Capitalism? Socialism? Who Makes Them Work…or Not?

By | October 10, 2011 | 0 Comments

Traffic engineers paint lines on streets to help vehicles move safely. The lines indicate the center of the road, the limits of the lanes, and pedestrian crosswalks. It is then up to drivers not to drive on the wrong side of the road, not to wander from lane to lane, and not to run over pedestrians.
The lines are aids to safe driving, but safe drivers are still essential. This is equally true, but less obvious, in other fields. In politics and economics, we assume that “the system” is responsible for the results, while we ignore the individuals who make the system work − or recently, not work.
● In theory, socialism means that there are no very rich or very poor, and no one lacks the essentials of food, clothing, shelter, or health care. Think of your kindergarten lessons on sharing.
In practice, socialism tends to degenerate into stagnation, because the nonproductive are rewarded while the productive are punished. Think of Stalin’s idea of sharing − what’s mine is mine; what’s yours is up for grabs.
In its extreme form − communism − all power is concentrated in the hands of a small group that enjoys the best of food, clothing, shelter, and health care, while the majority gets by with the minimum of all these.
Unrestrained by ethical principles, the pursuit of equality leads to gray uniformity, stifling regulation − and eventually to totalitarianism. To make everything equal, everything must be controlled.
● In theory, free enterprise allows people to achieve their potential. Inventiveness and productivity are rewarded, and laziness is penalized. Think of Steve Jobs and Steve Wozniak in their garage.
In practice, free enterprise tends to degenerate into rapacious capitalism. Think of Bernie Madoff in his penthouse. The stock market reaches new highs, but mountainous debt and bankruptcies drag it down. Businesses are ingested by remote conglomerates. Industrialists sell technology to potential enemies.
In its extreme form, a small group enjoys the best of everything, including the finest health care and private schools, while the majority gets by with rationed health care and decaying public schools. Executives loot their own companies and exit in golden parachutes, while workers lose their pensions and join the unemployed. Many people fear the tax collector more than they fear the police, which reveals the government’s priorities.
Unrestrained by ethical principles, the pursuit of profit leads to lawlessness, and eventually to chaos.
● But in a stroke of genius, we combined the worst aspects of socialism and capitalism. Think of Solyndra. Meddling bureaucrats thought they could pick winners. Instead they picked losers, and shady ones at that.
We established quasi-governmental agencies like Fannie Mae and Freddie Mac, which guaranteed loans. Then the government pressured banks to make loans to people who were unlikely to be able to repay them. We cloaked greed and buying votes in the mantle of “helping the poor and minorities.” Finally, we bundled the bad loans with good ones, and sold them as “investments.”
We removed the risk of making bad business decisions. We privatized the profit and socialized the risk. Then we were shocked − shocked! − when the house of cards collapsed. Like Captain Renault in “Casablanca,” we pretended we didn’t know there was gambling going on here.
As Victor Davis Hanson points out, when the mission director for Apollo 13 said, “Failure is not an option,” he meant that the astronauts would die if the problem was not solved. But when we say it now, we mean the opposite − even the incompetent and dishonest will be bailed out, at the expense of the honest and hard-working.
● Missing in all this is any consideration of what kinds of individuals are involved. Almost any system would work tolerably well if it were run by individuals who had been educated in the basics and were honest, hard workers. Such individuals were common in the early days of both socialism and free enterprise, but they were the products of religion and family structure that had remained stable for centuries.
Both socialism and free enterprise were the ungrateful beneficiaries of generations of hard-working, God-fearing people. But now, the legacy of generations has been squandered. We are running into trouble, but we don’t know why. We refuse to recognize that economic systems of whatever type are like automobile engines: They provide power but do not determine the direction of travel. What does determine the direction? We don’t even ask.
We refuse to recognize that effective workers need a work ethic, and that religion is its primary source. We cannot grasp that good citizens need a good education, which requires teachers who teach real subjects − including American history and civics − rather than politically correct pap that leaves students lacking basic reading and arithmetic skills, not to mention a sense of community.
Our problem is us. We used credit cards not as conveniences or as cushions for unexpected expenses, but to live beyond our means for as long as we could. We saw our houses not as family homes to protect, but as speculations to “flip” for a quick profit. We saw our position as corporate executive not as a commitment to keep the company healthy, but as an opportunity to enrich ourselves and then exit before the roof fell in. Rule-breaking spread like a contagious disease.
We belatedly added ethics courses to schools of business, law, and medicine, but you can’t teach 25-year-olds to be ethical human beings. You have to teach children − at home, in school, in church. But we don’t. Instead, we teach self-esteem. Unearned self-esteem is narcissism. Studies show that criminals tend to have high self-esteem. But we don’t listen.
“Thou shalt not covet,” “Thou shalt not steal,” and “Thou shalt not bear false witness” had no influence on our behavior. Person A falsified his mortgage application, Person B approved it without verifying, Person C sold the bad loan to a pension fund, and Person D rated it as a sound investment. We felt entitled to more than we earned. We thought we could get away with it.
Both socialists and capitalists have been living on their inheritance, and it is running out. This is true for economics, and it is also true for politics. What is your favorite freedom?
● Is it freedom of speech? This requires people who avoid government censorship by refraining from child pornography, instructions on bomb-making, and the grossest forms of slander and scandal-mongering.
● Is it freedom to bear arms? This requires people who use guns responsibly for sport and self-defense, and not for drive-by shootings or resolution of traffic disputes.
● Is it freedom from unreasonable searches? This requires people who do not use explosive chemicals to manufacture illegal drugs in crowded apartments.
● Is it freedom of religion? This requires people who do not join cults which teach that non-believers should be killed whenever they become inconvenient.
● Is it freedom of movement? This requires immigrants who come to their new homeland to participate in its success by sharing its culture of freedom, and not to bring their old, oppressive, intolerant customs with them.
● Is it freedom from government regulation? This requires people who do not loot the businesses they are responsible for, skimp on airliner maintenance, or turn banks into casinos − that is, people who regulate themselves.
Ethical, self-controlled citizens are helpful to any nation, but they are indispensable to a free nation. Only responsible adults can handle freedom. Squabbling brats who steal each others’ toys need a strict nanny. Unrestrained by ethical principles, the pursuit of freedom leads to chaos − and eventually to tyranny, when people will no longer tolerate chaos. If you doubt this, consider the massive increase in regulation being proposed to remedy the economic mess. Consider what will happen if the “Occupy Wall Street” demonstrations become more violent.
Wherever we paint the white lines, we depend on careful drivers who respect human life to observe them. Whatever economic or political system we adopt, we depend on conscientious, productive citizens with a sense of community. We have tinkered endlessly with these systems, but we have neglected the religious and family structures that formerly produced these citizens.
It’s time to stop repainting the white lines for a while, and concentrate on driver education.
Dr. Stolinsky writes on political and social issues. Contact:

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  • Neer says:

    Well, Marx did actually do some itrsteening analysis of the capitalist economy of the Victorian era. His useful observations were largely answered by anti-trust law here in the U.S., however.And the economy does, in fact, tend to undergo a decrease in profit margin every 80 years or so. But that probably has little to do with capitalism per se. My working hypothesis is that demographics is the dominant factor. Every 80 years or so, you get a smallish young generation–the Baby Bust follows the Baby Boom, if you will. Deflation is the logical result. Actually, if we’ve seen the worst of our current troubles, then we’re weathering it surprisingly well, considering the scale of our own Boomer generation. I’m not quite willing to say the worst is over, though. The next year will tell the tale.

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