Posted by jlongton on 10/31/08
Last updated 10/31/08

I was prompted by recent discussions about Socialism, to take a closer look at that particular system, and to contrast it with free-market Capitalism. I want to address, specifically, the means by which resources are distributed within the economy of each system. Though Socialism comes in many forms, they all share the underlying concept that the “collective ownership and administration of the means of production and distribution of goods.” It is from this definition that I base my criticism.

In any economy, there is the problem of routing people into jobs where consumer demand needs to be met. This is accomplished, in a Capitalist system through the price mechanism. If a scarce resource is in high demand its scarcity rises as it is consumed at a higher rate than it is produced. A scarce good or service naturally rises in value — and hence price — as it becomes scarcer. Higher prices attract self-interested entrepreneurs and laborers into that particular market where a profit is being sought. As more competition enters a market, the price is driven down until a relatively stable balance is reached between production and consumption. People are compelled to voluntarily seek, and become skilled in jobs they would not otherwise accept, due to the incentive of larger profits, higher likelihood of finding employment, and job security. If a particular market has been saturated, there is a disincentive for people to seek that as their main source of income, for reasons contrary to those stated above.

Under a Socialist system, the price mechanism is absent; since resources would be distributed by a central governing body (I’ll refer to it as the government, though some may prefer another designation). The continually changing demands of consumers are determined by the government and must be relayed back to producers. When a shortage occurs, i.e. demand exceeds the current supply; additional production of that resource is desired by consumers. Since there is no price mechanism, there is no incentive for laborers to enter that production market. The mere knowledge of higher demand for a particular good or service is insufficient to entice laborers to produce it.

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Posted 10/31/08 Anatasia Ojai, CA

I think the debate of capitalism vs. socialism is a moot point nowadays. REAL free market capitalism is nearly dead in the USA and it isn't socialism that killed it. Perhaps the purest example of real free market capitalism I have seen was in Mexico. While staying in a small town outside of Vera Cruz, I noticed that almost every house in the neighborhood sold something. You went to one house for aspirin, another for candy, and another for sopes (a snack food). No permits, no zoning, no government ... just people making their own money as they saw fit. Contrast that to the USA where zoning and licensing laws make starting a small business difficult ... and once you start your business you have to compete against giant corporates who can afford to take a loss simply to drive the local out of business and "capture" the market share. IMO the defining debate is no longer capitalism vs. socialism ... it is a REAL free market vs. corporate feudalism which likes to masquerade as free market ... but isn't. As a small business owner ... socialists never hurt my bottom line ... but Target and Walmart did.

Posted 12/02/08 salinesal Saline, MI

Posted 12/02/08 salinesal Saline, MI

It is really free market vs. central planning, not socialism. You could view the Target and Walmart as "Corporate Fascism" Corporations working hand in hand with big Government.