These two sciences are pretty new to humanity. Capitalism was first formalised by Adam Smith, but we did have economic systems before that. Most of these pre-capitalistic systems said that people could never be trusted to behave rationally, and should be subjects of rulers. Any opposition was violently repressed. There was essentially a 100% government tax, the lifes of everyone below them. Feudalisms' serfdom being the perfect example of these systems.

Adam Smith's true insight was that when people were left to their own devices, such as in the workshops of the time, they would make rational choices and quickly increase productivity, and subsequently the Wealth of Nations. The existing social structure of Corporations was the best way to acheive this and was adapted for it's use.

Enter the Industrial Era of humanity, and we'd never had it better. Adam Smith's legacy is the kickstart of the study of economics, but he was greatly aided by people such as David Hume and David Ricardo

The problem was, of course, that relying purely on self interest for direction didn't exactly always turn out well. Most people were living in abject conditions, surviving not much longer than they did before capitalism. The Wealth of Nations certainly increased, but the wealth of the people didn't change too much. 

Karl Marx jumped on this moral dilemma with a vengeance. The "capitalistic democracy" was a sham of the elites. The average working man never had any say, and capital always accumulated with the wealthy. However, there was an existing state institution in which everyone in it was clothed, trained, and fed daily - the military. The State had an incentive to keep it's soldiers in top shape to defent the Nation, and they did. History had proven how much more successful generals and emperors, such as Napoleon, had been when they treated their soldiers well and listen to their advice. Napoleon had risen from fairly humble belongings to become a highly successful coup d'etat emperor. He saw that Meritocracy from below was better suited at ensuring the sharing of success - the workers nomianting the best amongst them to govern. Everyone had to give what they could to the state, and they would receive what they needed in return.

It's a very nice economic theory, but just like classical capitalism, it just doesn't work unaltered.

These two systems clashed for a long time against eachother. Enter perhaps the greatest economist ever to have lived: John Maynard Keynes. He suggested a marriage of the two schools into Macroeconomics -looking at the big picture. His particular brand of it was named Keynesian Economics. The government had to interfere in the market to ensure maximum beneficial equality of wealth. Not perfect equality of wealth, but one that focus on maximizing the wealth of the middle class.

He later inspired a visionary to say "We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard." And paid for by taxes.


So to the question: Which is the better one between Capitalism or Socialism? Well, neither. And both. They both have compelling and appaling practical applications - neither one should be championed.

Views: 25

Comment by Robert Karp on May 22, 2011 at 7:21am
I'm for more of a socialist-capitalism then we have now here in the USA. In my opinion, the "pure' capitalist model we have leaves very little room for morals.  The majority of our society becoming less and less capable of caring for itself and the minority is becoming obese with wealth. I'm all for making it on your own and pulling yourself up by your bootstraps. However, without good education and healthcare, basic healthcare for all, this is not attainable. The US experiment is failing.
Comment by Arcus on May 22, 2011 at 7:53am

I wouldn't say failing, just slowly waning, and definately salvagable. It isn't that the capitalism is particularly pure, try reading through GAAP(...), it's that too many conciderations are being taken to buy all those votes which responds only to advertising, even though they are selling lies. And of course, protecting the precious feathers of the electorate which can take no counter argument at all.

If one attempts to be objective, and look at things such as Gini coefficients, UN HDI, Crimerates, or any of these metrics - however imperfect they may be individually - when combined, a reoccuring theme are areas such as Japan, Central Europe, Canada, and Scandinavia, which seem to suggest that a larger majority of people there currently have it better than the majority of people in the US.

I think the major issue is the strict adherence to the constitutional rights of individual freedom. I mean.. hasn't thought on these subjects changed at all in 250 years? Shouldn't human rights, and the legislation surrounding it, be subject to study also? I don't recall an explicit ban on executions, kinda reminds me of the Bible on the subject of rape.

I thought the idea of human rights is that they are supposed to lay the foundation of acheiving the best possible life for myself. But these aren't rights, they are privileges I can't take for granted, much like having a drivers license give you the right to break the speed limit.

Anyway, it's a bit roundabout way to say that I believe the wealthies needs to help out everyone a bit more in the US. And everyone should thank the wealthy from time to other for giving them charity just for having been born and not taken advantage of their rights better.

Comment by Robert Karp on May 22, 2011 at 8:16am
I agree Arcus, the constitution is not an infallible document and should be open to question like any other document.
Comment by Arcus on May 22, 2011 at 8:32am

If I recall correctly, it was Keynes who remarked (after he had asked Truman what on earth he was thinking when retracting he lend-lease agreement): Europe has all the brainpower, while America has all the capital.

Werner von Braun, Albert Einstein, Nikola Tesla etc, many of the greatest acheivements in the US was been done by either Europeans or people pretty much fresh off the boat from Europe. The last 50 years or so this has been extended to many more countries, and it is the world leader in science. If the cost of all these advancements is the suffering of American nation, it may just be a bit of Karmic justice for having kicked Darwin out of school books some places. ;)

Comment by Alejandro M on May 22, 2011 at 12:30pm

Yawn, yet another post trying to "bring down" the US. By Arcus, a European of course. Admit it, the US has more patents each year than all of Europe combined... so it seems that the US is (and will be for many years) the motor of the world.


As for capitalism vs socialism - one produces, the other distributes was has been produced. It's all very nice to be socialist, but for that you have to have produced before. Look at Sweden - 50-odd years distributing what they had made before... and now they have had to go back to center-right politics. 


As usual, socialism is only held accountable for its intentions - as it NEVER works in practice. 

Comment by Arcus on May 22, 2011 at 12:46pm

"Admit it, the US has more patents each year than all of Europe combined"

I admit it. And involved in ~40% of the worlds economic activity, and american insitutions (though usually in internation teams) publish around 40% of all scientific articles. It's an amazing acheivements which must be taken lesson of. That's exactly why I love America. But the point is, those stats are decreasing because many in the electorate vote against their own best interest for illogical reasons. I absolutely don't mind the rest of the world catching up, but I would really like America to become the clear world leader again since it's done a better job of it than all previous great societies. I hold America up to a higher standard because I think it should be when it is the only superpower.

"so it seems that the US is (and will be for many years) the motor of the world."

Yes, but steadily dwindling in importance. 'Weaker and weaker, but still the best' is a defensive position of the current America I don't think I have to subscribe to.  

"Look at Sweden - 50-odd years distributing what they had made before... and now they have had to go back to center-right politics."

Yes, Sweden saw the boundary allowed by the population when it comes to socialism. It's around 60% average tax rate. The government was overstretched, and it decreased substantially. The pension sysmtem was completely reformed, and everything from free school lunches to high unemployment benefits had to go. There was a limit to the charity in people. As for the current Swedish government, they would be shot for treason in the US. That's how left of center they are from mainstream American politics, including the most liberal democrats. You may not want to live in Sweden - I certainly don't want to, but then again, I'm Norwegian and I have a bit of a squed angle on the subject. ;) - and even prefer the US over it.

But statistically, it's one of the best places in the world to live, and even if it's nowhere you'd want to live, it might not be a bad idea to study why people seem to like it so much.


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