Topic: History buffs: Capitalism vs. socialism (Read 2589 times)

Well, I'll try; but to be honest I don't think that is possible without my ow biases entering into my language.  And an objective answer cannot have bias...

I don't believe that Karl Marx intended the term to misrepresent the idea, it's just that humans have a tendency to group abstract concepts into classes that make them easier to compare to each other.  Karl Marx's experiences, and most peoples', is with systems; i.e. hiarchial organizations, logical machines, governments, etc.  By By defining an -ism, he's implying that there is a structure to it, and thus an authority in control.  Further implying that the results of the kind of capitalism that he sees around himself (also in London during the Industrial Revolution) is a product of intentional design.  That is the kind of capitalsim that people hate, the idea of some faceless elite is controlling the economy.  The reality is that there is an elite that controls our economy, but they aren't faceless, they're elected to Congress; and they are all a far cry from "capitalists".

I think that's a good definition of capitalism.


Would you care to answer why the term capitalism, in some minds, can be such an "effective smear?"

Thank you for that.  I've read many books on this topic, and can offer many suggestions.  Currently, I'm reading a history book simply called Salt.  I'd wager that you can guess the focus of the kind of history it discusses.  That one is full of those little "interesting tidbits of history".

If you desire to improve your argumental position, I can suggest both Whatever Happened to Penny Candy? and Whatever Happened to Justice? by Rich Maybury, which are geared towards teenagers; and Economics in One Lesson by (IIRC) Henry Hazlitt, which is geared toward adults that are not formally educated in the dismal science.  Also, the videos by Praxgirl (just google it) are insightful and entertaining, but they are packed full of information.  Praxgirl doesn't wait for those who tend to fall of the back of the bus.

I do not contest this point.  It still is an ongoing process, puncutated by fits.


I do contest this point.  The rise of free markets are intertwined with the breakdown of class privilages, even though that does take generations.  Furthermore, the development of technology is provablely not possible without a concurrent increase in many freedoms, and particularly economic freedoms.  The freedoms of markets cannot be seperated from the freedoms of the public, because not only are they co-dependent, the markets are the public.  Every market is simply the sum total of the individuals who participate in the trade within that market.


There is no evidence that state expropriations were a pre-requisite, and much evidence that it is not.  Despite British contributions to the Industrial Revolution, a great many advancements during the Industrial Revolution were developed in places that did not engage in the suppression of the lowest classes to achieve these ends.  London begot so many advancements because it was the Silicon Valley of the age, attracting the self-selecting inovators to the same locale in order to learn from each other, like the world's first makerspace.  Britons did not have any particular quality of people or state that granted them the advantages, it's just that if your dream was to be the next great scientist or inventor, London was where you went if you could manage it, or New York if you could not.  Just like Seattle was the place to go if you wanted to be the next big alternative music artist during the 1990's.  It wasn't the place that held the attraction, it was the people who were already there already doing those kinds of things.

The fact that London was (and remains) a major investment finance center certainly didn't hurt matters, either; but was not the major contributing factor.

There is no exception to this rule though; that in every market, the freer that it is, the more beneficial for the consumer.   Free markets are not always beneficial for the producers, nor for governments that need to restrict freedom in order to extract tax revenue; but freedom is always and everywhere a net benefit for consumers.
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First of all, I didn't know that bit about Karl Marx, and I love interesting tidbits of history like that. So thanks for the lesson.

Secondly, I find that rule to be something I quite often end up debating with people nowadays in order to try and get them to believe it, so it's good to see someone else of the same belief before I even came to the table.

Insightful post.

I have already defined capitalism earlier in this thread, and don't feel the need to repeat myself.  But the short version is that "capitalism" is not an "-ism" at all.  That term was popularized by Karl Marx, and was meant to be derogatory and to equate the economic model that it represents to a religion.  It was an effective smear that many people buy into even today.  Words matter.

Capitalism, in an economic sense, is nothing but the sum total effects of the many 'natural' laws of economics that express themselves whenever a society is predominately left alone to exchange naturally; therefore it's not an "economic system" or even an ideology in any sense.  This almost never happens in reality, but instead we have varying degrees of freedom in markets.  There is no exception to this rule though; that in every market, the freer that it is, the more beneficial for the consumer.   Free markets are not always beneficial for the producers, nor for governments that need to restrict freedom in order to extract tax revenue; but freedom is always and everywhere a net benefit for consumers.

I don't argue with a Global Moderator 
But it would be better to separate statements of fact and of principle, and regard the first one, to qualify them with some detail, and regard the second ones, to try to keep them in non-contradiction mode with themselves.

In particular, you said that capitalism is not fascism. I agree if by capitalism you mean just free market. But then perfect free markets use to be a quite scarce commodity in world history.

About the improvement of the average quality of life (or richness) during the industrial revolution, I'd say that it was a quite long and much dialectical process (ask the luddites), influenced mostly by factors who had nothing to do with free markets (empire, class struggles, technology, market manipulations, etc). And the fact that the industrialization had to recourse to massive expropriations by state violence in order to start negates anything free-market about it.

Well yeah, the current central bank model is a load, and I'm not sure there are many people that would dispute that. I always view banking, especially when talking about bitcoin, at a very primitive level because that's all 90% of people really ever need.

Central Bank bank guided economics is certainly unsustainable, and increasingly more-so. I don't believe that fractional reserve banking in it's most basic state is the issue. The issue with fractional reserve banking is when standards get too loose, and the bankers get too wishy-washy. At a high reserve, relatively small amounts of investments can both minimize fees, protect reserve balances and leave room for profit. However, it begins with the people and the central banks requesting that more and more of the capital gets spread out to kick-start fundamentals. From there follows a winding path of easy money and despair.

The problem, as I believe you are trying to point out, lies in the central banks exercising control and pushing fake capital in every which way. Instead of handling the natural cycle of things, they try to smooth out the curves which always ends up doing more damage than good. In this respect, I agree with you that the currently driven central bank controlled and modeled fractional reserve banking system will not find footing in a bitcoin-dominated marketplace.

That's not capitalism, that's fascism. 

Even so, you may well argue that most people became poorer due to the injustices that occured during the Industrial Revolution in Britian, but you'd be factually wrong to argue that.  The facts are that the entire nation experienced great advancements in quality of life, at the cost of a relative few.  The overall average being that most Britons experienced an increase in their quality of life (i.e. greater wealth) even considering the many ways that Britons experienced harsher working conditions at the same time.

I'm not saying that the ends justify the means.  The most certainly did not; however, the ends were a net positive for Britons of every class, although particularly favoring the already wealthy class.

This is how free(er) markets always work in the long run, and that is the basic premise of Austrian Economic Theory & Praxeology.

I see that you are talking about traditional banking, and not the modern fractional reserve version.  As an "Investement Banker" you're likely closer to the older model than the current fiat & central banking model.  While "destroy" might not be the correct word, the current model of national fiat currencies backed by fractional reserve central banking models (price control of the cost of money, by their nature) cannot coexist with a rising dominance of Bitcoin or any related cryptocurrency.  That which is not sustainable, by definition, cannot continue; thus the current model of "banking" (as most people understand it, not as you understand it) must cease to exist.

Maybe the differences between Capitalism and Socialism are quantitative, not qualitative?

Higher taxes and social responsibilities of state, less individual freedom == Socialism (extreme - Communism)

Lower taxes, do what you want, but nobody guarantees you get anything useful == Capitalism (extreme - Anarchy)

Hmmm.


Wouldn't Bitcoin better enable socialism by facilitating a fully transparent distribution of wealth?

I have a feeling the working title for the Satoshi whitepaper was 'Socialism 2.0'.

Sorry, I don't understand where you're coming from here, care to elaborate? Let me rephrase, I'm an Investment Banker. As long as there are businesses, I will thrive. Secondly, true capitalism doesn't destroy banking, and neither will Bitcoin, even if it becomes the Global currency. There will come a time where people want interest on their savings, businesses will need larger loans that people don't want to provide etc, etc. At least, for these reasons If not for the fact that a bank is the most secure place to have your money for the FDIC backed insurance, which there will surely become a bitcoin equivalent of if it were to become the global currency.

I like this debate! Ok, I define socialism as:

socialism, noun: the economic theory that if we give all our money to a small group of "controllers," they will give it back to us fairly. Example: pirateat40

socialism, noun: stealing from the working class because someone else stole before, tearing down legitimate government because someone else created a mess of it before, and then killing anyone who says you are worse than the guy before. Example: Stalin

socialism, noun: hedonists pretending to be progressives

This was kind of discussed also in the "Capitalism with social benefits" thread a few days back.

Many was of the opinion that capitalism was the most important factor in increasing the wealth of the whole of society. However, it didn't benefit the poor de facto and the drizzle down effect still left some behind. Maybe even increasing the size of the poor population and concentrating the wealth with the few.

It was also argued that Socialism as a political model did not exclude capitalism as capitalism is not a political model, an apple and orange discussion.

I would say that a sort of "capitalism" (free labour market) has been imposed to the peasants after expropriating them with the (state's) force of their land, so depriving them of the means of self-sufficiency. When and where this happened (most notably in Britain just before the industrial revolution), you might well argue that most of the people became poorer.

I seriously question this claim...


Hindsight is always 20/20, and the kind of political policies that you refer to above are all reactionary, and more often than not, counterproductive to the very ends that they propose to address and you presume that they "dampen".  I could go into great detail, using the Great Depression versus the Panic of 1920 within the US.


Except there is exactly zero examples of a too "capitalistic" society destroying itself, while we now have several mostly socialistic societies that have done so.


I don't actually disagree with your perspectives here, but I do question whether or not your idea of capitalism could resemble my own, considering that no modern banker could possiblely love capitalism considering what true capitalism would do to his job.  You do realize that Bitcoin is going to destroy your employer's economic model, right?

Aside from all of the issues raised above which are very valid issues that I agree with, I suppose I will attempt to shoot an opinion out there, just for the sake of conversation.

It seems to me, that no nation that is 100% stuck in any sort of ideology has ever done well, even though most pretend to be 100% behind a certain concept. The US alone, as you can see today, as periodically adapted pseudo-socialist policies throughout its life, even though we claim to be 100% capitalistic. Academia widely acknowledges the fact that the US is not a purely capitalistic nation, and that our markets are not entirely free. Yet, we seem to continue moving on no matter how bad things temporarily get.

Let's try to examine this mechanic a bit; In the US, things get really good for a period of time, and then really bad for a period of time. This is normal, and to be expected. However, when you examine the policies that get adapted as we enter/exit each of those cycles, you will notice drastic changes. As we are entering an economic downturn, we see many pseudo-socialist policies coming into play. This could serve to dampen the blow, as socialist policies "for the people" may help many cope with living conditions in these periods of hard times. This could be why socialism collapses very slowly (at first, anyway). Socialist policies attempt to work for the people and spread the greatest "happiness", although we know that this does not work over a long enough time span.
On the other hand, as we enter a period of rapid growth and economic prosperity, we see the socialist policies either contract or disappear completely. (New Deal type-programs, etc, etc). It could be argued, that the re-adoption of more capitalistic policies help to propel the period of economic prosperity much higher than it would ever go under a strictly socialist policy. Just as it could be argued that the lows could probably be much lower under a strictly capitalistic society (never underestimate the people, and how much crap they will put up with before they snap).

That said, under a strict socialist/communist/fascist policy, you may see a very long string of dampened down cycles, but muted up cycles which results in a net contraction over time, and ultimately to destruction. However, in a perfectly capitalistic society, you would likely see very, very intense up and down cycles until the one down cycle that would throw the nation over the edge and cause it's downfall in the matter of a year or two.

Using policies on both sides of the coins may cause a dampening of the down cycle and a boosting of the up cycle. In the end, you would have a long-term break even/moderate growth of the nation.

So, after much ado about me blabbing and throwing theories out there with really no backing, it is my opinion that any nation that adheres to a strict ideology without implementing any of another will eventually collapse. This would include capitalism. (Don't get me wrong, I love capitalism, I'm a banker after all) I don't think capitalism is the end-all be-all, however I do think it could be the great equalizer with a stronger weight than the others.

The Roman Empire?  

Before anyone complains it wasn't really capitalism yet, heck they practically even coined the term, from Latin caput, head (of cattle).

The problem with this kind of question is that there is no de facto standard definition of "capitalism" than anybody agrees to.  Indeed, putting a lot of weight on any single word, whether ending in *ism or not, is generally a bad idea.  Definition, clarity, and meaning grow quite rapidly as words are added.  In general these words are good for posturing but not for conveying meaning.  

I could easily see your question answered by people with different idea of what is "capitalsim" in the following ways, all of them justified and logical:  

1)  Yes, every time capitalism has been adopted the society has become poorer or collapsed.

2)  No, this never happened because no society has really adopted capitalism.

3)  No, because "becoming poorer or collapsing" is exactly "leaving capitalism".

Similarly, "plenty of examples of countries falling apart due to socialist/communist/fascist policies" is in my opinion nowhere near clear enough to assign a truth value to.