Capitalism vs. Socialism: Why are we still having this debate?

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My Intro to Philosophy text says very little about capitalism and socialism and this is mainly because these aren’t political philosophies so much as positions about how economies should be structured. Perhaps it is due for the following supplement.

Capitalism the view that the means of production should be privately owned. Socialism is the polar opposite, the view that is the view that the means of production should be publicly owned. That is the traditional meaning anyway, though we should note that “socialist” has for some decades been used as a general epithet by demagogues like Rush Limbaugh to insult anyone less conservative than they are. Some of those people, like Bernie Sanders, have taken to owning the insult. But don’t worry, Bernie doesn’t want the government to run Chick fil a.

Neither pure capitalism nor pure socialism has ever sustained a developed functioning economy for long. Every developed economy in the world has a substantial public sector and a usually larger private sector. The public sector is just that portion of the economy that is publicly controlled and financed ultimately through taxes and fees of one sort or another. The private sector is that portion of the economy that is controlled by private individuals or organizations and it is financed through private spending and investment.

We can see certain political philosophies aligned with socialism and capitalism respectively. Libertarian political philosophy would aim for the purest possible form of capitalism, where the public sector is limited to securing property rights, e.g. prosecuting fraud or theft. Communism would aim for the purest possible version of socialism, complete public ownership of all industry, for example.

Communism has been tried, and hasn’t done so well. Aside from squashing economic liberty for individuals, the completely state run economy isn’t responsive to market signals indicating demand for more of this or less of that. It also stifles innovation that boosts productivity, economic growth and increasing standards of living.

No country has been successful in implementing a completely state run economy. The entrepreneurial spirit is hard to suppress and where it’s been tried, doing so has only fostered the black market. For instance, my wife had relatives in the DDR, communist Eastern Germany. One was a doctor, who’s salary was no higher than his brothers who were blue collar workers. When re-unification happened, however, the doctor had a rather eye popping stash of East German marks to trade in. In addition to being a doctor, he was an avid gardener and he had built a small fortune propagating and selling exotic orchids he brought back from vacations in Cuba. A great many East Germans were and still are serious gardeners. I don’t find this surprising since, on Lockean terms, this is the most basic means of creating private property, through mixing your own labor with the stuff of the Earth.

So communism has been tried and its shortcomings are known through experience. Libertarianism though, is pretty much just theoretical. Perhaps fairly primitive underdeveloped economies like small agrarian villages of the old west were more or less libertarian. But libertarianism and the kind of pure capitalism it recommends has never been implemented on a larger scale in a more developed society. Every developed country around the world has a mixed economy, one that has a substantial public sector and a generally more substantial private sector. This is largely because there are many functions required in a developed society that the private market just isn’t going to take up on its own, like basic infrastructure and universal education. Even on a broadly Lockean approach, which heavily favors the private sector as a matter of personal economic liberty, a developed economy will require a significant public sector to manage and regulate the use of commonly held resources like roads, watersheds, air quality, public health and so on.

And so it is curious to me why we still have debates about socialism vs. capitalism. These are the extreme and unworkable poles on a spectrum of possible economic arrangements. The world has plenty of examples of highly prosperous, free and open societies and in every one of these cases we find mixed economies with both substantial private and public sectors. Indeed, when things are functioning well, these exist in a kind of symbiotic relationship. In our own, for instance, the public sector has a long history of generously funding basic research in science and technology. When new technological innovations get close enough to profitability in the market place, and only then, private capital funds new investment based on patents and brings new products to the market.

The machine you are working at is a prime example of this. Apple, Google and Microsoft have brought great products to the market that have boosted our productivity, improved our quality of life, and created lots of wealth along the way. But these companies are running the last stage of a relay race that began long ago in the public sector. The groundwork for IT as we know it was built with public sector support starting over a century ago (partly with the development of logic, remember Bertrand Russell?) and continuing into the present through university research, military research and development, and many other forms of support for technological development. The relationship between the private and public sector is generally cooperative. Research and development for things like better batteries or touch screens, for instance, has been funded by government grants (often connected to military and national security projects) and carried out by private IT corporations. In other instances, private corporations serve as contractors on government projects.

There is plenty of reasonable debate to be had concerning just how the public and private sectors should work together in this or that economic role. But the idea that one can do without the other is a non-starter.

In the context of such fruitful collaboration between government and private companies, the widespread anti-government sentiment we find in this country, especially on economic matters, strikes me as a kind of blinkered ingratitude. Beyond that, it is a hazard to the prosperity and standard of living we enjoy (witness the state of our roads and educational institutions).

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