The Misconceptions of Capitalism vs Socialism | Building a Sustainable Economy

This post by Chris Milton is a repost from the Inspired Economist

Thanks to a couple of communist revolutions during the 20th Century the economic map  of the world has been polarised between capitalist and socialist thought.  Now, at the start of the 21st Century, we’re faced with the problem of how to build a sustainable economy and the whole capitalism vs socialism issue raises its head once again.

The first thing to take on board is that sustainable economics has nothing to do with either of these two great -ism’s.

Their foundation is all about who owns and profits from the mechanisms of production and distribution: capitalism says it should be private wealth, socialism says it should be society as a whole.  Capitalism does NOT say it has to be investment in the form of debt and socialism does NOT say it has to be the state which holds the reins.

If you take a look around today’s business environment you will see this all around you.  Crowdsourcing is a purely capitalist endeavour where people use their private wealth to invest in enterprises, yet there is not a shred of systemic debt in 99.99% of projects.  Co-operatives and B-corporations are rooted in social ownership and benefit, yet there is barely a crumb of state control in them.

This fundamental error has led to confusion around the role of banks and the state.  Capitalists want big banks and small states whilst socialists want big states and small banks … at least that’s what the politicians who profit from polemics would have us believe.

In fact the size of banks and the state (should) bear very little relevance to whether the economic system is capitalist of socialist.  Banks are needed under both systems as a safe place for capital and a channel through which it is invested; the state is required in both in order to regulate all aspects of society, including business and commerce.

That’s not to say that you can’t get a bloated state under socialism or top heavy banks under capitalism.  Of course you can, all I’m saying is that an interfering state and unstable finance system are not requirements of these forms of economy.

What, you may be asking, has any of this to do with building a sustainable economy?

The answer is Lots, because sustainability has nothing to do with either of these -isms.  It’s all about ensuring we live as a species, culture and individuals in a manner which can be sustained financially, ecologically and socially.  Whether that is implemented using capitalist or socialist principles is almost beside the point, if it wasn’t for one very important thing ….

Both have failed.

The horrors of communism show that if you put too much emphasis on society as a whole the individual becomes so repressed the economy finally dies; and decades of western capitalism have resulted in debts so large that governments now face decades of austerity (read: economic repression) to pay them back.

Just as the publishing laws for yesteryear’s newspapers are inadequate for global social media, so last centuries economic philosophies are inadequate for the challenges of this century.

So the final misconception about capitalism and socialism is that they will help to create a sustainable economy and politicians will rehash these old and misconceived arguments as they battle for control of sustainability.

What they don’t understand is that people want to share and generate personal income: they want to co-operate as well as compete.  That’s the way the economy is going at the grass roots and it’s what will be the foundation of sustainability.

All capitalism and socialism have to do is get out of the way.

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  • Uncle B

    First some parameters:
    Capitalism – An economic system in which private individuals or corporations own and invest in the means of production.

    Anarcho-capitalism – A proposed economic system calling for an anarchic society with sovereign individual property rights and a capitalist free market. Any public services that are deemed valuable, such as law enforcement, would be privatized.
    Social democracy – The most commonly proposed form of socialism, calling for worker ownership of the means of production and centralized democratic government. In democratic elections, workers would vote for 1) their supervisors, 2) their representatives to a local and national council of their industry or service, and 3) their representatives to a central congress representing all the industries and services.
    Liberalism -“1) Openness to progress or change. 2) Generosity and willingness to give. 3) In the 18th century, a political philosophy that advocated smaller government and greater individualism, much as modern conservatives do today. Also known as “classical liberalism.” 4) In modern times, a political philosophy that advocates greater public support, defense, regulation and promotion of the private sector.” (5)
    Marxism – The philosophies and teachings of 19th century economist Karl Marx. Although Marx is credited with the idea of socialism and communism, Marx did not really elaborate much on his utopian government. The vast majority of his writings were critiques of capitalism. However, he viewed the struggle of workers as a continuation of historical forces that would one day lead to communism. This would occur in three stages. The first stage was capitalism, in which the proletariat (workers) are exploited by capitalists (business owners). The second stage would be socialism, or a “dictatorship of the proletariat.” Marx envisioned that this stage would be brief. In the final stage — communism — society would become so classless and collectivist that the formal state would wither away, and society could spontaneously operate as a collective whole without government.
    Communism – 1) A social and economic system in which all (or nearly all) property is public, not private. That is, resources are shared by everyone. Not to be confused for socialism, which only grants to everyone the ownership of the means of production — not necessarily all property. 2) A technically incorrect but widely used term for the system practiced by the Soviet empire. 3) In Marxist ideology, a utopia achieved in the third and final stage of workers’ struggles. (See Marxism, above.)
    Conservatism – The disposition to preserve tradition and resist change. 2) A political philosophy calling for reduced government and greater individual freedom in the private sector.
    Capitalism – An economic system in which private individuals or corporations own and invest in the means of production.
    The current global capitalist crisis
    We are waging our struggles and seeking to deepen our national democratic revolution in the context in which capitalism is facing one of its most severe crises since the depression of 1929. This current capitalist crisis has several interacting dimensions – extensive damage to our environment, the destructions of rural livelihoods, mass urbanization without effective job creation, and above all the gambling with workers’ lives through a casino type economy in which workers have lost jobs and their shelter.
    The America I loved was democratic. America today is a Coca Cola Corpocracy run by multi National plutocrats – eve the Chinese our major Creditors as are the Japanese, and many others. The power of multinational Corporate Lobbyists far exceeds the power and influnece of the American peon, and the two party sham is the laughingstock of the world!
    “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” ― Napoleon Bonaparte
    “How can a country have a world empire when it can’t finance its domestic budget? It’s not possible.” — Paul Craig Roberts
    “Brace yourself. The American empire is over. And the descent is going to be horrifying.”—Chris Hedges
    “For many, the American Dream became a nightmare long ago. It’s little wonder that Americans are afraid and angry.”—Michael Fumento
    “Democracy is four wolves and a lamb voting on what to have for lunch.” ― Ambrose Bierce