With the constant discussions these days about whether or not America could or should accept socialism, it amazes me just how little understanding there is of what socialism actually is. Many in the media see socialism as the equivalent of a welfare state with government programs for everything. That's not socialism. Socialism is a system in which the people own the means of production and it is run by the government. That is different from capitalism in which individuals own the means of production and run it themselves.
There are no countries left that have pure capitalism. Governments regulate businesses in one way or another. Similarly, there are no purely socialist countries. There are always little bits of private enterprise that remains.
So why is it that socialism doesn't work? It's not that difficult to understand if you think about it. Here's one way to consider it.
1. In a capitalist system, even one with much regulation like the USA, the basic economic decisions are made by individuals working together as a market. If a company decides to produce prune flavored cookies for sale and too few people buy them, production of the cookies will stop. If a company comes up with the idea of cell phones and offers them for sale, if the public likes the product, they will buy the phones and more and more will be produced. Competitors will try to improve on the phones being marketed in order to win customers. As a result, phone quality will improve as the competitors make efforts to gain customers. Prices will also come down as companies seek cheaper ways to do the same thing so that they can reduce prices and gain customers. The items produced are constantly modified to satisfy the desires of the public and the methods of production are constantly modified to improve quality and reduce cost.
2. In a socialist system, the basis economic decisions are made by government bureaucrats. If these bureaucrats decide that prune cookies are a good idea, those cookies will be produced and that production will continue whether or not the cookies are desired by the public. There will be some feedback that could lead to modifications, but it will operate much more slowly than it would in a capitalist system. If a company in a socialist society invented the cell phone, it would produce the phones and the public would buy them. There would be little incentive for the phones to be improved however since there is no competition. Phone quality would not improve and phone manufacture would not be made more efficient.
3. These examples are simplifications, but they tell the basic truth. In addition, labor would behave in a different manner in the two systems. In a capitalist system, pay is set by the value of the work being performed by the worker. This means that a worker makes more if he works harder or more efficiently. In a socialist system, pay is set by the government and it is unrelated to the value of what the worker produces. This means that the goal of the worker is likely to do as little work as possible in order to still get his or her wages. Capitalism pushes towards efficiency and socialism pushes towards avoidance of work. (This too is a gross simplification, but it also tells a basic truth.)
4. In a socialist system, the first few years can proceed well enough. As time goes by, however, the lack of incentive leads to a loss of efficiency, an economy that doesn't produce the things that people want and the continuation of outmoded processes and production methods. The products produced become shoddy and less in number. Eventually the economy breaks down. In other words, it becomes like Venezuela.
2
There are no countries left that have pure capitalism. Governments regulate businesses in one way or another. Similarly, there are no purely socialist countries. There are always little bits of private enterprise that remains.
So why is it that socialism doesn't work? It's not that difficult to understand if you think about it. Here's one way to consider it.
1. In a capitalist system, even one with much regulation like the USA, the basic economic decisions are made by individuals working together as a market. If a company decides to produce prune flavored cookies for sale and too few people buy them, production of the cookies will stop. If a company comes up with the idea of cell phones and offers them for sale, if the public likes the product, they will buy the phones and more and more will be produced. Competitors will try to improve on the phones being marketed in order to win customers. As a result, phone quality will improve as the competitors make efforts to gain customers. Prices will also come down as companies seek cheaper ways to do the same thing so that they can reduce prices and gain customers. The items produced are constantly modified to satisfy the desires of the public and the methods of production are constantly modified to improve quality and reduce cost.
2. In a socialist system, the basis economic decisions are made by government bureaucrats. If these bureaucrats decide that prune cookies are a good idea, those cookies will be produced and that production will continue whether or not the cookies are desired by the public. There will be some feedback that could lead to modifications, but it will operate much more slowly than it would in a capitalist system. If a company in a socialist society invented the cell phone, it would produce the phones and the public would buy them. There would be little incentive for the phones to be improved however since there is no competition. Phone quality would not improve and phone manufacture would not be made more efficient.
3. These examples are simplifications, but they tell the basic truth. In addition, labor would behave in a different manner in the two systems. In a capitalist system, pay is set by the value of the work being performed by the worker. This means that a worker makes more if he works harder or more efficiently. In a socialist system, pay is set by the government and it is unrelated to the value of what the worker produces. This means that the goal of the worker is likely to do as little work as possible in order to still get his or her wages. Capitalism pushes towards efficiency and socialism pushes towards avoidance of work. (This too is a gross simplification, but it also tells a basic truth.)
4. In a socialist system, the first few years can proceed well enough. As time goes by, however, the lack of incentive leads to a loss of efficiency, an economy that doesn't produce the things that people want and the continuation of outmoded processes and production methods. The products produced become shoddy and less in number. Eventually the economy breaks down. In other words, it becomes like Venezuela.
2
No comments:
Post a Comment