Capitalism or socialism – are those our only choices?

Do we really have to choose between capitalism and socialism? If you listened to American political debates (before “the virus”) you’d probably think so – if you can call all that sloganeering and name-calling a debate. What are these terms supposed to mean, and why all this acrimony?

The term capitalism is defined as an economic system driven by profit, in which trade and industry are controlled by private owners rather than by the state. This pretty well describes the economies of today’s industrialized nations. Conveniently, this definition doesn’t say anything about ethics, about what capitalists can and cannot do to make a profit; it practically sanctions profiteering and exploitation.

The term socialism once meant ownership and control of industry by the state. Today the word has largely become a meaningless slogan, a dirty word smacking of communism (U.S.S.R. = Union of Soviet Socialist Republics). If it has lost all meaning, why is this term still around? Because any demand for economic reforms can be dismissed as socialism, and equating socialism with communism is a very effective tool for deflecting any criticism of capitalist abuses. Add to this a general distrust of governments, and even people struggling economically will fall for this trick.

What is wrong with our beliefs?

Obviously all wasn’t well with our economic system even before the current pandemic, or we wouldn’t have had these arguments. There is unprecedented and unjustifiable inequality in capitalist societies. There is ever greater unearned wealth at the top, while the middle and working classes are struggling. Many full-time jobs are disappearing, and workers have less and less job security, fewer benefits and inadequate wages. There is inexcusable scarcity in the midst of plenty.

Too many people are fooled into attributing today’s (very unevenly distributed) wealth to the capitalist system’s drive for profit and to a fictional free market. Of course, the drive for profit will maximize the Gross Domestic Product – companies will want to sell as much stuff as possible – but the GDP is hardly an indicator of societal wellbeing. It simply measures economic activity, whether it is useful and fairly compensated or not.

The dramatic rise in material wealth isn’t due to the drive for profit. It is the result of (largely publicly funded) scientific advances and to the powerful new technologies based on this knowledge – provided that those technologies are used responsibly and for society’s benefit. Technologically advanced societies should be able to provide a decent living standard for all.

What we got instead was an unheard-of level of inequality. Technology gave rise to wealthy and powerful corporations. Money and power attract the greedy and unscrupulous who grab as much of that wealth as they can get. Money is power, and that power can be used to hijack the political system and further entrench wealth and power. Instead of a decent living standard for all we ended up with an economic system that brought us to the brink of ecological disaster.

So what is it to be – capitalism or socialism?

Rather than arguing over the pros and cons of “socialism vs capitalism” we need to ask what is wrong with our existing economic system, and how we can fix it. Like it or not, these changes require government interventions in the economy. It is governments’ role to outlaw economic activities that are harmful, and only governments can enforce those laws and regulations. If you don’t trust governments – an understandable sentiment – remember that we elect our leaders. It is up to us to participate in public affairs, to choose our representatives wisely and to send the incompetent and/or corrupt ones packing. We need to be informed and politically engaged citizens. Only a functioning democracy can have a fair economic system.

Capitalism isn’t an economic system that optimizes the common good. It is a system in which the most determined and the most ruthless have hijacked the political system and are plundering the world. Why would profit seeking, an inherently selfish motive, maximize the common good? As the economist John Maynard Keynes supposedly put it: “Capitalism is the extraordinary belief that the nastiest of men for the nastiest of motives will somehow work for the benefit of all.”

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