Systems: Socialism vs Capitalism

  • by Gitabushi

I spent a few hours debating on Twitter with an unapologetic Socialist the other day, author Will Shetterly.

He’s a great guy. Intelligent and thoughtful, non-combative, focused on ideas, never attacks the person.

I learned a few things from him.

He thinks Socialism is the way to go.  He is bothered by inequality.

This is a picture of a lizard, taken in Texas, by me. Because PCBushi demands I have a photo in all our posts. It makes sense, but sometimes I have to rebel.

Here’s where I can’t thoroughly debunk his thoughts: We are heading toward robotics taking over the bulk of physical tasks, and pseudo-Artificial Intelligence taking over the bulk of mental tasks.  Where does that leave humans?  In a true post-scarcity society, how does society organize itself?

Moreover, Capitalism *does* have some problems.  Capitalism does encourage a “Them that has, gets” cycle, where once you have gathered control of resources or means of production, it easier to ensure you continue to control resources and means of production.  And the human capital you have gathered gets locked into being nothing more than human capital, with their efforts going to enrich the guy at the top.

There are reasons for this, of course: the person who has the creativity, vision, and willingness to risk to organize resources and labor to produce a good actually *should* be rewarded for it.  But once it has created the good, the wealth is on rails: the guy at the top continues to gather wealth and continues to control capital, even if he no longer provides value.  And his progeny also continues to control that capital, even though none of the effort or risk was theirs.

Good examples of this:

Jimi Hendrix died decades ago.  His family still controls all copyrights, and there are dozens of rich family members living off of his creativity that have added nothing to human society.

Facebook made it easier for people to regain connections to friends and family with whom they’ve lost touch.  But Faceook mines users for information, sells this information to companies regardless of intent, buys up (and kills) competition, and manipulates users into avenues of thought and tech use that Facebook prefers.

I have a bunch of thought about this, though.

We on the Right talk about capitalism vs socialism, but what we really are talking about is Free Market Capitalism vs Central Control.

The problem with Socialism is not the so-called sharing or the concern for the poor and marginalized.  The problem with Socialism is it is predicated on centralized control.  A handful of people are in charge.  They have to be, in order to decide what each person’s means is to provide supply, and to decide what each person’s need is to determine demand.  There must be a person or mechanism to consider all resources from an external view, and to assign and then distribute.  And since the goal is maximum efficiency, so that all can live equally at the highest level possible, the central decision-making mechanism decides what your work is, how much you will contribute to the effort, when, and how.

There are so many problems with this. It is impossible for a central group of decisionmakers to predict the consumption of a massive group, so there will be shortages.  It is impossible for a central group of decisionmakers to understand the needs and special circumstances of people they don’t know personally, so they will always favor friends and family, and neglect those out of their immediate sphere of awareness. The system will try to reduce choice as much as possible, in order to increase predictability.  Humans will be forced into less and less freedom to make the system work.

All these are obvious.

But the biggest problem, in my opinion, is that it is a system.

Look: Humans are intelligent.  By “intelligent”, we mean that we are able to alter our environment to suit our desires, and able to do it across a spectrum of aspects (in contrast to an anteater, which can use a twig stuck in an ant-tunnel to get more ants to eat).

That has some implications: Humans are evolved to exploit systems. Humans are always trying to maximize their benefit for a minimum of effort.  Even just a minimum of consideration makes it clear how this mindset is a benefit to survival.

Now consider intelligence from the perspective of IQ. My current working theory is that the only people who use systems as intended/designed are those two standard deviations (or maybe more) above and below the norm.  The smart follow systems because they are able to see the benefit to everyone if they follow the system, even if it hurts them, and/or they are able to see the long-term benefit to themselves, even if there is short-term harm. The stupid follow systems because they don’t know any better; they believe the system will work as intended.

But the mushy middle of the biggest bulge in the bell curve: they are smart enough to see the system isn’t working as intended.  But if they try to use the system as intended, they are at a competitive disadvantage with those more intelligent than they are.  So the mediocre are very good at finding the exploits.  Even someone of average intelligence has the ability to game the system to their benefit.  And any system can be exploited.

So for Socialism, it means that once people figure out how much they are getting, they will work less.  No matter how much they work, they are “getting according to their need”, right?  So why work hard?  They see that Bob over there isn’t working hard, but still getting just as much, so why work harder than Bob?  And those with the power to decide where things go: well, it is so tiring and difficult to have the stress of making these decisions.  That extra ration of meat won’t mean anything after it gets divided among 300 people, so might as well keep it, make sure it doesn’t go to waste.  Moreover, look at all these items that are about to be distributed…everyone is going to get one, and they are right here, so why don’t I just pick the one I like before sending it on to the next distribution level?

The Socialist system has no incentives for people to work hard, try hard, delay gratification, care about others, etc.  That’s why only the very smart and the very stupid can really believe in Socialism.

Capitalism *does* have incentives for people to work hard. I mentioned the problem of family members benefiting from the hard work and innovation they didn’t contribute to. I agree with Mr. Shetterly that rich people giving their kids enough wealth they never have to work is a bad thing.  But I accept it as a necessary incentive for the rich people to create the value that got them wealthy.  I agree with Mr. Shetterly that the top 1% having 80% of the wealth is a bad thing.  But I accept it as being an unimportant side note to the most salient issue: do people have enough to live?  And, of course, that any attempt to remedy wealth disparity through force is worse.

The problem with Capitalism is that once you start to gather resources and wealth flows to you, you start to gather power along with it.  Money talks.

We *need* to have government.  Anarchy is horrible for the human condition.  But government produces nothing.  They can only pay themselves what we let them get away with.  But government officials, being human, want to maximize their wealth and comfort while minimizing their effort. And so do the wealthy Capitalists.  And so the government officials and wealthy Capitalists find common cause of exchanging wealth for power, to keep themselves wealthy and powerful.

For those without wealth, that sucks.

The response of the Socialist is to replace it with a “sharing” system.  Except that humans being humans, it would replicate the same “wealth/power/control” that excludes the little guy even more quickly, with no means of redress.  The response of the Anarchist is to smash the system.  Except that humans being humans, it would be replaced by Strong Man Rules, which would be even worse.

No, when the Right talks about the superiority of Capitalism, what we *really* mean is Free Market Capitalism.  In Free Market Capitalism, everyone has choice: to work for others or gather capital, to purchase something, to not purchase something, whom to work for, whom to vote for, where to live, etc.

Free Market Capitalism works because as a Capitalist endeavor grows, it becomes sclerotic. It loses agility by its size.  It often cannot respond to new technological developments because it was organized to work with outdated assumptions.  The best example of this is Blockbuster vs Netflix.  Blockbuster was a giant with rentals from a box store.  When Netflix started up the mail delivery, Blockbuster followed suit and competed for a time…but it was always just to prop up the box stores. It was doomed to fail.  Netflix has transitioned well from video mail delivery to streaming…but has stiff competition from other streaming services, and will probably be vulnerable to challenges from the next, more agile technology.

Where Free Market Capitalism breaks down is when the Capitalists pair with government to make things harder for competition.  Like Mattel pushing for lead paint testing requirements: it *sound* good: “Protect Our Children from Lead!”, but the impact is Mattel can keep testing costs down with economies of scale, and the rule reduces competition from small, upstart rival companies.

I realize there are all sorts of problems with the United States government. I recognize there are all sorts of problems with the Capitalist system as enacted in the United States in specific, and the West in general, to include Westernized economies of Japan, South Korea, and China.

The problem is that we have systems, and humans are biologically programmed to exploit systems, even if it kills the system.  We are natural parasites of any *system*.

But the lack of system is even worse.

What I like about a Free Market Capitalist system is the incentives are best aligned that everyone benefits even when those with power are selfish.  And I like that the Free Market Capitalist system is based on disruption.  With maximum freedom of choice, there will always be A Way To Do Things, and the bulk of companies and individuals can compete to be the best at doing The Way To Do Things…and then 20% of companies and individuals can try to capture market share by Trying Something Different.

In a Free Market Capitalist system, need inspires creativity, creativity results in success, success breeds complacency, complacency causes failure, failure stimulates need, and the cycle goes around again.

Free Market Capitalism *is* a system, yes, but it is a system that doesn’t specify a specific system.  It is a system of disruptive systems, if that makes sense.

Free Market Capitalism always sows the seeds of competition along with the seeds of success.

So when people talk about the failure of Capitalism, the problem is always “non-equitable distributions” or “unearned wealth”.  But when people talk about the failures of other systems, like Socialism, Mercantilism, Protectionism, Fascism, etc, the problems are always “loss of liberty” and “death”.

Each system has its problems, yes, but the problems of Capitalism seem to be much better than the problems of any other system.

So when I see things like this, my thought is always: they are asking the wrong questions, based on the wrong assumptions.


I don’t care if 80% of the people in the United States think wealth should be distributed differently. Wealth isn’t distributed.  Wealth is earned by creating value, and as such, cannot be distributed by anyone.

*Money* can be distributed, however.  That’s what they are really saying.

The only thing is, distributing money destroys wealth, because it delivers comfort (shorthand for satisfying needs: food, clean water, clothing, dwelling, information, etc.) to those who didn’t earn it.  Since wealth is money flowing to those who create value, delivering money to those who didn’t create value is the *destruction* of wealth.

That means that, yes, a rich person giving money to his kids is the destruction of wealth; and unless the child learns to create new value, the wealth will disappear.

The main objection is that the children of the wealthy can simply hire someone to manage their money, or a trust fund can be set up.

However, that is still putting money toward the creation of value, so it does still create some level of wealth.  It is unfortunate that the wealthy inheritor isn’t personally risking or creating wealth via the use of their capital, but again: the incentives of this minor exploitation of capital use is *still* better than any of the proposed remedies: government taking money and giving it to others.

With this view and understanding of how the world works, I’m convinced that Capitalism is the best system, but can be improved by adding more and more Free Market principles.  We have a long way to go to improve the US system of government before we worry about improving the free market system: we need to clear Left partisans out of the government bureaucracy at all levels, out of education, out of the news, out of publishing, out of entertainment; we need to restore Rule of Law in the FBI, DoJ, IRS, etc.; we need to end crony capitalism, where the government picks winners and losers; we need to end the common phenomenon of Career Politicians, where so-called public service results in multi-millionaire wealth.

But as we resolve those problems, I think we should look to figuring out incentives that encourage disruption, that encourage competition.  I, and others, have proposed automatic sunset clauses of *all* government laws that require higher percentages of legislative support for each successive renewal.  Maybe we could enact laws that restrict the incorporation of a company to a certain length of time?  Imagine if Disney would have only had a charter for 50 years.  At the end of 50 years, they’d *have* to sell off all their various holdings to someone. Maybe someone would get character rights, someone else would get Disneyland/world rights?  I don’t know.  But it certainly *should* have a better outcome than letting Disney retain copyrights on 80 year old works, along with the cash to purchase ABC, ESPN, etc. That power structure has certainly not benefited the entire populace of US citizenry.

It’s something to consider.


5 thoughts on “Systems: Socialism vs Capitalism

    1. Depends on what you mean by “problem”.
      I have zero interest in changing it. I’d like to have zero death tax.

      But as a parent, I don’t think it is a good idea.

      This is partly because my worldview is getting money you haven’t personally earned, risked or sweated for is not good for people, in general. I don’t like lotteries, gambling (except as entertainment as you try to lose money more slowly), or getting rich through the stock market are good for you, either.

      The other part is I also feel if I do my job right as a parent, my kids won’t need any money.. Nor will my grandkids.

      I just really believe that true wealth is living within your means, and wealth is created when you add value to the world.

      I would never want to keep people from giving their kids money, or gambling, or lotteries, or stock market speculation. I want everyone to have the *liberty* to do those things.

      But my personal advice is to work to earn every cent you have. And give big gifts.

      Liked by 1 person

      1. Not a bad attitude at all. The trick with unearned wealth is that the person inheriting it is ready to get it.

        At the end of the day, where I differ from the socialists–among many other things–is that I don’t think society any claim whatsoever to the fruits of my labor over my family’s claim. Yes, it’d be better for all if that wealth isn’t squandered. But if we are to have a society where people are allowed to live as free individuals, then that’s the risk we take absent an intrusive central power. something you discussed quite eloquently in your original post.

        Liked by 1 person

      2. Exactly. I think the benefits to society as a whole from the effort that goes into getting the wealth is worth the squandering.
        And, in the end, LIBERTY.
        It might be unfortunate if people use their liberty to make choices others think are bad, but everyone has the right to make that choice themselves.

        Just because I don’t see a need to give my kids a big inheritance doesn’t mean there isn’t a reason to. I don’t know. I’m not Bill Gates or whomever. I can’t choose for them, and I don’t want to, and no one has the right to choose what anyone does with their money except the one who earned it.

        Liked by 1 person

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