Last time I wrote about socialism. I relayed a story about a professor who graded his class as an average of everyone’s performance, and discussed how it was a valid single dimensional example of how pure, true socialism fails under the weight of human nature.

This time I’d like to write about capitalism. I don’t have a story I consider to be as cute or pithy that derides capitalism, but given the current economic and political climate, I feel there is enough sentiment both toward and against it that I really don’t need one.

To be clear in what I mean by “capitalism” let’s define it thus: A system (economic and social) in which property, business, and industry are owned by private individuals and not by the state. In particular, any products, results, or outcomes that each individual is able to accomplish belongs solely to that person or to those persons with whom it has been contracted. This is in opposition to the socialist tenant that outcomes ought to be shared equally. Capitalism gives each person two main things that socialism fails to, those being 1) the threat of failure, 2) the incentive to excel.

First, the threat of failure. In a truly free market, everyone is free and otherwise left alone to accomplish what they can or, importantly fail to. This means there is no free ride. No one is going to bail you out if you can’t stay afloat. More accurately, no one is obliged by the system or government to bail you out. This threat of failure is a good motivator for those who would like a free ride. It keeps them productive and puts the burden of their support squarely on their own backs.

Second, the incentive to excel. If anyone by his or her intelligence, work ethic, supreme talent, or other superior ability is able to produce more than someone else, they are able to keep what they earn. Since many of us like comfort much more than the daily struggle, the incentive to work harder or be better at something keeps us on our toes and allows many of us to achieve higher standards of living and much comfort.

This is about the extent to which capitalism wins out over socialism. But capitalism isn’t without its flaws. Take for example the Industrial Revolution. During this period the flaws of the capitalist system reared its ugly head so clearly that it couldn’t be ignored, even this many years later. Many business owners, particularly in the rising industries, succumbed to greed (ah, that human nature again), were so focused on profit (ie. capital) that they abused and exploited their employees to get it. Since nearly every business was doing it there was nothing the working class people could do. Working conditions worsened, salaries sank, health, and living standards as a whole suffered. If someone were to complain, they’d most likely be fired on the spot and replaced by the end of the day by someone who’d keep his mouth shut.

This is where unions came in. Workers united and basically forced businesses to treat them fairly. Improvements didn’t come all at once, but the relative respect workers enjoy today is largely due to the unions, even in non-unionized work places. But unions, it turns out, are a lot more socialist than they are capitalist. You see, unions are there to protect each member (except when they’re not), and collectively ensure the good of the whole. This is a socialist tenant. Capitalism would dictate every person should take care of his or her own self.

My point here isn’t to say that capitalism is bad, or that socialism is bad – or that either of them are good for that matter. My point is that in capitalism, if everyone plays by the rules and does what’s right , actually works for everyone. But then it is also true that in socialism, if everyone plays by the rules and does what’s right, it works for everyone too.

So why so much criticism of both capitalism and socialism (especially socialism)? Because not everyone plays by the rules and certainly not everyone does what’s right. This is human nature. In capitalism this leads to a few getting very wealthy while many become very poor, the vast majority being somewhere in the middle. Many aren’t paid what their work is worth but what those above them can get away with, while others are paid much more than what they’re worth. In socialism this leads to apathy and lower standards of living for everyone, except perhaps a small ruling class that doles out the diminishing results of everyone’s labors.

It seems then to me that the best system would be either the right mix of capitalism and socialism, or a completely orthogonal system I’m not aware of as of yet. We certainly want everyone to be paid what their work is worth, and we don’t want to demonize or punish the wealthy just because they worked harder. Further, we’d like to be sure those who absolutely can’t take care of themselves are taken care of. The important thing in seeking a system isn’t looking for one that looks good on paper, but looking for one that matches the people, their morals, desires, and motivations, then applying the right set of limitations and rules to catch and penalize those who would exploit the system.

That system, as far as our country is concerned, looks a lot more like capitalism than it does socialism, but it contains elements of both. It’s been a long time since we were purely capitalists, and the people clearly don’t want to be socialists. Many are uncomfortable with the degree of socialism we have already while others feel the problems we face are caused by capitalism. Both sides have merit to their arguments, but less than they think. Even so, supposing we continue to “progress” closer to socialism, I doubt very much that any of the core ideals of capitalism will ever be given up without a fight.

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