By John Hawkins
Given what we know in 2012, saying that capitalism will make a society richer than socialism should be about as controversial as saying the earth is round, not flat. Yet, a recent Gallup poll shows that more liberals have a positive view of socialism than capitalism. This is only possible because there are so many perverse incentives that drive the promotion of socialism. If you’re a politician, socialism puts power in your hands while capitalism takes it away. If you want to use the government to control people’s lives, socialism is a wonderful vehicle to do just that while capitalism robs you of that opportunity. If you would rather live off the dole than to work or alternately, prefer to make money off “who you know” instead of “how good a service you provide,” again socialism works better for you. Now take into account the fact that there are no pure socialist or capitalist economies left and it becomes very easy to muddy the water and keep people from realizing the obvious economic superiority of capitalism.
1) Socialism benefits the few at the expense of the many: Socialism is superior to capitalism in one primary way: It offers more security. It’s almost like an extremely expensive insurance policy that dramatically cuts into your quality of life, but insures that if worse comes to worse, you won’t drop below a very minimal lifestyle. For the vast majority of people, this would be a terrible deal. On the other hand, if you’re lazy, completely incompetent or alternately, just have a streak of very bad luck, the meager benefits provided by socialism may be very appealing. So a socialist society forces the many to suffer in order to make it easier for the few. It’s just asWinston Churchill once noted, “The inherent virtue of socialism is the equal sharing of miseries.”
2) Capitalism encourages entrepreneurship while socialism discourages it: A government in a capitalist economy can quite easily give everyone equality of opportunity with a few basic laws and regulations, but socialism strives to create equality of results. This should frighten people who value their freedom because ultimately, as F.A. Hayek has noted, “A claim for equality of material position can be met only by a government with totalitarian powers.“ You can see this happening in America as our efforts to reduce “inequality” have led to an ever expanding government and a vast regulatory tangle that is almost unexplainable despite the fact that it is certainly enforceable. Capitalism encourages people to start a business and build a better life for themselves while socialism lays in wait with IRS agents, nooses made of red tape and meddling bureaucrats looking for businesses to control and loot.
3) Capitalism leads to innovation: Coming up with new products is often time consuming, expensive and hit or miss. Nine ideas may fail before that tenth one takes off. The less the creative people behind these ideas are allowed to benefit, the less time, money and effort they’ll put into developing new concepts and inventions. Put another way, the bigger the risk, the bigger the reward has to be to convince people to take it. Capitalism offers big rewards for productive people while socialism offers makers only a parade of bureaucratic leeches who want to take advantage of their “good fortune.”
4) Capitalism produces more economic growth: Capitalism produces considerably more economic growth than socialism and as John Kennedy said, “A rising tide lifts all boats.” A fast growing economy produces more jobs, more wealth and helps everyone. Many people assume that capitalism isn’t working if there are still poor people, but that misses the point. In many parts of the world, poverty means living in a hut with a dirt floor while in America, most poor Americans have TVs, refrigerators and cell phones. The rich may take home a larger share of the pie in capitalism, but the poor also benefit tremendously from living in a growing, thriving economy.
5) Socialism is too slow to adapt: Capitalism is extremely good at allocating capital to where it’s most valued. It has to be. Either you give people what they are willing to pay for or someone else will. On the other hand, socialism is slow and stupid for a variety of reasons. Because the government is spending someone else’s money, it doesn’t get particularly concerned about losing money. Political concerns about appearances often trump the effectiveness of a program. Moreover, even if politicians and bureaucrats are intelligent and competent, which are big “ifs,” they’re simply not going to have the specific knowledge needed to make decisions that may impact thousands of different industries. This is why capitalism may have its share of troubles, but when there are really colossal economic screw-ups, you’ll always find the government neck deep in the whole mess.