This article will focus on some of the disagreements between capitalists and socialists, the debate will be located in a loose general framework between these two viewpoints and illustrate a couple of the most common propositional and counterarguments in the discourse. The core of the capitalist doctrine will be defined as the belief that the means of production and distribution should be owned privately in order to gain profit: private ownership and free enterprise are believed to lead to more efficiency, lower prices, better products and rising prosperity 1/2. Socialism will be stipulated as a theory which advocates that ownership and control of the means of production should belong to the community for the common good: under these premises the community is assumed to be both more just and humane3.
That capitalism is the presiding economic system of today's world is indisputable, however the fact that it is dominant does not necessarily imply that it also is the supreme. The 20th century has been marked by fierce debates challenging or justifying the validity of capitalism; world powers have disagreed and still disagree about the benefits and drawbacks of the system and the dispute's considerable consequences can amongst others be felt through the relics of the cold war4/5. According to many the question was settled with the dismantlement of the Soviet Union in the late 1980's, it ostensibly seemed that the capitalist system had proven its victory over socialism when compared to the economic failures and horrors of the former Soviet countries6. However, despite a dip in interest during the late 80's and 90's, the debate has not lost its relevance and was vividly revived with the 2008 financial crisis; due to the crisis' severe consequences of mass-unemployment there was a renewed urge in questioning the validity of the western capitalist economic system7/8. The debate's importance and actuality cannot be stressed enough as it has a force which can re-/shape the very fundamental cornerstones of our society.
8 Kunkel, B. (2011). How Much Is Too Much? Benjamin Kunkel, 9-14.
A free market gives the power to the people to choose and decide what products and services should be offered to them. If many people want the same thing the demand will be higher and it will be profitable to offer them on the market since it will sell, therefore the people are in command of what products are being offered to them through their own want. The market is thus decided upon what people need and therefore there will be no excess products or services offered e.g. let us presume that many people want to see high quality basketball, a person like Michael Jordan who has a talent for basketball and has honed his basketball skills would in this case be much in demand. People are ready to pay for the service he offers (excellent basketball) and consequently his high wage will be justified. On the other hand a mediocre basketball player would not be paid at all since there is no demand to see mediocre basketball, his service does not have an attraction on the market and will thus be eliminated1/2. This is all part of what could be called a "dynamic capitalist system" which values individuality (honing your basketball skills), rewards ability (having basketball skills) and risk-taking (risking that you will succeed with it).
2 Nozick, R. (1974). Anarchy State and Utopia (pp. 54-56, 137-42). Basic Books.
Often when consumers buy things they might ostensibly believe that they have a choice, when in reality they do not, since they are presented with several options; I could e.g. either watch this blockbuster movie or that blockbuster movie on the cinema. However, there is no option to watch anything else than a blockbuster movie and consequently there is no real choice offered. Capitalism has already decided what is going to be produced and the consumer is left with nothing else than purchasing whatever is provided. Another example could be that there might be a whole range of food options in the supermarket, but the good food is expensive and therefore the people with less income end up eating unhealthy food since they cannot afford the good food, therefore in practice there is no real choice since one of the options is not available for the people with less income because it is too expensive1. An additional counterargument might also be to question the validity that a product/service's price should be determined by the pure fancy of the market, is it really justifiable that Michael Jordan earns much more than e.g. a nurse? The nurse provides a service which saves lives while Michael Jordan only supplies entertainment, even if it is only Michael Jordan who can play a certain kind of high quality basketball and many more people are qualified nurses, it does not justify at all the wage difference between the two2.
2 Sandel, M. (2004). Justice: What is the right thing to do? Allen Lane.
The right to own property is central to man's existence since it ensures him of his independence of survival. It provides a means to sustain himself without relying on others inasmuch as he has control over a property and can make a living from it. However in order to acquire property the person must gain it from his own labour, if he takes the fruit of someone else's labour without consent that would be plain stealth. However, this is not the only requirement which must be fulfilled in order to gain property: imagine a scenario where I pour out tomato juice into the ocean, I have mixed my own labour with nature and made an "own" creation, but could it be said that the ocean is my property? Most people would certainly say no and therefore one of the following two provisos must also be met before one can fully acquire property:
1. It does not impact on others chance of survival/ comfort of life
2. Leaves the others better off than before.
Let us presume that we have a wasteland which generates very little harvest since it is uncultivated. If I privatise and cultivate a bit of this land it will generate more harvest since I have put work effort in it. Presuming that the privatisation does not leave the others worse off than before e.g. there is plenty of other wasteland they can cultivate on their own and does thus not harm anyone else's opportunities/chances to cultivate their own land, privatisation is allowed for the individual good. Alternately, others are better off if they do not have the skill to cultivate land themselves and can lease their labour working on my privatized land, they would win on the deal since the wage I pay them would be better than what they would have gained on their own1/2.
2 Nozick, R. (1974). Anarchy State and Utopia (pp. 54-56, 137-42). Basic Books.
Under capitalism property is privatised under the presumption that it will not harm anyone or even that it will benefit everyone. This is not the case and what actually takes place is that property becomes concentrated into the hands of a relatively few well-off people leaving the rest more or less without property. The capitalist's bargaining position is far superior in comparison to the worker's (since he is a capitalist) and he can use it as an advantage in order to concentrate wealth for himself. If the capitalist has everything and the worker nothing it leaves the worker with nothing more than the mercy of the rich for work, charity, etc. Even if the capitalist offers the worker a salary on which he can survive (in comparison to unemployment a salary on which he can survive "makes him better off') it is a forced contract out of necessity from the worker's part1/2. Consequently private ownership is by no means on par with the possibilities of owning goods in common and is thus contradictory to the capitalists premise of not harming others3. Capitalism makes the majority more dependent on a minority than they would have been if property were shared.
The Western democratic capitalist system protects individual's rights and liberties through freedom from of interference by other people. Mature adult citizens are believed to have the capacity to choose what kind of life they want to lead and create their own future without paternalistic coercion from the state (Berlin, 1958). The capitalist society's ideals could perhaps be best exemplified with the American dream where everyone has an initial equal opportunity to reach their full potential, each individual being choosing their own path free from external coercion,. James Truslow Adams defines the American Dream as the following in 1931 "life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement"1. The current President of United Stated Barack Obama is a typical example of a person who has achieved the American dream. Barack Obama did not start his life with a traditional "fortunate circumstance" previous presidents had enjoyed (e.g. George Bush). Nevertheless he succeeded in transcending his social class, his race etc. and became the president of United States2. Thus capitalism provides everyone with a fair chance to reach great achievements in their life if they seize the opportunities.
1 James Truslow Adams papers, 1918-1949. (n.d.). Columbia University Library. Retrieved June 7, 2011
Capitalists often disregard the fact that people, although being individuals, also are formed by their social circumstances 1/2. People's class belonging, sexuality, sex, nationality, education etc. have a major impact on people's opportunities; there might be cases of individuals achieving the American dream like Barack Obama despite their social background, however this is not applicable to the majority of people. In capitalism the people with the most opportunities are usually the people who have the most capital, take the example of university students: universities in many countries such as the United States and United Kingdom charge students high tuition fees, if one is not wealthy enough to pay for these fees the likelihood to continue into further education is much lower (if a loan is provided one would have to risk to be indebted for a long period of one's life, or not have the opportunity to study at university at all)3. This can by no means be called an equal opportunity for everyone. It is not enough to provide opportunities; people must also be in a position to grab them.
1 Berger, P. L., & Luckmann, T. (2007). Kunskapssociologi : hur individen uppfattar och formar sin sociala verklighet. (S. T. Olsson, Ed.). Falun: Wahlstr
The strongest motivational force a human being can feel towards work is a potential reward for their effort, therefore those who work hard and contribute most to society should justly also gain the most in form of increased wealth (e.g. private property). When work is uncoupled from reward or when an artificial safety net provides a high standard of living for those who do not work, society as a whole suffers. If those who work will benefit equally as the ones who do not there will be no reason to work and the overall productivity will be lowered, which is bad for society. Incentives are therefore necessary since it increases the overall standard for the whole society in form of material wealth, the fact that individuals are driven to succeed and earns what is rightfully theirs is thus in all our interest. With an overall higher productivity even the worst off may benefit more than they would have if the productivity had been low e.g. through charities etc.1/2/3/4
1 Rawls, J. (1999). A theory of justice (Rev.). Oxford: Oxford University Press.
2 Bradford, W. (1856). History of Plymouth plantation. Little, Brown and company.
3 Nozick, R. (1974). Anarchy State and Utopia (pp. 54-56, 137-42). Basic Books.
4 Perry, M. J. (1995). Why Socialism Failed. University of Michigan- Flint, Mark J Perry?s personal page.
According to Karl Marx work should not be regarded as just a means to achieve a reward in the form of profit, work should (i) be directed to the need of their fellows, (ii) be an enjoyable, meaningful activity which develop human capabilities. In the capitalist system labour becomes distorted e.g. industrial work tends to be monotonous and dulling without any enjoyment at all. People are more or less coerced to work for their survival and accept even the most horrific work conditions; work is only performed on the capitalist's terms1/2. If workers did not have to fight for their survival and labour was directed to the meaningful activity of helping others instead of profit making for capitalists, incentives in the form of profit would be without value. The want to share wealth and material amongst the community is inscribed in the human essence and constitutes meaningful activity. It is not merely possible
The gap between poor and rich countries has never been as great as it is today, Warren Buffet's wealth was estimated to be a net worth of approximately US$62 billion in 20081, this while one in seven people on earth goes to bed hungry every night and 6.54 million children die of starvation and malnutrition every year2. The absurd inequality between people's wages is because of the capitalist system, since the capitalist's only aim is to generate profit there is no reason to keep anything other than a minimum wage for the workers. In a globalized world, rich countries can outsource industries to poorer countries where workers will not expect so high a wage. The lower the wages a capitalist can pay to the labourers, the more profit he can generate. A capitalist does not care whether his labourers' living standards are good, acceptable or bad (although he does want to maintain a level where the labourers will not die or rebel), as long as they deliver the work for the lowest wage possible3. Therefore a company CEO can gain an absurd amount of money since he will reap all the profit made from all the labourers in his company while the lowest worker in the hierarchy will only earn enough to survive. The ordinary worker does not have a free choice whether he wants to work or not since he is at such an inferior bargaining position that he has to accept the capitalist's offer in order to survive.
According to socialism this inequality is atrocious, it can by no means be justifiable that an ordinary labourer who works equally as hard, or harder than a CEO should struggle for his survival while the CEO lives in unimaginable luxury. In socialism, production and wages are directed to human needs, there is consequently no need to maximise profit and thus this gross inequality would be evened.4
1 The World?s Billionaires: #1 Warren Buffett. (2008, March). Forbes.
4 Marx, K. (n.d.). Critique of the Gotha Programme: I. Marxist Internet Archive.
The reasons behind the poverty gap are not purely because of a capitalist expansion; a clear example may be seen at the development of the African region between the 1960.
Free market economics also provides the solution to such inequality; labor will gravitate towards companies which provide the best working conditions and wages. For example, while most automobile companies offered two dollars per day as wages, Henry ford offered five, guaranteeing him the best of the best by way of labor. The important point is that the employers do not enslave the workers, the workers are more than free to try to find better employment, be it in better pay, better conditions, easier work, better benefits or more satisfaction.
Capitalism always acts on the cost of nature and its ecological balance. With its imperative to constantly expand profitability, it exposes ecosystems to destabilizing pollutants, fragments habitats that have evolved over time to allow the flourishing of organisms, squanders resources, and reduces nature to the exchangeability required for the accumulation of capital. Socialism requires self-determination, community, and a meaningful existence. Capital reduces the majority of the world's people to a mere reservoir of labor power while discarding much of the remainder as useless. The present capitalist system cannot regulate, much less overcome, the crises it has set going. It cannot solve the ecological crisis (e.g. global warming) because to do so requires setting limits upon accumulation
In practice capitalism and environmentalism do not necessarily have to clash with each other as can been proved by small enterprises that can directly implement green criteria by, for example, using renewable energy sources, avoiding toxic chemicals, repairing or recycling used products, and minimizing reliance on long-distance shipment for either supplies or sales. Because the free market is directed ultimately by its consumers if the consumers demand more eco-friendly products the suppliers will also increase its efforts to be eco-friendly, thus the two of them don't have to be incompatible. Here are a few suggestions of how capitalism and environmentalism could go hand in hand: (i) energy-saving and other cost-cutting measures are advantageous to companies; (ii) maintaining good public relations with consumers involves having an eco-friendly policy1.
'Credit bubbles' and resultant credit crunches (financial crisis) are inherent in the capitalist system. The economy undergoes a crisis whenever productive economic sectors begin to undergo a slowdown resulting in falls in profits. The recent crisis was caused due to the fact that there was an inflated investment in real estates. It was invested in with the purpose of keeping up profits which lead to a rise in the price of properties. Because of the increased price in property many people took out loans on their house and bought goods for the credit, thinking they could easily pay back their loans since their house would be more valuable at sale. However, since the rise of price was fabricated and not corresponding to an actual need (it was a bubble), house prices had to invariably go down at some point. When the prices eventually went down people could no longer afford to pay back what they had bought on their loaned houses and the installed payments were the trigger of the financial crisis. It could perhaps be said that the economy was surviving on money which did not exist (thereof the name 'credit bubble'). The result was that there were countless goods which no one could buy because no one could afford to pay for them, in turn this lead to a stagnation in the economy and hence to a crisis. A socialist system would not produce overconsumption since its aim is not profit but human needs, it would not have a reason to fabricate an investment for the sake of keeping up the profits and would therefore not cause a capitalist crisis1.
In order to avoid economic crisis there is a need to return to a separation of commercial banking from investment banking which was e.g. implemented as legislation in the U.S.A. under the 1933 Glass-Steagall Act (scrapped under President Clinton in the 1990s). It is dangerous to allow banks to get into a position where they can be shut down by pursuing exciting, but high risk investment banking activities such as real estate speculations. The rationale for this separation is that it was a commercial banking crisis which posed the systemic risk, investment banks should be left alone from state interference and left to the influence of the market. "This leaves a much more limited, and practicable, but still absolutely essential, role for bank supervision and regulation: namely, to ensure that the core commercial banking system is thoroughly sound and adequately capitalised at all times. The crisis can thus be resolved through a separation of the banks since the commercial banking won't be affected when investment banks go bust, the whole system will not be dragged down if only a few investment banks misbehave since commercial banks are the backbone of the economy. Financial crisis doesn't have to be something "inherent" in the capitalist system due to overproduction but can be accommodated through some regulations1.
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