Socialism, communism and the beauty of capitalism

Tom Rogan Commentator
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This week, The Guardian, a major U.K. newspaper, published two videos by two different economists. In both videos, the narrators advocate replacing our traditional capitalist market economy with a much more collectivist one.

Video 1 and Video 2 make articulate, passionate arguments. While I enjoyed watching them, I fundamentally disagree with their arguments and conclusions.

Video 1 asserts that society would be better off if the government provided far more services — particularly welfare, transport and banking services. The narrator argues that by providing these services, the government would free up money that people would otherwise spend on these services, which they could then spend on goods and services that directly relate to their personal happiness. He goes on to argue that reducing artistic licensing for music, film, and other art forms would allow for these goods to be acquired at no real cost.

His conclusions have major flaws. First, he neglects to inform us of how society could afford such a dramatic expansion of state services. It seems to me that in the diminished private sector that he seeks, there would be less taxable revenue available to the government even as the demands on the government increased dramatically. Put simply — his math doesn’t add up.

I also fundamentally disagree with his assumption that expanding the state would benefit society. I suppose that ultimately this is an ideological disagreement between us — I believe that the private sector is more productive than massive state structures. Effective private sector services ensure that personal interest is translated across the spectrum of provider-consumer interactions — i.e., that all parties have a tangible interest in improved services and outcomes. In contrast, in the public sector, the provider has no personal interest in ensuring that the consumer can access a high-quality service.

As an extension to this point, the narrator’s belief that “free” music would lead to a dramatic expansion of artistic creativity seems to me to be a complete falsehood. In the absence of a profit incentive for music, film, and the like, many talented individuals would simply leave that marketplace. As a result, their creative talents would be lost to society. Today’s artists aren’t prohibited from providing their music for free if they so desire. The fact that most decide to seek profit from their work is a sign of the critical importance of capitalism in spurring creativity and expanding consumers’ opportunities.

The narrator’s call for community banks that “do not speculate” also troubles me. Clearly there are flaws with the current banking system, but limiting banks to basic investment requirements would destroy the capital base that allow banks to provide loans to individuals. Such limitations would have a direct and catastrophic impact on businesses, which rely on loans to expand employment and productivity. Effective banking requires the pursuit of profit. Money — the value for a good/service — does not come from the ether; it is found in the effective pursuit of greater opportunity and strong capital flows.

I have similar concerns with the second video. Here, the narrator (a communist) argues that the power of “the community” should be greatly increased through the Internet and new forms of living. The narrator argues that protest movements like Occupy Wall Street illustrate a clear trend toward individuals communicating and organizing in pursuit of collective interests. Unfortunately, the narrator completely neglects to mention protest groups like the tea party, which have very different objectives. He doesn’t seem to understand that most people probably don’t share his view of “utopia.”

Interestingly, he argues that the key advantage of communism is that it enables individuals to support each other in ways that, from his perspective, escape the bondage of monetary pursuit. The narrator uses the example of a lady looking for a dog in Argentina (I kid you not) who received help from her community to find the dog. He concludes that to these individuals, the lady’s interest in finding the dog superseded other less important interests that a capitalist society would preference instead. I have a major problem with this conclusion — it asserts that finding a lost dog is a more important social objective than the other pursuits that these individuals could be pursuing with their time. If society functioned this way, it would be rendered obsolete beyond the provision of a basic existence with basic interests. If everyone was looking for lost dogs, no one would be creating the next Google, or Apple, or high-tech health care device. Creativity would be subjugated to “the community,” which would be rendered a gray space of limited opportunities and poor services. What incentive would the entrepreneur have for pursuing a fantastic new product when the reward for his work was a society in which, instead of operating restaurants, or resorts, or retail outlets, most other individuals were growing vegetables and/or looking for dogs all day?

The beauty of capitalism is that it encourages entrepreneurs to develop new products and services that will benefit society by offering them opportunities to use their success to gain personal enjoyment from goods or services that other individuals are providing. In turn, these individuals are then able to pursue their personal interests. In essence, a capitalist society works because it rewards people for their services. Community in a capitalist state comes from common interests and beliefs, but in a manner that allows for higher living standards and diverse, expanding opportunities.

Ultimately, socialist and communist societies allow for a narrow understanding of collective interest, while capitalism allows social interest to be determined by personal choice. Where capitalism trusts in the ability of free choice to allow an individual to use her free time to grow a vegetable plot or, conversely, buy her own vegetables, communism subjugates freedom to the vegetable plot as a necessary mechanism for survival. Free choice and free society are important, but capitalism serves these ideals far better than communism or socialism ever could.

Tom Rogan is an American blogger and writer currently studying in London, England. He holds a BA in War Studies from King’s College London and an MSc in Middle East Politics from SOAS, London. His blog can be found at TomRoganThinks.com.