Capitalism v. Socialism? - Part II

(Wow. I have finally had some time to put thoughts together. Huh. I hope they come together coherently.)

In order to explain why capitalism and socialism have been placed in opposition to one another, it's important to take a brief look at history.

Socialism came about some time in the mid-1800's, largely due to the fact that the emerging middle class were becoming aware of the presence of a large population of disgruntled workers. As Ricardo's Machinery Problem became reality, capitalists (as opposed to landowners) began to push for reform to either break the workers or assist them; either way, the capitalists just wanted to continue to pursue profits. In order to get the political powers to agree, however, the capitalists had to band together with the landowners -- who were the Lords, Ladies, and politicians -- in order to suppress the working class. Needless to say, there was plenty of class conflict going on at this time.

Robert Owen was a capitalist that believed that strong public planning would create a utopian community that was capitalist in nature -- that is, the property was owned privately -- but subject to strong public laws that would ensure the proper evolution of that society. Owen went to great lengths to prove this theory, and even created his own community. Unfortunately, the planned community, built around working industry, failed to take hold, and the idea collapsed. However, the idea of public planning was agreeable to those workers that could live with that kind of control in exchange for guaranteed wages, a roof over their heads, and steady employment. The first communist ideas thus arose from Owen and his proselytizing.

John Stuart Mill, known for his philosophical writings on liberty, was one of the strongest of the socialists that came out of the 1800's. He believed that social assistance was required for a couple of reasons: first, he believed that gluts -- what we would now call GDP gaps -- existed, as proposed by Malthus (and rejected by Ricardo), and that this would cause unemployment; and, second, he believed that private ownership was essential to the operation of an efficient capitalist nation. In order accommodate those possible gaps, Mill suggested intervention by the government to ensure that the economy remains at full employment. So, you could say that Mill was the father of capitalist-socialism (as opposed to Marx's communist-socialism), with a benevolent government ensuring the well-being of its citizens. Let's just put aside the fact that Smith proposed social programs, such as public education, in order to ensure the proper division of labor (or labor specialization) that would facilitate greater economic wealth for a nation.

Karl Marx would be the one that proposed the "radical" belief that labor, as the ultimate producer in the economy, is the driving factor in the economy, and that labor should take control of the political economy in order to ensure its own interests are met. For Marx, the problem in the political economy was that the laws disfavored labor, for the benefit of capitalists and landowners, and that labor, in a proper representative government, should have stronger participatory rights in the discourse on public policy. Marx's utopia, thus, was one where the government worked for the people: much like Owen, that utopia would be one where labor would be guaranteed shelter and sustenance, and would also be afforded other luxuries normally reserved for the non-productive sectors of the economy.

It is important to move back, now, to a discussion of capitalism and communism. Basic economic courses teach that the fundamental difference between capitalism and communism is the ownership of property. In a capitalist society, property is private; in a communist society, property is public. In a capitalist society, the economy is driven by self-interest, competition, and empathy (according to Smith, a facet which is often left out of most discussions on capitalism); in a communist society, the economy is driven by the government, which has planned out imports, exports, and domestic production to sustain the population. In a capitalist society, everyone is supposed to look out for themselves; in a communist society, the government is supposed to look out for everyone.

And, full stop -- that's where the disconnect is. The concepts of public property and a planned economy does not posit that the government is "looking out for everyone". In fact, communism, to a great extent, is not concerned with the wants or needs of the people; it is primarily concerned with the wants and needs of the nation, for the nation is the sole owner of all property, and the sole determinant of economic production. Meanwhile, capitalism -- as defined by Smith -- is a system which is driven by the motivation of self-interest, regulated by competition, and guided by empathy. In fact, if a capitalist society were to be formed as proposed by Smith, the government would do three things: (1) provide for the protection of the nation; (2) provide a system of laws to protect private property; and (3) ensure proper regulation of the economy by preventing monopolies. Aside from the first tenet, Smith is clearly proposing that the government take an active role in the economy, and that this active role is, in fact, intended to protect the interests of the people, and not the nation.

If the purpose of the government is to protect the interests of the people, then it stands to reason that the form of government that Smith (and others) have proposed is one that is social in nature. Thus, captialism and socialism are not aliens or opposites; in fact, they are closely-related!

When the government proposes a law that may affect the economy, a capitalist ought to examine whether that law meets any of the following interests: (1) the protection of the nation; (2) the protection of private property; and (3) the protection of free competition in the market. For example, the bailout of banks: on the one hand, it could be argued that it was necessary in order to protect the value of private investments controlled by the banks seeking assistance; on the other hand, it could be argued that the intervention distorted competition in the market by keeping certain banks afloat that should have rightly fell. Another example, universal health care: on the one hand, it could be argued that it will destroy free competition in the health industry; on the other hand, it could be argued that it is necessary for the protection of the nation, and that the effect would eliminate the market entirely, thus wringing the question of "free competition" out of the argument.

In either case, it is clear (to me) that capitalism and socialism are not opposites in thought or theory. As stated above, they are, in fact, closely-related. The questions that need to be asked involve the extent to which markets will be destroyed by government intervention, and whether their destruction is in the best interests of a nation.