Updated: Jun 3, 2021
By Radheesh Ameresekere | Canada
Within the popular literature of economic-philosophy, there is a harsh dichotomy between the two most popular economic systems. When considering the best candidate for widespread implementation, most of us usually support one of two options: Capitalism or Socialism. Avoiding the semantics, Socialism relies on socially-driven, state-owned enterprises within a guided economy, whereas Capitalism relies on profit-driven, private ownership in a free-market with minimal state intervention. While these descriptions vastly oversimplify the nuances of each system, they are fairly standard textbook definitions. But beyond their theoretical makeup, how has each system fared?
The Failure of Socialism in Practice
The two premiere examples of socialist failure have been the Soviet Union, and China under Mao Zedong. Economic success, if any, has been at the grave cost of fundamental human rights, and nearly 100 million lives. The same applies to Cuba – there’s a requirement of tyranny and oppression for any tangible success. But strictly for the sake of discussion, I’ll assume that these states “pervaded” the ideology far beyond its intentions, therefore they are incomparable to any “genuine” socialist state.
Genuine socialism was abandoned in the United Kingdom in the 70s and 80s due to three decades of economic failure. The slowest economic growth on the continent, taxation rates in the sky-high 80- 90%, and gridlocked unions, nearly crippled one of the formerly most powerful nations. The economic decline of Venezuela is another relevant, contemporary example of socialist failure: corruption and state mismanagement lead to a total economic collapse in 2010. A quick study of history shows that socialism has failed everywhere it was implemented, and any successes are so disproportionately outweighed by their costs that they are virtually irrelevant.
Capitalism: Economic Growth Despite its Flaws
On one side, capitalism has resulted in atrociously imbalanced wealth distribution, severe alienation of laborers, and massive global-market crashes due to lack of regulation. However, Capitalism has largely succeeded where Socialism has failed – it drives economies. The United Kingdom’s economy was only saved due to vast privatization. China only saw economic prosperity upon becoming a market-economy around the same time, and it was the fall of the USSR, about a decade or so later, which began Russia’s dominance as an Eastern economic power.
Virtually every Western Economy on the planet is capitalist, if not some form of a market economy, and while there have been ups and downs, these economies are significantly more successful than their socialist counterparts. It’s no surprise then that global poverty has seen a sharp decline in recent years. Since the mid-90s, there has been an acute drop in both the worldwide poverty rate and the total number of extreme poor. Capitalist economics is solely responsible for making the world less poor.
“What about the Scandinavian socialist model and its success?” The Scandinavian countries in question, namely Sweden, Denmark, Finland, and Norway, are not Socialist. However, they do provide insight into smart, socially-conscious economics. Mostly mixed-market economies, these countries have economic-freedom rates very close to the United States (the poster-boy for capitalism). Although their GPD per capita reports aren’t outstanding, they’re good in terms of modern economies. This is also due in some part to their small populations. Where the Scandies do succeed are in their robust welfare systems (many of which are being abandoned nevertheless due to high strain). The “Socialist” aspect of the Scandinavian model concerns itself with how economic prosperity should impact the quality of life.
These systems are only so successful due to the economic prosperity of these nations, which “Socialism” is by no means responsible for. This is, however, a rather brilliant insight into the necessity of pairing the profit that only Capitalism can provide, with balanced tax systems that contribute to well designed welfare systems and social nets.
Capitalism Works, Socialism Doesn’t
Socialism seems to be the terrible idea we all love. While the theoretical flaws of the system are numerous, the failure of the system is most clear in its practical application: Russia, China, Cuba, Britain, Venezuela, and so on and so forth. Socialism’s endearing nature stems from the Marxist delusions of benevolent, transitional dictators, and the “charming” nature of human beings; the issue was and is that these things don’t exist.
Nobody explicitly objects to the idea of establishing a utopia. The issue is that socialism is not only deluded in thinking that one is attainable, but it also falls victim to the very things it tries to prevent – tyranny and oppression. Capitalism is by no means a perfect system, but failing to recognize its power to drive economies and innovation, reduce global poverty (empirically, not anecdotally), and enhance the quality of human life overall is willfully ignorant.
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