5 Reasons Socialism Is Inferior To Capitalism


“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” — Winston Churchill

Saying that capitalism is better than socialism is like saying that winning a million dollars is better than being in a high impact car crash. In other words, if you have an open mind, a good grasp on human nature and economics, and a passing knowledge of world history, there’s absolutely no question that capitalism is superior to socialism.

Unfortunately, this lesson has been lost on a lot of people because our school systems have become so mediocre, there are no pure capitalist and socialist systems, and there are a lot of people who promote socialism for reasons that have nothing to do with economics. Is it surprising, for example, that politicians prefer an economic system that concentrates power in their hands as opposed to a system that makes them less relevant? Would anyone be shocked to find out that there are people who like the idea of making money based on whom they know and where they put their campaign contributions as opposed to slugging it out in the free market?

So with all that in mind, it is worth explaining, once again, why capitalism is absolutely, undeniably, unquestionably superior to socialism.

1) Capitalism produces faster growth than socialism. Ever heard someone say, “A rising tide lifts all boats?” It’s very true. Why do you think most poor people in this country have refrigerators, microwaves, and televisions that we think of as basic necessities even though those items are considered to be luxuries in much of the world? For all the Occupy Wall Street talk about the “1%,” if you make $34,000 a year after taxes, you are part of the worldwide 1% — and Americans make up half of the total 1%ers on the planet. You can thank the growth created by capitalism for that. Even nations like China have figured this out and have seen their economies lift off by moving towards capitalism. If China keeps at it long enough, eventually the hundreds of millions of Chinese who’re still living in huts and shacks will be able to have the sort of lives and technology even the American poor take for granted.

2) Capitalism works in concert with human nature while socialism works against it. “From each according to his ability, to each according to his needs.” That famous quotation from Karl Marx is at the heart of communism and socialism. It runs completely contrary to human nature. As a general rule, people will work hard for themselves and their families, but it’s considered an imposition so large that only God can ask them to pay other people’s bills without resentment. Put another way, the vast majority of human beings care far more about what they’re going to eat for lunch today than they do about whether someone they’ve never met can pay his rent. (PS: And most of the people who claim to be part of that exceptional few are lying).

Capitalism, on the other hand, relies on a philosophy best described by Adam Smith.

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.

Because capitalism works hand in hand with human nature and asks people to serve themselves as they serve others, it creates a much more productive society that gets the maximum out of its citizenry.

3) Capitalism rewards merit. Socialism rewards mediocrity. Who gets rewarded in a capitalist society? People who can produce. If you come up with a hot new product, give people a service they want, or entertain them better than they can find elsewhere, they will pay you handsomely to do it. Some people complain about the people who get rewarded in a free market. Why should Peyton Manning make so much more than a school teacher? Why should a bank CEO make so much more than a teller at the same bank? Capitalism offers a simple solution to that problem: If the market rewards NFL quarterbacks and CEOs more than teachers and tellers, you can become a quarterback or a CEO — if you’re capable. If you can’t and you don’t like what you get paid as a teacher or a teller, the good news is that you’re free to move on to somewhere that better rewards your talents. In this fashion, capitalism encourages people to make the best use of their talents.

Conversely, socialism rewards people for failure. Can’t find a job? Great, here’s your welfare and your food stamps. You haven’t worked in a year and a half? Fantastic, we’ll keep incentivizing you not to work by extending your unemployment insurance. Are you a mediocrity who is so unskilled and unambitious that you’ll stay at the lowest paying job you can find long-term instead of learning from it and moving on? No problem! We’ll raise the minimum wage for you.

If you incentivize success like capitalism does, you get more growth, prosperity, and success. If you incentivize failure like socialism does, you get more sloth, poverty, and failure.

4) Capitalism is freedom while socialism is slavery. Socialists often use envy to trick people into becoming angry at successful people instead of the ones who are really taking away their freedom.

Bill Gates, the richest person on the face of the earth – what can Bill Gates make you do? That is, during the 70s and 80s, the era of busing, could he have made you send your kid to a school that you did not want him to go to? Can Bill Gates deny you the right to dig holes on your property or put up a little shed on your property? He cannot do any of those things, but a lowly town clerk can…destroy your life just by denying you a permit to add an addition to your house. Bill Gates can’t stop you from doing that. I think that politicians and those that want to control our lives get us to focus away from the power that government has over our lives and cast our attention to rich people.Walter Williams

For socialists to gain authority over your life, your own power has to shrink. The more the socialists take, the less of their own money the people get to spend. Capitalism reacts to the citizenry, while socialism tries to control and enslave the citizens. Capitalism will give you what you want for the right price, while socialism will give you what it thinks is best for you and tell you that you better like it!

5) The marketplace does a much better job of allocating resources than socialism’s central planning. As Ronald Reagan noted, “Millions of individuals making their own decisions in the marketplace will always allocate resources better than any centralized government planning process.” How could it be otherwise? Is there any one person on the planet who truly understands all the ins-and-outs of making a television, an airplane, a computer, and a vending machine? No, of course not. So, how can some bureaucrat in a central location, who may have no practical experience with business at all, make wise decisions that impact tens of millions of products and hundreds of millions of consumers? They can’t. That’s why some people have to wait more than six months for hip operations under socialized medicine in Britain. It’s also why people used to wait in long lines to buy poor quality toilet paper and toothpaste in the Soviet Union.

Conversely, under capitalism, the market reacts almost like a living thing and allocates resources where people want to spend their money. You may think that people aren’t using their money “as they should.” I might even agree with you in some cases, but the only thing the market “cares” about is finding a way to make a profit giving people what they want. Complain all you want about capitalism, but you won’t be waiting for hours to get toothpaste and toilet paper while you do it.

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