(This article originally appeared at LinkedIn here)
Capitalism Versus Socialism
Going out on a limb I would say that the majority who will read this article at LinkedIn or in some other business oriented venue are, in one form or another, capitalists by nature who are trying to maximize wealth and corporate performance while still serving and promoting their social responsibility as theysee fit.
However, if I may bring politics into this discussion for one moment in a direct violation of traditionally accepted business mores, what we are seeing and hearing in the current election cycle is a pro-socialism case that is being made in some quarters that has incredibly gained traction and a significant following.
The charts below are of two surveys that were conducted months apart by the website YouGov.com that clearly highlight the current state of much of the body politic in the United States today…
May 2015:
October 2015:
No Free Lunch
While for some a socialist system for an economy may on its surface sound like a good idea, this old quote spoken by a well respected leader from our past sums it all up incredibly well…
“The problem with socialism is that you eventually run out of other people’s money.” – Margaret Thatcher
In other words promises of free this and free that to be financed by taxing the ‘rich’ sounds like an easy and simple solution, until of course that source of funds is tapped out and there is no one left to finance things.
From the finance/economic blogger Michael ‘Mish’ Shedlock, the shortcomings of capitalism that were put forth by Philip Kotler in an article at Huffington Post are listed followed by the rebuttal of each of his points by Shedlock!
But first, repeating another old and cliche quote, ‘elections have consequences‘ and it is up to ALL Americans regardless of political leanings and philosophy to decide who and what they stand for and WHY, and then work to elect those who best represent that way of thinking.
If you sit back, listen to slogans and promises and then simply watch the process go by hoping for the best, then ultimately you deserve what you get!
Unfortunately, at the same time you will be taking the rest of us down with you.
Socialism versus Capitalism
14 Alleged Shortcomings
- Proposes little or no solution to persistent poverty
- Generates a growing level of income inequality
- Fails to pay a living wage to billions of workers
- Not enough human jobs in the face of growing automation
- Doesn’t charge businesses with the full social costs of their activities
- Exploits the environment and natural resources in the absence of regulation
- Creates business cycles and economic instability
- Emphasizes individualism and self-interest at the expense of community and the commons
- Encourages high consumer debt and leads to a growing financially-driven rather than producer-driven economy
- Lets politicians and business interests collaborate to subvert the economic interests of the majority of citizens
- Favors short-run profit planning over long-run investment planning
- Should have regulations regarding product quality, safety, truth in advertising, and anti-competitive behavior
- Tends to focus narrowly on GDP growth
- Needs to bring social values, well being and happiness into the market equation.
Mish 14 Point Rebuttal
- It is capitalism that is responsible for improved standards of living over the decades.
- The Fed and government bureaucrats, not capitalism is behind growing income inequality. That said, some degree of inequality is not only a good thing but a very necessary thing. People need to be rewarded for bringing new ideas to the market. Successful new ideas raise the standards of living of everyone, and income inequality creates the very incentive to market new ideas.
- The inflationary policies of central bank planners is the primary reason people do not make a “living wage”.
- Throughout history people feared automation. Yet every technological advance created new jobs. One reason for the acceleration of job losses now are the very “living wage” proposals espoused by those like Kotler that price humans out of jobs.
- It’s not the role of businesses, nor should it be, to be concerned with undefinable “social costs”.
- It’s not capitalism that fails to charge businesses for pollution costs, but rather governments.
- It is beyond idiotic to propose capitalism causes economic instability. It is governments and central banks that cause economic instability.
- With his concern about “community commons”, one can easily see Kotler is a dyed-in-the-wool socialist. The problem with socialism is, it does not work and never will.
- Capitalism does not encourage high consumer debt. The Fed and central banks do, in the inane belief debt drives the economy.
- Capitalism does not let “politicians and business interests collaborate to subvert the economic interests of the majority of citizens”. Rather corrupt politicians willing to do anything to get reelected are the problem.
- Capitalism does not favor short-run profit planning, but tax laws might.
- In point 12, Kotler argues in favor of “anti-competition”. Competition is the very essence of improved products and rising standards of living.
- Capitalism does not focus on GDP at all. Misguided economists, politicians, and central banks do.
- Pray tell, whose “social values” do we need to consider? Mine? Yours, ISIS? Kotler’s? Personally, I do not want some jackass or set of government jackasses, deciding what is socially right or wrong.
Michael Haltman is President of Hallmark Abstract Service in New York.
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