The Disparity between Capitalism and Socialism

Do young people know the difference between the two?

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I was recently invited to give a talk at a business conference designed to help high school seniors in our county who have an interest in pursuing a business career. Specifically, I was assigned two sessions to describe what the young person should expect as they make the transition to adult life, which was based in large part on my book, “Morphing Into the Real World – A Handbook for Entering the Work Force.”

I wore a suit and tie for the occasion to express my credibility and out of respect for my audience, even though none were older than eighteen years of age. This was going to be an unusual talk for me as I normally address adults, not youth. Because of this, I wanted to know a little about my audience. So, using a show of hands, I inquired where the students were from, such as their high schools, but I also flippantly asked how many were capitalists and, conversely, if there were any socialists present. I received a lot of blank stares on both accounts. This caused me to deviate from my planned program and deliver a mini-dissertation describing the differences. I contended in order to be successful in business, the students would be wise to know what each meant.

Interestingly, some were brainwashed into believing capitalism was evil and simply represented another form of greed. I contend greed is a human emotion, and can be equally applied under either system. Therefore, capitalism is not greed, it is a celebration of the individual’s right to try and succeed. Whereas capitalism focuses on the rights of the individual, socialism concentrates on the rights of the group overall.

I explained, under capitalism the individual has the right to try his/her hand at anything they are so inclined, thereby representing freedom. They simply have the right to try, nothing more, nothing less. If they are lucky, they may succeed, but they also run the risk of failure. Failure is an inherent and important part of the system. There are no guarantees for success. This is why risk is important, to force the individual to work harder and smarter to avoid defeat. As such, capitalism encourages entrepreneurship (innovation and invention). If the person is successful, they are entitled to enjoy the fruits of their labor. If they are not, they must suffer defeat. This should force the person to redouble his/her efforts and try again which, of course, is evolution in action.

To encourage entrepreneurship, our founding fathers took steps to safeguard the intellectual property of the individual. This specifically includes Article 1, Section 8 of the United States Constitution, wherein the powers of Congress are defined. It states, in part, “The Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;”. This led to such institutions as the Patent and Copyright offices which were specifically designed to safeguard an individual’s intellectual property. As early as 1790, the first patent and copyright were approved. At the time, safeguarding intellectual property in this manner was rare to the rest of the world. By promoting the entrepreneurial rights of the individual, our forefathers were embracing capitalism.

As mentioned, the focus in Socialism in on the group, not the individual. Here, the rights of the many take priority over the individual. Because of this, personal initiative is discouraged and the individual cannot endeavor to do better than the next person, and failure is prohibited; the group will always bail you out. There is no notion of assuming risk and being held personally accountable for your actions. All compensation is equitable among workers with no rewards for outstanding achievement or penalties for inferior workmanship. Intellectual property belongs to the group, not the individual. Consequently, this approach discourages entrepreneurship and tends to promote apathy.

The Achilles’ heel of Socialism is the belief everyone is equal and, as such, should be treated and compensated on an equitable basis. On the surface, this sounds like a fair and noble notion. The assumption though is everyone works at the same level of effort and expertise which, of course, is simply not so. Restraining the individual from achieving higher levels of workmanship or striving for higher goals is unnatural and discourages the worker.

To summarize:

Capitalism: The rights of the individual; the right to “try”; requires freedom.
Socialism: The rights of the group; collective decision making; regulations restrain the individual.

Capitalism: Yes, encourages risk; enjoys fruits of labor; individual assumes personal responsibility; promotes evolution.
Socialism: No, discourages risk; individual cannot fail; encourages apathy, discourages change; unnatural.

Capitalism: Yes, belongs to the individual.
Socialism: No, property belongs to the group.

Before closing my talk, I encouraged the students to become familiar with the works of author Ayn Rand, particularly “The Fountainhead” (1943) and “Atlas Shrugged” (1957). Rand’s work touted the need for individual achievement and capitalism, and saw them as two intertwined concepts.

In business, we have to be mindful of encouraging individual achievement and teamwork equally. We realize our team is as good as its weakest player, hence the need to encourage workers to strive harder for perfection. However, there will always be those people who will rise above others and it certainly wouldn’t make sense to impede their growth.

“But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man’s capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made–before it can be looted or mooched–made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can’t consume more than he has produced.”
– Ayn Rand


Is America a Socialist State?

America may not have embraced Socialism as fervently as Cuba, China, North Korea, Viet Nam, or the old USSR, but make no mistake, America has been moving in a Socialist direction for quite some time. Whereas, the country used to embrace capitalism, and was repulsed by the very idea of socialism, now we are just as tolerant of it as marijuana. Young people today are more amenable to accepting it, probably because they were never taught what it was in school. Liberals market it as “equality for all,” while conservatives perceive it as repressive slavery.

Seventy five years ago I would have described the country as 75% capitalist, and 25% socialist. Today, I believe it is just the opposite. Socialism has been in the country since the 1820’s, but was not widely embraced until the country was faced with the Great Depression and had to rethink its economic policies under Franklin D. Roosevelt. FDR’s social programs may have been noble in intent, but did not eradicate the problem. Only World War II brought America out of it. FDR’s legacy was continued by Kennedy, Johnson, Carter, Clinton, and now Obama. It is manifested by labor unions, welfare entitlements, economic bailouts, and handouts to friendly countries around the globe, some for humanitarian reasons, others as a bribe.

Today, approximately one third of the country is on some federally subsidized program. This includes illegal immigration. Another one third is paying not only for their own family, but those on welfare as well.

318.9M – people in America
109.6M – on welfare

58.7% – pay income tax
43.3% – do not

The socialist way of paying for entitlements is through heavy taxation, including personal, corporate, and foreign. The capitalist way is to reduce tax rates, stimulate the economy, and put more people to work.

Socialism represents a redistribution of the wealth. When you hear politicians say, “free education,” “free health care,” and “free” everything else, without having a way to earn it yourself, that is the voice of slavery, not freedom. This explains why the federal debt is so high.

So, Yes, I believe the country is at least 75% socialist and 25% capitalist. It also appears the Democratic Party has turned socialist. Even DNC Chairman, Cong. Debbie Wasserman Schultz, cannot discern the difference. Further, there is the distinct possibility the Democrats will elect Senator Bernie Sanders, an admitted Socialist, as their candidate for president. The only difference between Sanders, and the other Democratic candidates, is Sanders is honest about his position, the others are not.

Keep the Faith!