The respective virtues and pitfalls of two competing economic systems are in full-throated debate. Socialism, which only until recently was advocated by “fringe” progressives, is being promoted by many mainstream Democrats. Capitalism — the economic system that propelled the United States onto the world stage and maintains our high standard of living — is under attack as “cronyism.”
In the coming election cycle voters must be aware of how a Socialist shift in America would affect our day-to-day life in the Valley.
Let’s define these systems. The Merriam-Webster Dictionary defines Socialism as, “a form of government in which instead of individual people and companies owning industries, they are controlled by the government itself.” In other words, the government owns and operates the means of production, not investors or private companies. That’s the basic definition of Socialism. It has nothing to do with student loan forgiveness, Medicare for All, free internet streaming, guaranteed minimum income or climate change, as many current candidates for office claim. Nor is Socialism responsible for the construction of the interstate highway system or for the Social Security system.
Capitalism is defined as, “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”
In purely economic terms, Capitalism is our means of generating the “capital” that we spend to build schools, bridges, electrical grids, dams and other modern necessities. Capitalism is designed to reward private industry for transforming people’s investments and savings into these things. Do you suppose that the staff at the Department of Transportation builds these roads and bridges? No, they hire private construction companies to do the jobs, in return for which the companies receive a profit on their investment of money, resources and time, to be put toward growing the company so more roads and bridges can be built.
In contrast, Socialist systems typically generate capital through confiscatory taxation, runaway inflation, or — all too often — forced labor. Socialism puts industry in the government’s grasp, resulting in poor quality goods at non-affordable prices, and in short supply. In summary, Capitalism works because it is based on incentives and the expectation of returns on investment. It rests upon three legs: (1) prices determined by free-market forces, (2) a sensible profit-and-loss system of accounting and (3) private property rights. Socialism fails because (1) prices are set by government committees without regard for actual market conditions, (2) profit is not allowed and losses are not acknowledged, so that no one knows where the money comes from or goes to, and (3) the property rights of the state overrule any private ownership rights. Instead of freeing people from oppression, Socialism keeps them under state control. Before giving your support to candidates who promote some Utopian version of American Socialism, ask them what they propose to do, and about the impact of discarding Capitalism on your day-to-day life.
James Poplar lives in Quicksburg.