
Left to itself, socialism has historically had to resort to
quota systems to motivate production, and dreary quotas just aren't
nearly as motivating as the prospect of material gain—also
known as plain old greed.
Capitalism's
overwhelming advantage is its ability to provide
effective incentive (material gain) for investment, innovation, and production.
Free-market competition rewards those firms that
answer the public demand most effectively, and tends to be
self-stabilizing over the long term. No other system
yet established can match capitalism for its innovation and productiveness.
However, capitalism isn't perfect. Left to itself, the
nearsighted pursuit of profit at the expense of all else
inevitably leads to problems. Without labor
unions or competition for a competent workforce, business
tends to exploit its employees with unsafe conditions and
low wages. Without consumer advocacy or government
safeguards, business tends to victimize its customers with
exorbitant prices, shoddy products, and misleading
advertising. Without external regulation and patent
protection, businesses tend to
destabilize their own environment in the short term, through
cutthroat competition and other unscrupulous practices.
And, as we've seen over several generations, capitalism
tends to generate boom-and-bust cycles, some of them utterly
devastating to millions of people—even many who might at
one time have considered themselves prosperous.
Following
nearly seven years of laissez-faire policy under
Presidents Coolidge and Hoover, the Great Depression of
the 1930s taught us something soberly unpleasant about capitalism.
As President Franklin Roosevelt observed in 1937: "We have
always known that heedless self-interest is bad morals.
We know now that it is bad economics." However, the
fact that capitalism has flaws doesn't mean that it's evil
and ought to be abolished. It simply means that, like
most "isms" in their pure form, it works better on paper than it does
in the real world. To be of practical benefit to a
nation of people who
must rely on such a system for something as crucial as their
livelihood, there must be balancing and compensating
mechanisms to damp
capitalism's natural oscillations and to ameliorate the
adverse effects of blind obsession with short-term profit to
the exclusion of all other concerns.
Nowadays, economists
are generally agreed that any economic downturn will
spontaneously rectify
itself through the markets over time, and that unemployment
will naturally tend to stabilize in the long term at about
six percent of the work force. The problem is that
even a minor recession might last a couple of
years, and recovery from a major calamity like the Great Depression might
take decades or even a generation without effective
intervention.
Wonderful though the free-market idea is in good
times, it cannot be passively allowed, over time, to cost people their livelihoods, their life-savings,
and in some cases even their lives, whenever the economy goes into
one of its
inevitable slumps. Astute regulation is needed to
moderate the extremes of the business cycle.
Safeguards are needed to avoid wholesale economic chaos and
personal tragedy whenever the regulations prove inadequate
to the task, and these safeguards must function reliably
even under enormous economic pressure (such as escalation of
the national debt). Even if it
were willing, the private sector is unable to see
effectively to such
measures. That's why it's government that must
shoulder the burden of ensuring the continuing well-being of
society when the economic machinery breaks down.
That's why the Federal Reserve System was devised to
regulate the supply and value of money in circulation.
That's why the Federal Deposit Insurance Corporation was
formed to guarantee the bank deposits of ordinary savers.
That's why Social Security was created to keep people who've
labored long and honestly from unexpectedly becoming destitute when they're no
longer able to work.
For similar reasons,
though focused on health rather than wealth, Medicare
and Medicaid were enacted in the 1960s, and health-care
insurance reform was passed in 2010. As each of these
proposals was being debated, it was loudly criticized as being
socialist and expensive. And indeed they are—just like
national defense and the justice system and public roads.
Yet, having lived with them and benefited from them, few of
us would fancy ourselves better off without them.
Indeed, in the long run, the general well-being of the populace
translates into lower overall costs, greater productivity,
more consumer demand, and thus ample profits for
the farsighted capitalist. In other words, capitalism
and socialism are not mutually antithetical. Applied
appropriately to the tasks each is best suited to address,
they're complementary.
Capitalism and socialism,
in balance and moderation,
aren't inherently good or bad. They're just tools to
address different needs under different conditions.
Each is potentially beneficial when used wisely, and
dangerous when used unwisely; and neither is without its
costs. Our first issue of concern, then, is not blindly to
praise one and denounce the other, but to become wise enough
to deal intelligently with both.