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Jan 22 2016

Which is more ethical: capitalism or socialism?

Ask this of a random sampling of people and they will first translate the question, “which is more ethical” into some variation like, “which one do I like most” and then they will translate the subject terms “capitalism” and “socialism” into some pre-conceived definition based on their political viewpoint.

capitalism – an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market. – Merriam Webster

Capitalism is an economic system that is based on private ownership of the means of production and the creation of goods or services for profit. – Wikipedia

socialism – any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods – Merriam Webster

Socialism is an economic system characterised by social ownership of the means of production and co-operative management of the economy, and a political philosophy advocating such a system. – Wikipedia

Advocates of socialism will insist that capitalism is based upon greed and the exploitation of the working class and therefore is inherently an unethical system. Likewise, advocates of capitalism will insist that socialism by design concentrates power and always devolves into tyranny and abandonment of liberty. Historically, both complaints seem to have been true. And both seem to progress into their negative aspects because of the failure of leaders to maintain a good ethical posture.

Most Socialists don’t seem to understand capitalism well. They often misconstrue the term, “capital” to be synonymous with money. Karl Marx himself, while pointing out that capital included more than money, seemed to be thinking mostly of money when he used the term. Money is only one of the resources that make up capital and they can include: property, buildings, machines, knowledge, experience, intellectual property and maybe most importantly, the willingness to take entrepreneurial risk in a business endeavor. Effort is also a major ingredient of capital and it should be noted that all of the elements of capital can come from a starting position of ownership (the wealthy) or can be obtained by industrious effort (loans, leases, shares, parternships).

Capitalists seem to be uncaring about the main concerns of socialists. While concentrating on their economic darwinism, they leave by the wayside many casualties in the working class who never got the same chance that industrial leaders had. They often attribute failure to laziness and self-induced ignorance, while at the same time turning a blind eye to monopoly and manipulation in the marketplace that produce the conditions holding down the working class. The obvious successes of capitalism produce corporate giants that are built on a foundation made of the compressed dust of failed workers. These giants then install many obstacles to success by the common human.

Greed and lust for power seem to eventually overwhelm even basically good people who are exposed to it for too long. Both socialism and capitalism tend to work toward the concentration of power and economic leverage that can corrupt and move the system toward tyranny.

When capitalism is working well, the free marketplace determines success and failure and equalizes unfair advantages. It allows economic exploration to seek out new means of production, new markets and new ways to create efficiency that enhance civilization. It is essentially a system of free form ethical analysis, bent on finding the best pathway forward.

When socialism is working well, a central planning group makes ethical decisions based upon the well being of the larger group and the best way to execute the plans efficiently. Fairness is automatically built into the system and the welfare of everybody is equally considered.

Capitalism fails when it is most successful, generating great wealth that can be accumulated into the control of a few hands. It can also fail when it is over-regulated by government and the free market conditions necessary for success are limited.

Socialism fails when it is successful because power becomes concentrated with the central planners and tyranny becomes the inevitable result. It can also fail when the central planners do not have enough collective wisdom to make the best decisions.

Capitalism beats socialism hands down when it comes to finding the best economic solutions because, over time, it probes more possibilities. This comes with the expense of the failures that didn’t work. In order for socialism to compete in this area, it would need a large group of planners with a high level of experience and wisdom. This kind of collective intelligence could synthesize the product of capitalism with less expense of failure, but it rarely is found in the real world. Where it does exist, it is almost always in small groups, with a narrow focus, and almost never in large groups with a wide focus.

Both systems fail when they are successful and power and leverage become concentrated in small groups or individuals who succumb to the lure of control and end up embracing tyranny. It’s worth noting that in both cases, the failures are primarily related to human weakness. However, both systems seem to feed directly into that failure and particularly when they are most successful.

It seems the best solution is not to pick one system over the other, but to concentrate on improving human ethics and preventing the concentration of wealth and power that always leads to tyranny. The key is to do this without abandoning the “trial by fire” and open market solution seeking that works so well in capitalism and also without forgetting the common sense ethics of cooperation and efficiency that can be found in the planning of socialism. Historically, it seems obvious that socialism has failed more spectacularly, at least when it is attempted on large scales.