I've been following Financial Samurai's review of Capitalism: A Love Story, the newest documentary from Michael Moore. The post itself is pretty impressive (although I haven't seen the film yet, I've heard quite a bit about it through the grapevine), but even more fascinating is the discussion that has ensued following it. FS had the foresight to not only ask about the movie itself (which, to judge from the comments, he might be the only person in the blog-o-verse to have seen), but about the relative value of capitalism, itself.
As you might expect from a crowd consisting mostly of personal finance bloggers (or at least, those who willing read and comment on personal finance blogs), the responses were primarily in favor of capitalism, and opposed to Mr. Moore's conclusion that capitalism was horribly flawed. But the conversation about the film, capitalism, and biggest alternative, socialism, got me thinking: is socialism even workable as an economic system?
Before we start looking closer at socialism and socialist societies, we should probably define the term. Nowadays, it seems that it gets tossed around quite a bit, usually as an pejorative to describe the possible health care reforms. But that's hardly an objective definition. Instead, let's check the online reference of choice for word definitions, Dictionary.com:
Socialism: a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.
So, rather than private or corporate ownership of companies, utilities, and other services, the community as a whole (usually in the form of the government) owns everything. It's generally viewed as a more moderate form of communism, not completely eliminating private property and private ownership, but nationalizing most of the corporations and other large businesses. A complete list of the (British) Socialist Party's goals should shed more more light on what the socialists seek to accomplish.
Going through their goals, there seems to be a lot to like; maximum 35-hour workweek, free education from preschool to university, ensuring full employment: what's not good about this? It almost makes me want to run out to the nearest Socialist party meeting and sign right up; it sounds like a working class paradise.
The Problem with Socialism
If you start to read through the list of goals (actually, according to their own words, ‘Our Demands'), though, some things start to stand out as being troublesome, if not impossible to actually implement:
- No transfers of jobs or production without the agreement of the workers. – I don't know about you, but if I had a decent, well-paying job (and I'm open to any offers, by the way 😉 ), there's no way in heck I'm going to let it go. If this sort of law was on the books in 1920's USA, there would still have been workers making Model T's into the sixties.
- All factories and plant threatened with closure to be brought into public ownership and used for socially-useful production, with compensation only on the basis of proven need. With one simple rule, you've ensured that no private corporation would ever close a plant again (unless the ‘proven need' part is much easier to do than I would think). If I were a business owner, I'd never even think of closing a plant again, regardless of how much money it was hemorrhaging.
- Take into public ownership the top 150 companies, banks and building societies that dominate the economy, under democratic working-class control and management. Compensation to be paid on the basis of proven need. There's that ‘proven need' bit again; I'm going to go out on a limb and assume that none of the owners of the top 150 companies are getting any compensation, period. Also, as anyone who's watched government in action could tell you, democracy is great in principle, but slow at getting anything actually done.
There's also any number of services that would be rendered, including free education for life, decent housing (with affordable rents) and a public transit system, all of which must be paid for in one way or another (taxes being the most obvious, although if the government owns the 150 biggest companies, I suppose their could just redirect the profits, although that's just taxation by another name).
That's not the only problem with socialism; as noted on the WikiAnswers page for socialism, socialist societies tend to have few incentives to participate, to work in order to become better at your job. If you can easily get a job that provides you a living wage, more than enough to fund the essentials in life (especially if they are kept well below what you're making) without having to work to advance your skills or efforts, why would you try to improve yourself? The result is a society that promotes stagnation.
Socialism is a nice theory, one that's very attractive, particularly to those who aren't exactly winning the capitalist game. But it depends on people behaving in a way that is totally opposed to the natural tendencies most of us have; that is, to be greedy, selfish bastards. Without the profit incentive, there needs to be something to encourage people to work harder and build society, and honestly, I'm not sure that anyone's really stumbled across that something yet; even the countries we call socialist still have some private enterprise and the ability of people to advance their monetary situation. Until human nature changes, I don't think we're going to see many successful truly socialist countries.