There is far more confusion about economic systems than can be clarified in one column. The terms capitalism, socialism, Marxism and communism mean different things to different people. When someone uses these terms, that person should be asked to define them.
Picture a loose sequence of systems: primitive capitalism, feudalism, mercantilism, modern capitalism, socialism and communism. Capitalism is “an economic system in which the means of production, distribution and exchange are for the most part privately owned and operated for private profit. The marketplace is ... regulated by competition.” One could call primitive capitalism a “natural” system in that it is based on man’s natural instincts and sprang up spontaneously millennia ago. This was concurrent with the division of labor and might be called “individual” or “artisan” capitalism (potters, bakers, coopers, tailors, cobblers, scribes, etc.).
This was followed by feudalism with the fall of the Roman Empire and the breakdown of law and order during the Dark Ages. Serfs worked for barons as tenants and barons provided land and protection. Production was for use rather than sale.
Mercantilism “developed during the centralization of power that accompanied the decay of feudalism and the emergence of the nation state which was intended primarily to unify and increase the ... wealth of a nation by strict governmental regulation of the entire national economy” the purpose of which was to increase that nation’s wealth and power by means of the development of industry, a favorable balance of trade, foreign trading monopolies and a national bank. This was the system used by European countries with their colonies in the New World and by China today.
The industrial revolution had not occurred when Adam Smith published his famous book “Wealth of Nations” in 1776 and the capitalism about which he wrote was individual capitalism. “Smith’s book is a plea for the economic freedom of the individual. It is an eloquent appeal against mercantilism ...” Smith recognized the monopolistic impulses in capitalism when he said, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, in some contrivance to raise prices.”
Industrial capitalism arose in England in the early 19th century and, while its long term impact has been tremendously positive, the living and working conditions it produced at the time were terrible. The status quo was untenable. Three responses emerged: (1) regulated or tempered capitalism where law prescribes “do’s” and “do not’s” to restrain its negative inclinations; (2) socialism; and (3) communism. The first has been the most prevalent.
In socialism, “there is public collective ownership or control of the basic means of production, distribution and exchange (manufacturing, transportation, communication, banking, natural resources, etc.) with the avowed aim of operating for use rather than profit and of assuring to each member of society an equitable share of goods, services, and welfare benefits. With these exceptions, private property and free enterprise are retained.” Socialism can range from limited to extensive and has been adopted democratically to various degrees in different countries.
We have a limited form of socialism in the United States in that we have what I call certain “socialist enterprises.” Our public school system is a socialist enterprise. Our forefathers believed a successful democracy depended on an educated electorate. Public/government corporations such as USPS, Amtrak, TVA, MCCH and municipal transportation systems are other examples. They provide needed services the private sector or individuals alone cannot provide.
Notice the very important element of competition remains. We have public and private school systems, colleges and universities which compete against each other. The same goes for hospitals and other public institutions. Our governmental system of checks and balances and federalism is predicated on competition. It drives both success and failure in business and preserves liberty in politics and society.
Socialism is scary because it can, as Marx said, provide the transition from capitalism to communism. Marx postulated the “withering away of the state” in his socialist utopia but it never works. Communism extends collective ownership and control to virtually everything, which is extremely contrary to human nature and requires a totalitarian police state to implement.
Socialist enterprises can work if they are strictly limited to relatively small ventures which operate within a capitalist system with competition. The important question about socialism is not if it can be voted in. The important question is if it can be voted out.
Winfield H. Rose taught political science at Murray State University for 39 years and is now retired. He is active in the Calloway County GOP, but speaks here as an individual and not as a representative of either of these organizations.
Editor’s Note: Opinions expressed do not necessarily reflect the editorial opinion of the Murray Ledger & Times.