Why Capitalism is Better Than Socialism
Historically, saying that capitalism is better than socialism is so obvious that it’s the equivalent of saying that Ibuprofen is better at curing headaches than smashing yourself in the forehead with a hammer. However, because all modern economies today tend to be a blend of capitalistic and socialistic policies, this has allowed advocates of socialism to use rhetorical tricks to hide the obvious inferiority of their favored economic system. They pick out the parts of socialist nations they like, ignore the parts they don’t, deny that every socialist nation that implodes is really socialist, and try to claim that mostly capitalist nations are really socialist.
With that in mind, as a starting point, we need to define capitalism and socialism. Here’s Encyclopedia Britannica’s rundown of both systems:
…capitalism, also called free market economy or free enterprise economy, economic system, dominant in the Western world since the breakup of feudalism, in which most means of production are privately owned and production is guided and income distributed largely through the operation of markets.
…socialism, social and economic doctrine that calls for public rather than private ownership or control of property and natural resources. According to the socialist view, individuals do not live or work in isolation but live in cooperation with one another. Furthermore, everything that people produce is in some sense a social product, and everyone who contributes to the production of a good is entitled to a share in it. Society as a whole, therefore, should own or at least control property for the benefit of all its members.
As Jonah Goldberg has noted in his excellent book, Suicide of the West, there is such a lack of controversy over which system produces greater wealth and prosperity, that socialism could be better classified as an ideological system than an economic system at this late date:
Irving Kristol observed that there are no non-capitalist economic theories. I think that is right. The moment a supposedly alternative economic system stops recognizing the role that markets and prices play, it ceases to be economics and becomes some romantic ideology that borrows from the language of economics to sound more attractive or authoritative.
This is so non-controversial that even “Red” China and Russia, the former core of the Soviet Union, have both adopted many capitalist ideas into their systems, so much so that both are in the top 5 nations worldwide in billionaires.
There are lots of examples of wealthy capitalist nations that have added socialist policies to redistribute the prosperity created by capitalism, but there are no examples of nations that became wealthy via socialism. That’s because socialism is always, always, always an enormous drag on creating wealth, so much so that it has destroyed the economies of some socialist nations. A frequently cited example of how bad socialism can make things comes to us from Venezuela in 2017:
Zoo animals in Venezuela are being stolen and eaten as the country sinks further into a food shortage crisis, local police have said.
The Zulia Metropolitan Zoological Park in the city of Maracaibo reported that more than ten species of animals had gone missing from the facility in recent weeks.
Officers said they “presumed” the buffalo, tapirs and collared peccaries - small pig-like mammals - had been stolen for food.
...Three in four Venezuelan citizens report suffering involuntary weight loss due to the shortages and have lost an average of 19lb, according to a recent report.
Why doesn’t socialism work as an economic system? Why does socialism inevitably slow economic growth? What is wrong with socialism?
Simply put, capitalism incentivizes merit while socialism incentivizes freeloading.
Don’t buy that?
Well, take the world’s richest man, Elon Musk. Did you know that he originally made a fortune via PayPal? Of course, it’s what he did with that fortune that’s really remarkable:
“My proceeds from the PayPal acquisition were $180 million. I put $100 million in SpaceX, $70m in Tesla, and $10m in Solar City. I had to borrow money for rent.” - Elon Musk
Under socialism, someone like Elon Musk could have never made that much money to begin with, and even if he somehow did there would have been zero incentive for him to create staggering amounts of wealth, jobs, and tax dollars by putting his wealth into multiple risky companies that he wouldn’t be allowed to profit from. It’s like the old Polish proverb that supposedly goes:
"If I lie down, I get 1000 kopeks a month. If I stand up I get 1000 kopeks a month. Why stand up?"
Yet, this is the world socialists advocate for. As Vladimir Lenin described it:
“We want to achieve a new and better order of society: in this new and better society there must be neither rich nor poor; all will have to work. Not a handful of rich people, but all the working people must enjoy the fruits of their common labour. Machines and other improvements must serve to ease the work of all and not to enable a few to grow rich at the expense of millions and tens of millions of people. This new and better society is called socialist society. The teachings about this society are called socialism.”
Maybe 100 years ago, this sort of nonsense sounded plausible to people, but after all the real-world experience the world had with socialism in the 20th century, only an ignorant person could fail to see the obvious problems with it today.
The government does nothing better, cheaper, and more efficiently than the private sector – and no wonder. Centralized decision-making by non-experts is inferior in practically every way to decentralized decision-making made by elite experts in the field.
Using Elon Musk as an example again, is there anyone alive who could possibly believe that Joe Biden or Mitch McConnell could make smarter, better-informed decisions about the intricacies of electric cars or rocketry than Elon Musk? Of course, not – and those are just two fields out of tens of thousands. The world today is fast and almost impossibly complex while socialist decision-making is inevitably simple, slow, and stupid.
Disincentivizing the hardest working, most talented people and incredibly poor, centralized decision-making would be bad enough, but socialism also rewards laziness and mediocrity.
The moment you start handing out goodies to people whether they deserve it or not, a large percentage of people are either going to coast at BEST or try to do as little as humanly possible at worst. This is why the more socialist a nation becomes, the slower the pie grows for everyone. If a nation adds in too many socialist policies, the pie even starts to shrink. Maybe even to the point where you’re eating zoo animals.
On the other hand, in a capitalist society, where people can gain outsized rewards from their work and risks while being offered few protections if they don’t want to work, people will respond to those incentives as well. People will work harder and take risks with their capital only if they can gain from it. Many people who start businesses put in large percentages of their personal fortunes and work staggering amounts of hours to try to make their new venture a success. Why bother if they can’t profit?
If you want a facile theoretical example of how this could all play out, consider two random, but comparable groups of 100 people who are both tasked with moving as many portable rocks as possible from one side of a football field to the other in a month.
The first group pays each person $100 per rock they personally move from one end of the field to the other and the people that move the most rocks get better food, better beds, and better entertainment than everyone else in addition to earning more money to spend on whatever they want at the end of the month.
The second group splits $100 between everyone in the group each time a rock is moved across the field and there are no rewards, privileges, or benefits for people who move more rocks than anyone else.
Which group is going to move more rocks? We all know the answer to this. It’s so obvious that we don’t even need to say it.
What we don’t know is how every person would answer the question, “Which group do you want to be in?” The reason we don’t know this is that all the people with good work ethics who are physically able would want to be in the first group because it’s where they’d be best rewarded. Granted, they might not be the most rewarded. There certainly could be people who get much bigger rewards than they do at the end of the month, but it’s still where they could do the best.
On the other hand, all the lazy people, along with those that couldn’t or just don’t want to move rocks, would prefer to be in the 2nd group. They’re probably not going to get much compared to people in the other group, but at least they can get something without having to work for it.
It’s just as Winston Churchill said:
In other words, the most talented, hardest working, most capable people tend to prefer capitalism while the laziest, least talented, least admirable people in society and the people trying to appeal to them are going to be pro-socialism. A society full of the sort of people drawn to capitalism is going to economically outperform a society full of people drawn to socialism by large amounts in almost every way, shape, and form possible. That may lead to more inequality, but it will also lead to a several orders of magnitude bigger pie for everyone to take a piece of than there would be under socialism.
So, what are you drawn towards? Capitalism or socialism? The answer doesn’t say much about capitalism or socialism, but it says a lot about you as a human being.