Socialism and Capitalism

· Government policy
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It worried me at the time. An uneasy feeling, I could not actually pin down. I overheard someone say, “If you’re not a capitalist, you must be a socialist.” Aside from the black or white view, something else nagged at me.

Are capitalism and socialism the ends of the same line? Are they “soft” to the others “hard”? Are they “black” to “white”? Maybe “capitalism” and “socialism” are more like “soft” and “black”. They are not the opposite of each other.

To try and understand, I first looked at definitions:

Capitalism. An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.

Socialism. A political and economic theory of social organisation which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

At first glance they may seem opposites, but look closer.

Capitalism is an “economic and political system”.

Socialism is a “political and economic theory of social organisation”. So one is a “system” and the other a “theory of social organisation”.

If you talk about capitalism you are talking about how the politics and economics of a country are organised to encourage business owners to make a profit. The actions of the state are biased towards supporting private owners.

Last time I looked I thought democratic governments were elected by the people to serve the people, not private enterprise.

On the other hand, socialism tries to manage a country so that society – the people – manage the production, distribution and exchange of goods and services. Note the definition says “owned or regulated”. It doesn’t say the state must own every business. It says the state can also control companies through regulation.

What is the opposite of Capitalism?

Following the logic above, the opposite of capitalism must be defined as:

An economic and political system in which a country’s trade and industry are controlled by the state for profit, rather than controlled by private owners.

Perhaps a better word to use for the opposite to capitalism is “stateism”.

Both words (capitalism and statism) are a narrow view of what a government is expected to provide. It refers only to the commercial activities within a country. It has nothing to do with the social, legal or moral values that are influenced by the government other than where they are a result of the commercial activities.

The definition defined above for socialism is much broader than the definitions for the pair of opposites – capatilism/stateism.

  • Socialism is based on social organisation theory rather than control. In other words, it uses a set of principles to guide the application of political and economic controls. It is a desired set of outcomes rather than the actions to achieve the outcomes. A direction rather than a course.
  • There is the option to meet these principles through either state ownership OR regulation.
  • It applies to “production, distribution and exchange”. It does not apply to profit other than as a by-product of the components above.

Opposite of socialism

If “statism” is the opposite of “capitalism” what is the opposite of “socialism” If you take the definition of socialism and invert it, the opposite would be something like:

“A political and economic theory of social organisation which advocates that the means of production, distribution, and exchange should not be owned or regulated by the community as a whole.”

If it sounds a bit like the wild west, you are right. It not only excludes ownership by the state but also regulation by the state. I suspect that when people say they are capitalists, many are using the antithesis of socialism rather than the strict meaning of capitalism.

Is there a word for this situation? Conservatism may be a candidate. The definition is:

“The holding of political views that favour free enterprise, private ownership, and socially conservative ideas.”

Conservatism, however, does not cover the full spectrum of what is needed. It does not fully express the lack of regulation. It also talks about socially conservative ideas. Is lack of regulation a socially conservative idea? Maybe not.

If you were looking for the opposite to social conservative, the word “radical” springs to mind. The problem however is that the radical/conservative spectrum is focused on change. It misses the free enterprise and private ownership aspects. Conservative has two different but complementary meanings.

“Free market” but a free market can include state ownership. Public companies like to capitalise their profits and socialise their losses. In simple language, they keep their profits but rely on government bailout Since there is no single word, perhaps we have to come up with a phrase such as Deregulated free market”.

Even so, we have not captured the “social theory” component. It can hardly be “social” if the theory applies to the private ownership of companies. Maybe we have to expand further and call it “Delegated and deregulated free market theory”. We have delegated the economy to private enterprise and taken away regulation.

There does not appear to be a single word that is the opposite to “Socialism“. We need a collection of words such as “Delegated and deregulated free market theory”

Is there a case for state ownership?

It is important that the state (or the people if you like) own certain things. Water supply is an obvious one. Do you want your water supply to be provided by a “for-profit” enterprise?

For reasons of security, the state should own certain enterprises. I wrote a previous post talking about food security. If all agricultural enterprises were owned by offshore companies, what guarantee is there that the population of the country can access the food produced in that country? Do we want the defence of the country to be in private hands? Should we outsource policing? We are now seeing the impact of not having enough producers of medical supplies like respirators and PPE.

Another reason may be a monopoly. If there were only one provider of telecommunications in a country, that company could charge what they want. Society (the people who elect the government) would suffer. State ownership could be a good thing.

Certainly, states do draw profits from state-owned businesses but hopefully, those profits find their way back to the citizens of those states.

In certain cases there is a case for state ownership. Certainly not in all cases, but there are particular situations best managed by the state.

Is there a case for regulation?

Without regulation, the community have no protection from private owners. It is a game that has been going on for centuries. Owners try to maximise profits from the community, and governments regulate their operations to benefit the community. Often this results in private owners making less profit, so they try to find a way around the regulation. The cycle goes on.

There is the potential for over-regulation but what is over-regulation can be a very grey area. What a company calls over-regulation may be perfectly acceptable to the population and vice versa. The banks said they were over-regulated before the GFC. Since then, most people think they were under-regulated.

Parts of the world are struggling with Coronavirus now because of lack of regulation, or regulation applied too late.

About the only thing you can say with regulation, is that someone will always complain that it is too lax, and someone will complain it is too strict. If you have both parties complaining equally, you have probably got the level of regulation about right.

Conclusion

Where all this is leading is to make people think before they apply labels to people or ideologies.

Looking first at economic and political oposites – capitalism and statism:

  • There are aspects of statism that are positive. For reasons of security, monopoly and continuity of supply state-owned enterprises can be beneficial.
  • There are aspects of capitalism that are positive. Innovation and investment from private companies can improve the world.

When you look at the theory of social organisation, the situation is somewhat different:

  • There are aspects of socialism that are positive in particular the concern for the welfare of people.
  • It is hard however to find value in a delegated and deregulated free market theory. While some more ‘entrepreneurial’ types may wish they were deregulated and had ownership of all state enterprises, it is not in the best interests of society in general.

Of course, most of us are at one pole or the other. There is a spectrum of views between the opposites, and we usually sit somewhere in the middle or closer to one end or the other.

While many in the western world describe themselves as capitalists, it only takes a plague to bring out socialism. Suddenly it is all about reliance on government to provide support and leadership. The key thing to remember is that it is not contradictory to be a capitalist and a socialist.

Socialists look at the world through a filter of “what is best for society so that we can function in a safe, harmonious and supportive manner.” Capitalism may fulfil many of those needs. So might statism.

The danger is the person who is anti-socialism. The person who looks through a filter of delegated and deregulated free market. They do not have the interest of society in mind when they apply capitalism or statism to the political and economic controls. Their only concern is how much profit can I make or how can I minimise losses.

Where do you sit in the grid.

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