Free Market Capitalism vs Government Socialism

Socialism by definition involves the government directing resources. Capitalism by definition involves individuals self-directing themselves.

so·cial·ism – a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

Free market capitalism – A market economy is an economic system in which the decisions regarding investment, production and distribution are guided by the price signals created by the forces of supply and demand.

Someone said they don’t believe the GDP pie can be expanded by capitalists work?

So for example – if I take one day of a designers labor, one day of a developers labor, and combine it with capital to purchase a server to create something worth more than all the inputs … A website.

Or more simply that it once took 100 humans to cultivate 100 acres of land, but through efficient use of resources we can now just have one person do all of that with a tractor?

Capitalism makes everyone richer because everyone participates willingly and freely. From the landowner to the tractor maker (and his employees) to the farmer.

We are able to use 1/1000 of the labor it took 100 years ago to produce the same amount of food. That seems hugely respectful to the worker at the bottom. The poverty level workers life is far better today than it was 100 years ago. Now they have modern medicine when sick, they always have more than enough food and clean water, efficient shelter that is heated or air conditioned, children that receive free public education, etc. All as rewards directly from a capitalist system that makes more for everyone.

Technological development is driven by the profit incentive. If you won’t get rewarded, why would anyone spend decades of their life working super hard? That is why countries with dictatorships including socialism stagnate and generally have to steal technology from others. The Soviet Union stole tons of technology from capitalist nation’s and still fell far behind, China currently steals from other nations but is far behind (though that is changing since they accepted capitalism and letting people make money from their work in). The reason we have such fast improvements is capitalism incentivizes people to do the really hard years of work.

Even today, countries where people won’t get rewarded for years of labor see that people never even start. That is why we have such a huge gulf between countries. At the end of WW2, Germany and Japan had zero capital… But through a capitalist system their people fully developed into first world countries again within two generations

But set history aside … I see this myself personally every day. I was very lazy most of my life. Then I found capitalism and was rewarded for hard work. So I worked as hard as I possibly could. And I see this same phenomenon in dozens of friends and in everything I contact in society. Even the small business owner who cuts my hair works extremely hard to make it a great experience. She keeps a nice clean shop, tries to get me exactly the cut I want and tried to entertain me with conversation during the process.

Under a correctly functioning free market, no one is a slave. Everyone chooses to work in the area they wish, for the employer they wish. Socialism is slavery…. Since no one has positive incentives, and the state still needs janitorial work, farming and all other work done, the state uses force. That is true literal slavery… “Wage slave” is an oxymoron in a free market. A person might wish they could make $10,000 to jerk off to porn, but that doesn’t benefit society… So they freely can choose to work in any chosen area or company that will pay them. For example, you personally could probably maximize your income by working for $50k as an accountant. Or you could maximize quality of life by working as a writer or a bartender or a ski lift operator for far lower pay. If you worked as an accountant for Microsoft and felt unappreciated, you could easily choose any of thousands of other companies. Many of those will have nice bosses or smart bosses or whatever you prefer. In socialism, no one wants to be the janitor so someone is forced to be it at the point of a gun. There is no opportunity for career growth or change then.

I was just talking to a Romanian friend last night about living under communist rule. Everything was rationed. Shitty apartment housing was assigned. Food was exported to Russia for money for the state while people were starving. Meat was allowed only twice per week. The most expensive personal property one could own is one car. Nobody was incentivized to work or innovate and so nobody did. From multiple first hand accounts it was a horrible place to live. There were two state owned tv channels which were 100% propaganda crap. All of the citizens desperately wanted anything from the western developed countries like cars TV shows etc.

We can’t have the state organized under socialism because of a very simple problem… When you remove incentives, people stop working. When they stop working and you can’t give them a positive incentive, you have to use force. Thus socialism at the government level inevitably leads to dictatorships and gulags. When you can’t use positive incentives, you resort to negative ones.

Free markets and capitalism have tons of socialist businesses… Those are fine. Some nice ones are usaa or mondragon or others. But using government to force socialism leads to disaster.

There are thousands of companies that work just as you say… They are called ESOPs or credit unions or mutuals. Some are better than others. None of them seem to innovate as much as those led by solo founders like Elon musk or bill Gates or Steve jobs or Sam Walton.

But even the companies owned by employees rely on capitalism to motivate their workers.

Published by

Joel Gross

Joel Gross is the CEO of Coalition Technologies.