The socialism vs. capitalism debate is tired and stale. If you look at any media on the topic, you’ll find people rehearsing the same, boring arguments.
“Socialism doesn’t work because human nature is flawed!”
“Socialism doesn’t work because nobody would be incentivized to work!”
“Socialism is inefficient!”
Of course, these statements are true. However, they are not convincing for those who don’t believe them. There is always a get-out clause, a way to skirt around the issue, or simply an imaginary, “what if?” scenario.
These arguments do not get to the heart of the issue of socialism’s impossibility. Next time you find yourself into a debate, use these arguments to tackle the root cause of what you’re discussing.
Socialism is irrational
The biggest and most fundamental task of any economic system is to work out how to mobilize and allocate resources.
One of the biggest contributions Austrian economist Ludwig von Mises made was the notion of economic calculation. He posited that without a functioning market and private property, economic activity would be fundamentally irrational and technically impossible.
This is because meaningful economic knowledge is widely dispersed, and is unveiled through people’s actions. When people act, their preferences are revealed, and people use whatever means they can to achieve them.
Unless people own property, they cannot display that information. Without markets, they cannot transmit that information to others, and without prices they cannot evaluate those choices and wants against others.
Under socialism of any kind, that entire process is centralized and becomes fundamentally political. There is no way for a political body to know all the information to make economic decisions, and no way for them to rationally act.
This leads to economic chaos, shortages, and waste. Prices and markets are the best reflection of current realities because they transmit the most information.
Socialism invites government failure
Socialism is like a game of whack-a-mole: It sees undesirable outcomes, and it tries to change them without realizing this is a reflection of real conditions, leading to them popping up in another form elsewhere.
Take for example home ownership among the economically disadvantaged. The US government thought it was too low, and mandated the private sector to extend unsustainable mortgages, and then subsidized them while constricting supply. The end result was a housing boom and bust, which spiraled into the great recession that caused economic ruin for millions, with no overall benefit. What a waste of time and resources.
It is far better to cure social ills through markets, or supporting consumers, than disrupt the process itself. This makes for a healthier economy, with more money to be spent on social programs, and greater efficiency.
Socialism is too abstract and radical
Societies develop over time. People form their own culture, their own history, and institutions develop to be a reflection of this. Socialism does away with all of that and imposes a universal, abstract ideal on the population.
This is particularly poignant in socialism’s distaste for the family. Traditional, tried and tested institutions that have stood the test of time are seen as throwaway barriers to the ultimate utopia.
It says there are no limits, no unchangeable aspects to society, and views everything as a universal blank slate, ready to be molded by an enlightened intellectual few if only given the proper tools. But of course, the world does not operate this way.
Liberal capitalism is not perfect. It can be corrupt. It can cause inequality. It can experience crises. But it does not necessarily follow that the solution is to throw the whole thing out for something someone read in a book.
Take any radical movement that overthrew an imperfect but functioning system. More often than not, it leads to political instability, bloodshed, power vacuums, and unequivocal human misery.
Further reading
For more content on socialism, capitalism, and economic systems more broadly, be sure to also check out the following articles:
Socialism: the failed idea that never dies
Why modernity is unthinkable without capitalism
Don’t be fooled, life in the Soviet Union was awful
Socialism requires cult-like dedication
Liberalism is inherently pluralistic. You are free to express what you want, to experiment through trial and error, and exist alongside competing models. You are fundamentally responsible for yourself and what you voluntarily associate with.
Under socialism, no such freedom exists. You are at the mercy of the collective vision, and it requires a high amount of buy-in to have any hope of surviving.
Regardless of the model, because it has a unifying goal, everyone must be forced to dedicate themselves to it, and that amount of political power leads to corruption and tyranny.
Aside from this being unethical, it relies on the idea that the end goal is desirable or feasible, and if it ends up not being so, you’re in dire political straits. Why would you hinge an entire society on a vision that has such a horrible record?
The reality is that human beings are a diverse and restless folk, and are not mindless automatons that can be moved around on a chess board.
Socialism is not scalable
Socialist societies can only vaguely function in small populations with high degrees of trust. Think of it like a family: you can all pitch in, you know what you get out of it, and you are familiar enough to exert pressure on others to be productive.
Add onto that how dysfunctional many families can be, and you begin to see how this doesn’t work when you scale it up.
Once you start adding more people into the mix with their own thoughts and ideas, you become further removed from the people who make the decisions. Even if you organized into familial subfactions and exerted democratic pressure, you simply start losing track of the entire system and it starts to become dysfunctional, or it devolves into tribal warfare.
Fundamentally, the further decision making gets away from actors, whether it be producers, consumers, or non-economic decisions, the worse it gets. There are simply too many variables, and the feedback loops break down.
At that point it simply makes more sense to decentralize and communicate information through prices and trade, and you end up with something closer to liberal capitalism.
For more content on the failings of socialism, be sure to check out our video below:
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