Challenge: Define capitalism and socialism in ways that are not ideologically loaded.
People on the left are inclined to define capitalism in ways that are negative, emphasizing greed and exploitation. They are inclined to define socialism in ways that are positive, emphasizing fairness and community.
People on the right are inclined to define socialism in ways that are negative, emphasizing tyranny and inefficiency. They are inclined to define capitalism in ways that are positive, emphasizing freedom and innovation.
Is it possible to come up with definitions that would be agreeable to both sides? Here is my attempt:
Capitalism is the term that we use to mean a system in which economic decisions are decentralized, with prices and profits serving to coordinate production and guide the evolution of economic activity.
Socialism is the term that we use to mean a system in which the results that would arise from decentralized markets are significantly altered by collective action. In representative democracies, this collective action is undertaken by government officials, who are subject to periodic judgment from the voting public. Under non-democratic systems, this collective action is undertaken by government officials without giving the public a meaningful electoral voice.
In this formulation, the phrase “significantly altered” is the question-begger. Depending on where you set that bar, the proportion of socialist countries in the world could be anywhere from a handful to 100 percent.
In fact, I think that we are better off without a binary classification system. I believe that there is conflict between those of us who want fewer outcomes altered by collective action and those on the other side who want more outcomes altered by collective action.
In older economics text books, there was a category called “mixed economies.” Maybe it’s time to bring that back.
Classically capitalism/socialism is about a fight we aren’t really having in america, i.e. ownership of the means of production (exception maybe is the healthcare sector?). Rather than trying to reinvent the words, better to talk about free vs regulated markets.
Even that leads to confusion. I think you need at least two dimensions: how free are markets and how much redistribution occurs. Otherwise you get in a situation where you say “Denmark has freer markets than us” and a liberal says “no, it has way more social welfare programs.”
Well yes. We have all seen the line idea, where something like a number line is drawn, with anarchy at one end and full central control at the opposite end. The ends are limits, at least for most people.
But it matters just what functions are placed under central control. And the functions have pretty much unequal effect.
Perhaps some sort of graph, like a state machine. It would be unfamiliar. People wouldn’t pay attention to the thing…
You are right though, the common categorizations are not working.
Of course, “significantly altered” (and for that matter even “collective action”) are going to beg questions, but your definition is a great starting point. I would ensure that the definition of socialism also includes not to allow the actions of decentralized markets — in the first place — to yield outcomes which could have then be altered in the of ways suggested. I would also like process of “collective action” to reflect the fact that even in democratic systems, special interests and public choice considerations may produce policies that may not appear much more democratic than those of non-democratic systems.
There is a degree of arbitrariness since capitalism also depends on the background of rules set by law and judgment within which to work and socialism generally relies on the establishment of these rules and letting markets make decentralized decisions compatible with them, and there isn’t any set determinant between which rules are necessary or desirable. Capitalism is full of entities that rely on centralized decisions called firms and socialism of full of entities that rely on decentralized markets called individuals. There isn’t a decentralized state of nature from which we leave or to which we return or a centralized state to which we must hew, but by custom, tradition, and reason we decide what is best.
“I believe that there is conflict between those of us who want fewer outcomes altered by collective action and those on the other side who want more outcomes altered by collective action.”
While I have no doubt such an ideological commitment to liberty on principal is a value in and of itself, most people don’t care about liberty in and of itself. They care about whether liberty leads to good outcomes. Does it help me afford my mortgage? Can my kids get a good education? Do I have opportunities to make full use of my talents?
People want to lead fulfilling lives. If liberty assist in that they are pro-liberty. If not, they aren’t. They aren’t firmly committed to any particular method of achieving that goal, they will go with whatever “works”.
If “collective action” alters outcomes in a good way people are for it. If a bad way they are against it. It’s the outcomes they care about most, not the method. They talk about method because that’s often the vocabulary we think and debate in, and because discussing methods is an indirect way of debating “what constitutes a good outcome.”
” They care about whether liberty leads to good outcomes.”
I would argue they just care about outcomes. Kind of how most stock market participants are preoccupied with momentum rather than underlying value. And a fundamental attribution bias tends to make people who are unaware of liberty into interventionists by default.
So, Americans are historically P.O.’d even though we are arguably the best country in history. You could almost argue that people don’t even care about results as they do about very recent trends. Shouldn’t we be really careful before we cook the golden goose based on short-term trends?
Dont our objective results argue that whatever underlies “America” is worth preserving? We have as much oil as Russia? Do we have the scale of China? Are we full of Swiss? Are we tiny like Hong Kong?
Some people say we are lucky. Tell me what our “luck” is? “Luck” is often just ignorance of underlying causes.
Aren’t the results of America awesome, considering? Do people seem to understand the causes of those results? Shouldn’t people be really interested in exactly what it is that allows “America” to surpass everyone else? My guess is that most people assume this attribute that makes “America” superior is “Americans.”
It all comes down to decision making.
Capitalism is a system where your ability to make decisions (for yourself and others) is determined by how much capital you have accumulated previously and your willingness to risk that capital on your current decisions. The ultimate capitalist system is the anonymous electronic market.
Socialism in the modern sense is a system in which your ability to make decisions (for yourself and others) is determined by your ability to navigate a social system and gain a position of authority. The ultimate socialist system is the government bureaucracy.
Your views on capitalism and socialism depend on which system you are better suited to.
I don’t think one axis is sufficient if you want to avoid ideological loading.
The two axes I have in mind are as follows:
1. Redistribution
2. Central Control of Economic Activity
A. At (0,0) you have something like a Minarchy.
B. At (1,0) you have something maybe like an idealized Denmark. Private ownership of the means of production, decentralized economic decision making, but high levels of taxation to pay for the welfare state and leveling the effective income / consumption distribution.
C. At (0,1) you have something like a world-wartime economy combined with ‘war millionaires’ but very little welfare spending.
D. At (1,1) you have something like Marxism.
Yes, you can take the absolute value of this 2-dimensional vector and get ‘total collective distortion’ and call it a ‘Socialism Metric’ or something.
But that’s ideologically loaded, because people who are advocating for B are going to accuse you of trying to conflate them with C or D, which are qualitatively very different and much less popular, with much uglier histories and connotations.
In “working on” to definitions at the same time there are tendencies to make the definitions in terms of comparisons. So let us take one subject at a time.
“Capitalism” is NOT (pace, Arnold) a “system.” In all of its various historic forms (feudal, mercantile, commercial, industrial, financial and now managerial) it has always been a RESULTING CONDITION. That Condition has resulted from particular relationships in specific circumstances. A predominant objective of the relationships has been the acquisition and accumulation of “durable” assets [Capital] for purposes of deferred consumption, additional acquisitions, production in addition to other aggrandizement’s. The forms of “Capital” in the various historical forms of “Capitalism” have varied from land in war goods in feudal times to corporate surpluses in managerial times. Historical efforts at the generation of surpluses provide a tone of capitalistic organizations of earlier societies.
The conditions of “Capitalism” of later historic periods, and our own, have been those of relationships of individuals or groups seeking their own objectives by means of their own choices in varying physical and ideological circumstances; over much of which they have had limited influence or control. The formation of objectives and determination of means by the (voluntary) commonality of individuals composing groups is often confused with (or labeled as) being some distinct political, economic or social system.
Accordingly, “Capitalism” can be DESCRIBED, but it cannot be DEFINED or delineated.
“Capitalism” has no “systemic” objective. The condition represents the objectives of the relationships that occur and the circumstances in which they occur.
For the reasons stated, Socialism Will Be Defined Separately.
I would define capitalism as a social arrangement that emphasizes contractual autonomy and floating prices as the dominant forces guiding resource allocation.
Socialism as a social arrangement that emphasizes politically funneled collective action as the dominant force guiding resource allocation.
On a slightly separate note, I’m beginning to think the mixed economy is another relic of the 20th century technological boom that no longer has relevance to today’s circumstances.
Instead I’m leaning towards the idea that markets and government are more complimentary of one another when they’re allowed to move towards their extremes.
The sine qua non of “socialism” is not collective action – actions in a capitalist society certainly involve collections of people doing stuff. I think it boils down to property rights and redistribution. “Socialism” says that the legitimacy of private property is contingent on certain conditions around the state of society, e.g. taking care of the poor. “Capitalism” places no such restrictions on private property, so that social justice considerations have to happen after the fact. Thus, both sides can favor a social safety net, but the justifications are wildly different
“Socialism”
Unfortunately, Socialism is not exclusively an economic system.
From its beginnings in the time of Henri de St. Simon through its refinements by Auguste Comte, it developed as a system of *Social Organization* based on the concept (Positivism) that results could be determined (in theory, scientifically) by the selection of objectives and means.
While that concept has been largely understood as applicable to economic results and conditions of a society, it has not been so limited.
In all it’s forms of social or economic order, Socialism systems require the establishment of collective objectives, and collectively determined means, to which all individual determinations are subordinate or subservient.
There are system variations in the modes of establishing the collective objectives, ranging from uses of Democratic processes to totalitarianism; but the central feature of each system is the preeminence of the collective or “universal.” In many of the systems the objectives are established and means determined by physical or ideological force; but in all cases the objectives and preferences of means of individuals must be subordinate or subservient, which, in turn, requires coercion or force to achieve sufficient commonality.
Thus, Socialism is a system of social (including economic) order of collective objectives and means established and maintained by processes that require coercion and force for effective cohesion and cooperation.
(Please note polite, helpful (and short!) responsive suggestion below the ranting.)
Why does the definition of socialism have to be 2-1/2 times as long as the definition of capitalism?
Perhaps because of all that pious gobbledegook about elections?
We need new definitions because the leftists have learnt from experience since the late 1800’s and now prefer pervasive so-called regulation to outright “state ownership of the means of production and distribution.”
Our biggest problem is the practical merger in America of the anti-market Left and Right. Both want pervasive government interference to obtain supra-competitive returns for their constitutents. The leftists want straight-up power for their political clique and redistribution to their client class. The rightists want straight-up power for their political clique and crony capitalism for their client class. They are both getting what they want, at the expense of all the people in the middle. (I think the rightist clients are doing better– I’d rather have private-jet money than a HUD rent subsidy– but the political cliques are doing equally well because they are utterly indistinguishable. Obama has worked just as hard to provide subsidies to Goldman Sachs as to low-wage illegal immigrants.)
I suggest you re-write your definitions like this (notice that the first is not altered):
Capitalism is the term that we use to mean a system in which economic decisions are decentralized, with prices and profits serving to coordinate production and guide the evolution of economic activity.
Socialism is the term that we use to mean a system in which economic decisions are substantially coerced by the use of political power to set prices and to obtain profits for political constituencies which cannot earn in the marketplace.
You are quite correct in noting “the term we use.”
But we often use “labels” which are not definitions, and uses of terms are often in-definite.
Please note my further response at 10:54 a m 2/19 below when moderated.
In your definition of “socialism” I would replace the phrase “collective action” with “political action”. The equation of “collective” with “political” is an issue over which socialists and non-socialists would disagree quite sharply. Politically un-representative government can very much be socialist (as your definition explicitly allows), but to call the political decisions of an un-representative government “collective action” involves a fairly Bolshevik conception of that phrase. “Collective action” exists in capitalism as well, we just call it “incorporation” . What is a corporation except a group of people who pool their resources in the interest of a common purpose?
In my opinion, the root of the difference between socialism and capitalism is where one locates the moral basis of ownership- individual or collective.
If you take the collective side of that distinction, i.e that at root everything is “ours” rather than “mine” or “yours”, than “we” through the political process get the final say in the disposition of resources (indeed in that view, socialists tend to consider the political disposition of resources to be the primary, essential function of government). As you point out, that consideration holds regardless of how representative or unrepresentative the political process in question is. What’s critical is not the extent to which free-market outcomes are altered but the latent potential to alter them in any way “we” want.
If you take the individual side of that divide- that individual ownership is an intrinsic human right, than of course the socialist view is horrifying- political disposition of resources is inherently an infringement on a basic human right. An economy can be highly centralized in that it is dominated a few large firms with a fairly small number of people making key decision but still be considered capitalist because the firms are privately owned and subject to minimal political ‘say’ in their operations. That capitalist systems tend toward decentralized decision-making should not be confused with a normative definition. Decentralization in capitalism is not an inherent intrinsic trait but a function of decentralization being more efficient. The main bugaboo of socialists are large corporations, which they assume will arise because they assume centralization is more efficient than decentralization and thus powerful decision-making power will end up in the hands or people who lack the legitimacy of the political process.
I would propose as a working definitions:
Capitalism is a political economy in which non-compelled private economic decisions carry the presumption of legitimacy and where political alterations to them carry the presumption of illegitimacy.
Socialism is a political economy in which political disposition of resources carries the presumption of supreme legitimacy and in which private economic decisions are considered legitimate but subordinate to political decisions.
I like the formulation of “presumption of” because any formulation that requires “all” or “never” will in the real world be the null set and because it mroe closely implies the moral basis. Capitalist systems have some political use of resources and socialist systems have substantial private sectors. They difference is where the burden of proof lies in choosing between political and private modes. In socialist countries arguing for a free-market solution to a problem involves overcoming a strong combination of skepticism and inertia. In capitalist countries overriding the private market carries the same high level of skepticism and inertia. In practice that’s where many of the differences really are
You might say a “Political Economy” is classified as one or the other when certain conditions are observed, but that is not definition.
The weak part of the socialism definition is “collective action”. What makes an action collective or non-collective? If a single government official executes an action, is it a collective action? If we’re talking about a dictatorship where one man makes all the rules, are his actions collective?
Perhaps something about the results being altered by third-parties at a remove from the transaction might work?
“collective action” is not in the Definition. It is in the descriptions.
Under your definition, our health care system definitely is not capitalist, since Medicare ends up setting the price for many medical goods and services. Thus it survives my litmus test!
I also agree with the classifications proposed by Robert H. As Will Wilkinson argues in his recent writing “Thinking Through Your Libertarian Vote” (https://niskanencenter.org/blog/thinking-through-your-libertarian-vote/), a highly redistributive state is completely compatible with a very free economy. In my view, redistribution is far less destructive than regulation. I think your definition of socialism, however, does not distinguish between these modes of collective action.
I understand the idea, but Denmark makes 20% less per capita. The weed better be cheap since we would have no disposable income wit which to enjoy our awesome socialist freedom.
Also, IIRC, A lot of the antiwar left was mad because our guns were aimed at actually evil socialists…who were also violent global revolutionaries.
What is your definition of ‘collective action’? Is the process by which Obama became President a “collective action”? The process by which Apple became the world’s most valuable corporation? The process by which my wife and I decided which movie to watch last evening? (What if she just said, “Your turn to choose!”?)
‘Socialism is the extent to which government controls greater than 20% or so of the economy.’
The treatments of Capitalism and Socialism differed in length because of the view that Capitalism can be described but not defined.
The length of the description of Socialism was to convey its role and origins as a form of Social Order, not just and “economic” phenomenon. Here is that Definition, draw from that description:
“Thus, Socialism is a system of social (including economic) order of collective objectives and means established and maintained by processes that require coercion and force for effective cohesion and cooperation.”
There are many forms of “collective” actions that are voluntary (such as cooperation) and result in the voluntary (usually commutative) subordination or even subservience of individual objectives and choices, which result in collective objectives and determinations of means. When examined these are extensions of commonalities of individual choices. Where coercion and force (physical or ideological) are necessary the collective natures of individual relationships are altered – as in Socialism.
I think your attempt falls short as the definition of socialism is already starting with a negative view of capitalism. You should be able to create a definition without casting judgement on either side of the equation.
Capitalism is a system in which the individual has the liberty or, is permitted, by the current entity that has monopoly on violence, to retain their personal earnings over that required for subsistence and use this “profit” to purchase additional productive capacity, such as training, machines, real estate, etc., i.e., capital, to better themselves vice spending it on non-productive consumption. Capital is nothing more than retained “old labor” that is put to use producing additional income.
The type of capitalism one has is determined by who is permitted to engage in investments to better themselves up to State capitalism, commonly known as total socialism. Crony capitalism is when friends of the office holder are given special leave to better themselves. This is facilitated by interventionism and is better called government cronyism.
Socialism in contrast uses government to limit the individual ownership of productive capacity up to total socialism where the individual is permitted no ownership of productive capacity except for their direct personal skills and even then may be prevented by the overseers from using their skills in a job that requires them, instead being assigned other work.
“Precisely what makes a slave is that he is allowed no use of productive capital to make wealth on his own account.”
–“Socialism; a speech delivered in Faneuil hall, February 7th, 1903, by Frederic J. Stimson