Meredith Mineo
Date: 6/13/06 6/14/06
Topic: Stalinism vs. Capitalism
Objectives:
1. Students will be able to identify and explain the differences between Stalinism
(socialism) and Capitalism.
2. Students will be able to argue the pros and cons of Stalinism (socialism) and
Capitalism.
Related Standards:
- Social Studies Standard 1 – History of the U.S. and New York
- Standard 2 - World History
- Social Studies Standard 5 - Civics, Citizenship, and Government
Content: Two day lesson. Students will learn about Stalinism (socialism) and
capitalism. They will also learn how each none works and what are the pros
and cons of each ideology.
Materials: Handouts, overhead, chalk, board.
Motivation: Which ever group presents the most researched and in depth argument for
their side will receive bagels on Friday.
Procedures:
Introduction:
I will give a brief introduction on who Stalin was, and what his beliefs
were. I will then give a brief introduction on Capitalism and how it is
associated with the United States government.
Lesson:
Group Practice
- I will break the class into groups preferably 4 people per group
with no less than 3 and no more than 5.
- Each group will be given the handouts with the information on
Stalinism, Socialism, and Capitalism.
- Half the groups will argue in favor of Stalinism (socialism) and
against Capitalism, and the other group will argue in favor of
Capitalism and against Stalinism (socialism).
- Using the handouts I have given them, their text book, and any
other resources including the internet, fill out the chart that was
handed out to them.
- If they are arguing in favor of Stalinism (socialism) then they
will have to fill out good things about Stalinism and bad things
about Capitalism. And vice versa, if they are arguing in favor
of Capitalism then they will have to write good things about
Capitalism and bad things about Stalinism.
-
When the research is finish the groups will have to present
their information to the class and debate with the other groups
which ideology is better.
Closure:
Review: I will create a chart based on the best information from each
group and have the class add anything that they didn’t already have on
their sheet.
Summaries: I will ask the class which ideology they themselves think is
better, and if they could choose an ideal government/economy to live in
what would it be? Would it be any different then the one they live in now.
Assignment: Go home and gather as much research as possible on both ideologies.
Assessment: The quality of each group’s chart information and argument.
Reflection: Did I cover everything that I wanted to? Did the students understand
everything that I covered? Did they enjoy the group work? Was their
anything I could have changed to make this lesson better?
Stalinism
Stalinism is the political and economic system named after Joseph Stalin, who
implemented it in the Soviet Union.
The term "Stalinism" was first used by Trotskyists opposed to the regime in the Soviet
Union, which they called a "degenerated workers' state", particularly in an attempt to
separate the policies of the Soviet communist state from those they regarded as more true
to Marxism. It was soon adopted also by anarchists and anti-communists.
Like many other "-isms" it is also used as a pejorative term when referring to nationstates, political parties, or the ideological stance(s) of individuals.
Stalinism as political theory
"Stalinism", strictly speaking, refers to an interpretation of a style of government, rather
than an ideology per se.
The term "Stalinism" is sometimes used to denote the brand of communist theory that
dominated the Soviet Union and the countries within the Soviet sphere of influence
during and after the leadership of Joseph Stalin by anti-communists and trotskyists. The
term used in the Soviet Union and by most who uphold its legacy, however, is "MarxismLeninism", reflecting that Stalin himself was not a theoretician, but a communicator who
wrote several books in language easily understood, and, in contrast to Marx and Lenin,
made few new theoretical contributions. Rather, Stalinism is more in the order of an
interpretation of their ideas, and a certain political system claiming to apply those ideas in
ways fitting the changing needs of society, as with the transition from "socialism at a
snail's pace" in the mid-twenties to the forced industrialization of the Five-Year Plans.
Sometimes, although rarely, the compound terms Marxism-Leninism-Stalinism (used by
the Brazilian MR-8), or teachings of Marx/Engels/Lenin/Stalin, are used to show the
alleged heritage and succession. Simultaneously, however, many people professing
Marxism or Leninism view Stalinism as a perversion of their ideas; Trotskyists, in
particular, are virulently anti-Stalinist, considering Stalinism a counter-revolutionary
policy using Marxism to achieve power.
From 1917 to 1924, Lenin, Trotsky, and Stalin often appeared united, but, in fact, their
ideological differences never disappeared. In his dispute with Trotsky, Stalin deemphasized the role of workers in advanced capitalist countries (for example, he
postulated theses considering the U.S. working class as bourgeoisified labor aristocracy).
Also, Stalin polemicized against Trotsky on the role of peasants, as in China, where
Trotsky wanted urban insurrection and not peasant-based guerrilla warfare.
The main contributions of Stalin to communist theory were:
*
Socialism in One Country,
*
The theory of aggravation of the class struggle along with the development of
socialism, a theoretical base supporting the repression of political opponents as
necessary.
Stalinism has been described as being synonymous with totalitarianism, or a tyrannical
regime. The term has been used to describe regimes that fight political dissent through
violence, imprisonment, and killings.
Stalinist economic policy
At the end of the 1920's Stalin launched a wave of radical economic policies, which
completely overhauled the industrial and agricultural face of the Soviet Union. This came
to be known as the 'Great Turn' as Russia turned away from the near-capitalist New
Economic Policy. The NEP had been implemented by Lenin in order to ensure the
survival of the Communist state following seven years of war (1914-1921, WW1 from
1914 to 1917, and the subsequent Civil War) and had rebuilt Soviet production to its
1913 levels. However, Russia still lagged far behind the West, and the NEP was felt by
Stalin and the majority of the Communist party, not only to be compromising Communist
ideals, but also not delivering sufficient economic performance, as well as not creating
the envisaged Socialist society. It was therefore necessary to force the pace of
industrialization in order to catch up with the West.
Rapid industrialization was necessary for a number of reasons, both practical and
ideological, the overriding aim of which was to make Russia a force to be reckoned with
on the world stage.
1. To increase military strength: The fact that Russia was essentially still based upon a
backward agrarian economy, whilst her Western capitalist rivals were fully industrialized,
rendered Russia vulnerable to attack. The lack of any natural boundaries (other than the
great distances involved) as well as the extremely long border, essentially meant that in
the event of invasion, any attacking force could rapidly converge upon the comparatively
small industrial centre focused around Moscow. It was therefore necessary to establish an
eastern industrial base, beyond the Urals, that could continue the Soviet war effort in
event of Moscow's capture. However, even before this could take place, it would be
necessary to establish industry capable of producing armaments of sufficient quantity and
quality to fight a modern war.
2. To achieve self-sufficiency: Russia's backward economy also meant that she was
reliant on expensive imports for industrially manufactured goods, especially the heavy
industrial plant required for industrial production. The USSR required its own industrial
base to produce goods for its own people. However, this also necessitated an increase in
grain production, as surplus grain would be required for export in order to provide
foreign currency with which to buy the basis of an industrialized economy, as well as the
initial raw materials needed to fuel it. The problem was that, once again, the nature of the
economy meant that industrialization was in the hands of the peasants. If there was a poor
harvest, industrialization could not go ahead, as whilst the peasants required grain for
themselves, they also had to support the burgeoning urban population, as well as provide
aforementioned surplus grain for export. Stalin made use of the Collectivization of
agriculture in order to effectively finance the industrial drive. The process of
Collectivization was not a peaceful one. Resistance was met by the soviet authorities,
specially coming from the wealthy rural farmers ("Kulaks"), with which Stalin dealt
harshly.
3. The Move towards a Socialist society: According to Marxist theory, socialism could
only exist in a highly industrialized state, where the overwhelming majority of the
population were workers. However, in 1928 approximately 20% of the population were
workers. Also, Stalin wanted to prove the Socialist system to be at least the equal of the
capitalism, nor just in terms of industrial output, but also in terms of living standards. The
overriding aim of this would be to present Communism as a viable alternative to any
capitalist form of government.
4. Personal Motivation: During the struggle over power that ensued following Lenin's
death, Stalin had to prove himself as Lenin's equal and successor. Economic policy was
central to this, as an economic transformation of the USSR would establish him as a
leader of great importance.
A series of three five-year plans massively expanded the Soviet economy. Large
increases occurred in many sectors, especially in coal, pig iron and steel production.
However, Society made great strides towards catching up from decades-long
backwardness to the West within thirty years in key industrial areas, according to some
statistical measurements. Some economic historians now believe it to be the fastest
economic growth rate ever achieved, although the accompanying social costs and long
term economic results are highly debatable. Because of the perceived prestige and
influence of the successful Russian revolution, many countries throughout the 20th
century saw the politico-economic model developed in the USSR as an attractive
alternative to the existing systems in place, often perceived as "market economy"
systems, and took steps to follow the USSR's example. This included both revolutionary
regimes and post-colonial states in the developing world.
Capitalism
Capitalism has been defined in various related ways by different economic theorists[1],
and is commonly understood to mean an economic or socioeconomic system in which the
means of production are predominantly privately owned and operated for profit, mostly
through the employment of labour. In such a system, money mediates the distribution and
exchange of goods, services, and labour in largely free markets. Decisions regarding
investment are made privately, and production and distribution is primarily controlled by
companies or businesses each competing[2] and acting in its own interest.
Although most developed countries are regarded as capitalist[3], some of them have been
called "mixed economies"[4], due to government-owned means of production and
economic interventionism.
Capitalist theory
Some emphasize the private ownership of capital as being the essence of capitalism, or
emphasize the importance of a free market as a mechanism for the movement and
accumulation of capital. Others measure capitalism through class analysis, including the
class structure of society and relations between labor and the capitalist class. Some note
the growth of a global market system.
In describing capitalism, Hayek points to the self-organizing character of economies
which are not centrally-planned by government but rely on the free price system to
coordinate the distribution of resources. Many, such as Adam Smith, point to what is
believed to be the value of individuals pursuing their self-interest as opposed to
altruistically working to serve the "common good," maintaining that by individuals and
firms pursuing their self-interest the good of society is more effectively achieved. Karl
Polanyi, a seminal figure in the field of economic anthropology, argued that at the time
Smith was primarily describing a period of organization of production along commercial
lines. For Polanyi, capitalism is distinguishable from earlier mercantilist and commercial
eras by the commodification of land, labour-power, and money. It appeared in mature
form as a result of the problems raised when an industrial factory system, requiring longterm investment and entailing corresponding risks, was introduced into an
internationalized commercial framework. Historically speaking, the most pressing needs
of this new system were an assured supply of the elements of industry - land, elaborate
machinery, and labour, and these imperatives led to the aforementioned commodification;
not through a process of self-organizing activity, but rather as a result of deliberate, often
forceful, state intervention. (see Karl Polanyi, The Great Transformation)
Many of these theories call attention to various economic practices that became
institutionalized in Europe between the 16th and 19th centuries, especially involving the
right of individuals and groups of individuals acting as "legal persons" (or corporations)
to buy and sell capital goods, as well as land, labor, and money (see finance and credit),
in a free market (see trade), and relying on the state for the enforcement of private
property rights rather than on a system of feudal protection and obligations.
Due to the vagueness of the term, debates and controversies have emerged. In particular,
there is contention on whether capitalism is an actual system, or an ideal, i.e. on whether
it has actually been implemented in particular economies, or if not, then to what degree
capitalism exists in them (see mixed economy). From a historic point of view, there is an
argument on whether capitalism is specific to a particular era or geographic region or if it
is a universally valid system that may exist throughout various times and spaces. Some
interpret capitalism as a purely economic system; others however contend that capitalism
is a complex of political, social, and cultural institutions.
Contrasts with capitalism
Capitalism contrasts with (and in Western Europe, developed out of) feudalism, where a
monarch holds both law-making power and the ability to claim ownership over the land
rather than having to purchase it; the monarch loans the land to vassals in exchange for
various services, and the vassals, in turn, use serfs to work the land.
Capitalism contrasts with socialism, where the means of production are theoretically
owned and run by popular collectives (or by the state) for the people. It contrasts with
communism where the means of production are owned collectively rather than privately
by bosses or employers, and the produce of labor is collectivized, resulting in the
"abolition of bourgeois property" ("private property") [2]. In addition, as suggested by
Karl Marx, the products of labour are directly distributed "to each according to his need"
[3], and "buying and selling" is abolished (Communist Manifesto).
Capitalism as it exists in market economies is said to be in opposition to planned
economies, where "the elements of an economy (as labor, capital, and natural resources)
are subject to government control and regulation designed to achieve the objectives of a
comprehensive plan of economic development."[5] Capitalism also contrasts with
corporatism, where private businesses work more closely with the government in an
ostensible attempt to serve the interests of the nation. Countries undergoing periods of
dynamic class struggle (as in times of revolution) would be accompanied by significant
changes in material conditions such as industrialization and display features such as the
war economy and Commodification.
Participatory economics and council communism are alternative systems of workers' and
consumers' councils utilizing self-managerial methods for decision making, as opposed to
an economy dominated by big corporations or state enterprises.
Characteristics of capitalist economies
A set of broad characteristics are generally agreed on by both advocates and critics of
capitalism. These are a private sector, private property, free enterprise, profit, unequal
distribution of wealth, competition, self-organization (or catallaxy), the existence of
markets (including the labor market) and the pursuit of self-interest.
An economy with a large amount of intervention - which may include state ownership of
some of the means of production - in combination with some free market characteristics
is sometimes referred to as a mixed economy, rather than a capitalist one. [4] If
intervention occurs to such a degree that it overwhelms private decision, such an
economy is often referred to as statist. Some economists, such as Milton Friedman,
oppose all or almost all such state control over an economy. However, such distinctions
are disputed. By some definitions, all of the economies in the developed world are
capitalist, or are mixed economies based in capitalism. Others see the world integrated
into a global capitalist system, and even those nations which today resist capitalism,
operate within a globalized capitalist economy.
Private ownership of the means of production
An essential characteristic of capitalism is the institution of rule of law in establishing
and protecting private property, including, most notably, private ownership of the means
of production. Private property was embraced in some earlier legal systems, such as in
ancient Rome [5], but protection of these rights was sometimes difficult, especially since
Rome had no police [6]. This system and some earlier systems often forced the weak to
accept the leadership of a strong patron or lord and pay him for protection. It has been
argued that a strong formal property and legal system made possible a) greater
independence; b) clear and provable protected ownership; c) the standardization and
integration of property rules and property information in the country as a whole; d)
increased trust arising from a greater certainty of punishment for cheating in economic
transactions; e) more formal and complex written statements of ownership that permitted
the easier assumption of shared risk and ownership in companies, and the insurance of
risk; f) greater availability of loans for new projects, since more things could be used as
collateral for the loans; g) easier access to and more reliable information regarding such
things as credit history and the worth of assets; h) an increased fungibility,
standardization and transferability of statements documenting the ownership of property,
which paved the way for structures such as national markets for companies and the easy
transportation of property through complex networks of individuals and other entities. All
of these things enhanced economic growth.
Capitalism is often contrasted to socialism in that besides embracing private property in
terms of personal possessions, it supports private ownership of the means of production.
Those who support capitalism often credit the lack of control over the means of
production by government as crucial to maximizing economic output. Ludwig von Mises,
in Liberalism, says that the "history of private ownership of the means of production
coincides with the history of the development of mankind from an animal-like condition
to the highest reaches of modern civilization." [7] In all modern economies some of the
means of production are owned by the state, however an economy is not considered
capitalism unless the bulk of ownership is private.
Private enterprise
In capitalist economies, a predominant proportion of productive capacity has belonged to
companies, in the sense of for-profit organizations. These include many forms of
organizations that existed in earlier economic systems, such as sole proprietorships and
partnerships. Non-profit organizations existing in capitalism include cooperatives, credit
unions and communes.
More unique to capitalism is the form of organization called corporation, which can be
both for-profit and non-profit. This entity can act as a virtual person in many matters
before the law. This gives some unique advantages to the owners, such as limited liability
of the owners and perpetual lifetime beyond that of current owners.
A special form of corporation is a corporation owned by shareholders who can sell their
shares in a market. One can view shares as converting company ownership into a tradable
commodity - the ownership rights are divided into units (the shares) for ease of trading in
them. Such share trading first took place widely in Europe during the 17th century and
continued to develop and spread thereafter. When company ownership is spread among
many shareholders, the shareholders generally have votes in the exercise of authority
over the company in proportion to the size of their share of ownership.
To a large degree, authority over productive capacity in capitalism has resided with the
owners of companies. Within legal limits and the financial means available to them, the
owners of each company can decide how it will operate. In larger companies, authority is
usually delegated in a hierarchical or bureaucratic system of management.
Importantly, the owners receive some of the profits or proceeds generated by the
company, sometimes in the form of dividends, sometimes from selling their ownership at
higher price than their initial cost. They may also re-invest the profit in the company
which may increase future profits and value of the company. They may also liquidate the
company, selling all of the equipment, land, and other assets, and split the proceeds
between them. The price at which ownership of productive capacity sells is generally the
maximum of either the net present value of the expected future stream of profits or the
value of the assets, net of any obligations. There is therefore a financial incentive for
owners to exercise their authority in ways that increase the productive capacity of what
they own. Various owners are motivated to various degrees by this incentive -- some give
away a proportion of what they own, others seem very driven to increase their holdings.
Nevertheless the incentive is always there, and it is credited by many as being a key
aspect behind the remarkably consistent growth exhibited by capitalist economies.
Meanwhile, some critics of capitalism claim that the incentive for the owners is
exaggerated and that it results in the owners receiving money that rightfully belongs to
the workers, while others point to the fact that the incentive only motivates owners to
make a profit - something which may not necessarily result in a positive impact on
society. Others note that in order to get a profit one must satisfy some need among other
persons that they are willing to pay for. Also, some people in practice prefer to work for
and buy products from for-profit organizations rather than to buy from or work for nonprofit and communal production organizations which are legal in capitalist economies
and which anyone can start or join.
When starting a business, the initial owners or investors typically provide some money
(the capital) which is used by the business to buy or lease some means of production. For
example, the enterprise may buy or lease a piece of land and a building; it may buy
machinery and hire workers (labor-power), or the capitalist may provide the labor
himself. The commodities produced by the workers become the property of the capitalist
("capitalist" in this context refers to a person who has capital, rather than a person who
favors capitalism), and are sold by the workers on behalf of the capitalist or by the
capitalist himself. The money from sales also becomes the property of the capitalist. The
capitalist pays the workers a portion of this money in return for their labor, pays other
overhead costs, and keeps the remainder as profit. This profit may be used in a variety of
ways, it may be consumed, or it may be used in pursuit of more profit such as by
investing it in the development of new products or technological innovations, or
expanding the business into new geographic territories. If more money is needed than the
initial owners are willing or able to provide, the business may need to borrow additional
money with a promise to pay it back with interest. In effect, it may rent more capital.
Self interest
The pursuit of self-interest is commonly regarded as playing an essential role in
capitalism. Many writers, such as Adam Smith and Ayn Rand, point to what they believe
to be the benefit of individuals trading for their self-interest rather than altruistically
attempting to serve the "common good." Smith, widely considered to be the intellectual
father of capitalism, says in Wealth of Nations:
"By pursuing his own interest, [an individual] frequently promotes that of the society
more effectually than when he really intends to promote it. I have never known much
good done by those who affected to trade for the [common] good."
Ayn Rand, probably the most outspoken advocate of the role of self-interest in
capitalism, says in Capitalism: The Unknown Ideal:
"America's abundance was created not by public sacrifices to the common good, but by
the productive genius of free men who pursued their own personal interests and the
making of their own private fortunes."
Rand, though largely respectful of Smith's economic theories, didn't technically agree
with his interpretation of the role of self-interest. She believed that self-interest [8] was
philosophically justified and did not accept Smith's idea of, as she would describe it
'people blindly pulled towards serving the common good.'
Nobel-economist Milton Friedman also embraces the role of self-interest in capitalism. In
his famous article The Social Responsibility of Business is to Increase Profits, as he
asserts that business has no social responsibility other than to increase profits and refrain
from engaging in "deception or fraud." He maintains that when business seeks to
maximize profits, while respecting the guidelines of a free market by not defrauding or
deceiving, it almost always incidentally does what is good for society. Friedman does not
argue that business should not help the community but that it may indeed be in the long-
run self-interest of a business to "devote resources to providing amenities to [the]
community..." in order to "generate goodwill" and thereby increase profits. Some,
including some supporters of capitalism, dislike the focus on self-interest. For example,
self-described "free market libertarian" founder and CEO of Whole Foods Market, John
Mackey, claims in an article in Reason magazine that he is serving customers and society
out of "love" rather than self-interest while he boasts the profitability of his company in
that article. (Rethinking the Social Responsibility of Business, Reason magazine October
2005).
The pursuit and realization of profit as a method of self-interest is therefore an essential
characteristic of capitalism. Profit is derived by selling a product for more than the cost
required to produce or acquire it. Some consider the pursuit of profit to be the essence of
capitalism. Sociologist and economist, Max Weber, says that "capitalism is identical with
the pursuit of profit, and forever renewed profit, by means of conscious, rational,
capitalistic enterprise." However, it is not a unique characteristic for capitalism, some
hunter-gatherers practiced profitable barter and monetary profit has been known since
antiquity. In capitalism, profit is necessary for economic growth, with the growth being a
function of the amount of profit reinvested rather than consumed.
Free market
The notion of a "free market" where all economic decisions regarding transfers of money,
goods, and services take place on a voluntary basis, free of coercive influence, is
commonly considered to be an essential characteristic of capitalism. Some contend that in
systems where individuals are prevented from owning the means of production (including
the profits), or coerced to share them, not all economic decisions are free of coercive
influence, and, hence, are not free markets. In an ideal free market system none of these
economic decisions involve coercion. Instead, they are determined in a decentralized
manner by individuals trading, bargaining, cooperating, and competing with each other.
In a free market, government may act in a defensive mode to forbid coercion among
market participants but does not engage in proactive interventionist coercion; this state of
affairs is also called laissez-faire. Nevertheless, some authorities claim that capitalism is
perfectly compatible with interventionist authoritarian governments, and/or that a free
market can exist without capitalism (see market socialism).
A legal system that grants and protects property rights provides property owners the
entitlement to sell their property in accordance to their own valuation of that property; if
there are no willing buyers at their offered price they have the freedom to retain it.
According to standard capitalist theory, as explained by Adam Smith in Wealth of
Nations, when individuals make a trade they value what they are purchasing more than
they value what they are giving in exchange for a commodity. If this were not the case,
then they would not make the trade but retain ownership of the more valuable
commodity. This notion underlies the concept of mutually-beneficial trade where it is
held that both sides tend to benefit by an exchange.
In regard to pricing of goods and services in a free market, rather than this being ordained
by government it is determined by trades that occur as a result of price agreement
between buyers and sellers. The prices buyers are willing to pay for a commodity and the
prices at which sellers are willing to part with that commodity are directly influenced by
supply and demand (as well as the quantity to be traded). In abstract terms, the price is
thus defined as the equilibrium point of the demand and the supply curves, which
represent the prices at which buyers would buy (and sellers sell) certain quantities of the
good in question. A price above the equilibrium point will lead to oversupply (the buyers
wish to buy fewer goods at that price than the sellers are willing to produce), while a
price below the equilibrium point will lead to the opposite situation. When the price a
buyer is willing to pay coincides with the price a seller is willing to offer, a trade occurs
and price is determined.
Financial markets, though some of these markets are far from being free due to heavy
regulation, allow the large scale, standardized, and easy trading of debt, foreign
exchange, and ownership of companies (see finance capitalism). Similar changes have
taken place for products from agriculture, mining, and energy production. Standardized
markets have even appeared for pollution rights and for the prediction of future events
like future weather and political elections.
Markets have, of course, existed throughout human history. Hunter-gatherers used to
exchange their goods in barter. The appearance of money in antiquity facilitated
exchanges, permitting the flowering of trade fairs in the Middle Ages. Every society (in
time and place) however has its own ideas about the fitness of goods for treade, and thus
sometimes there were restrictions on the production or trade of specific goods: either
because such restrictions were deemed necessary toward another goal, for example to
enhance the status of a local lord/hero/chief, or because the idea itself that something
could be traded was considered an abomination. This of course prevented truly free
markets in the modern sense of the word.
Even in modern economies, governments do not allow unfettered market operation in
many areas; but price restrictions, for example, are much less burdensome than the
privileges granted to guilds in the Middle Ages. Most ecomonies are a mix of a free
market and a non-market. Overall free markets are an important aspect of capitalism, but
the two are not the same. There can be free markets without capitalism and vice versa.
Economic growth and mobility
One of the primary objectives in a social system in which commerce and property have a
central role is to promote the growth of capital. The standard measures of growth are
Gross Domestic Product or GDP, capacity utilization, and 'standard of living'.
The ability of capitalist economies to sustainably increase and improve their stock of
capital was central to the argument which Adam Smith advanced for a free market setting
production, price and resource allocation. It has been argued that GDP per capita was
much lower and progressed much slower until the industrial revolution and the
emergence of the modern capitalist economy, and that it has since increased rapidly in
capitalist countries [9][10]. Also, even before the industrial revolution, some countries
had some caracteristics of modern capitalism and had superior standards of living than
others, these include 4th century BC Greek civilzation, 1st century Roman Italy and 15th
century North Italy. 17th century Netherlands is one of the best examples, it per capita
income was various times larger than any other coutry at that time, it did achieve
standards of living comparable to 18th century England, but did not achieve an industrial
revolution like England did.
It has also been argued that a higher GDP per capita promotes a higher standard of living,
including the adequate or improved availability of food, housing, clothing, health care,
reduced working hours and freedom from work for children and the elderly. These are
reduced or unavailable if the GDP per capita is too low, so that most people are living a
marginal existence.
Economic growth is, however, not universally viewed as an unequivocal good. The
downside of such growth is referred to by economists as the 'externalization of costs' (see
externality). Among other things, these effects include pollution, the disruption of
traditional living patterns and cultures, the spread of pathogens, wars over resources or
market access, and the creation of underclasses.
In defense of capitalism, liberal philosopher Isaiah Berlin has claimed that all of these ills
are neither unique to capitalism, nor are they its inevitable consequences. See also
Sustainability.
One of the key markers of entrepreneurial economies and 'growth' in a society is its
economic mobility, defined as the existence of large changes in the make-up of its socioeconomic strata. This is manifested as the occurrence of large fluctuations in the various
deciles or quintiles of income and wealth among the population, and the existence of
large changes over a person's lifetime in relation to their real earning power. In standard
economics, a capitalist system provides more opportunities for an individual to rise faster
in the world by entering new professions or establishing a business venture. The
instability of economic strata is contrasted with traditional feudal or tribal societies,
which are considered to have more stable wealth relationships, and with the
egalitarianism that exists in socialist societies, which distribute more of their wealth in
the form of social benefits and therefore reduce income mobility, particularly among
those who own capital and wish to trade it.
However, the existence of large fluctuations in income deciles does not always represent
income mobility - with individuals receiving regular wage increases over their working
lives and then retiring, such fluctuations alone do not show that there is 'mobility' per se.
Moreover, it is argued by many labor economists that wage instability represents the
transfer of risk to workers and particular sectors of the economy such as agriculture, and
away from the holders of capital.
Self-organization
While a great deal of planning is undertaken among individual companies and other
organisations in capitalist economies, few significant mechanisms for imposing overall
direction are available to governments. There is also a scarcity of reliable predictive tools
and foreknowledge of how an economy is likely to behave or perform more than a year or
two into the future. While most transactions may be planned and agreed by the actors
involved, many society-wide phenomena that emerge from the markets and its
transactions are often not planned, predicted, approved or authorised by anyone.
Nevertheless, such an economic system can organize itself into a complex system without
an external guidance or planning mechanism. This phenomenon is called "selforganization." Friedrich Hayek coined the term "catallaxy" as a market where
"spontaneous order" emerges when no centralized control source (government) overrides
decisions of individuals pursuing their own ends. However, in all large-scale modern
economies the State conducts a degree of centralized economic planning (using such
tools as allowing the country's central bank to set base interest rates), ostensibly as an
attempt to improve efficiency, attenuate cyclical volatility, and further particular social
goals.
Some economists use chaos theory to argue that it is impossible to make accurate longterm economic predictions. They view the decentralized nature of economic planning and
development that occurs in capitalism as one of its greatest strengths, arguing that it
permits many solutions to be tried, and that real-world competition generally finds a good
solution to emerging challenges. This is opposed to the central planning approach to the
running of a society, which often selects inappropriate solutions as a result of faulty
forecasting. One possible example is the experience in Somalia where the previously
regulated telecommunications industry is reported to be "thriving" now that, and
reportedly because, the country lacks a government. [11]
Capitalist economies typically contain numerous companies, and people are free to enter
into many different types of arrangement with each other. Such an economy reacts to
technological change, new discoveries and other developments through continual
readjustments in the relationships which exist among companies and individuals. In this
way the economy's control mechanisms and how information flows through it evolve
over time, and are characterised by a kind of "survival of the fittest" selection and
evolution process which is not dissimilar to that exhibited in natural systems and their
component relationships.
Ancient Rome (particularly during the late republic and early empire) and China under
the Song dynasty are examples of societies with some of the characteristics of capitalism:
absence of feudal fiefs, (weak) property rights, some economic growth, and advanced
technology for their times. It is much debated why these societies did not have their own
"industrial revolution" and thus achieve industrial capitalism in the modern sense. It has
been suggested that these states formed monopolies in their parts of the world with very
limited competition from other states. The ruling class then become complacent and the
successful institutions were overturned in order to enrich certain special interest groups.
Much innovation has historically taken place when many small states compete for
allegiance, as in the city-states of ancient Greece and renaissance Italy, the most
developed regions of the world at their time.
Analysis of the networks of connections and arrangements in the economy has shown a
degree of similarity to other networks such as phone systems or the Internet. [12]
contains examples of networks of company board members. Networks of customer links
and monetary flows exhibit similar characteristics.
Socialism vs. Capitalism:
Which is the Moral System
On Principle, v1n3
October 1993
by: C. Bradley Thompson
Throughout history there have been two basic forms of social organization: collectivism
and individualism. In the twentieth-century collectivism has taken many forms:
socialism, fascism, nazism, welfare-statism and communism are its more notable
variations. The only social system commensurate with individualism is laissez-faire
capitalism.
The extraordinary level of material prosperity achieved by the capitalist system over the
course of the last two-hundred years is a matter of historical record. But very few people
are willing to defend capitalism as morally uplifting.
It is fashionable among college professors, journalists, and politicians these days to sneer
at the free-enterprise system. They tell us that capitalism is base, callous, exploitative,
dehumanizing, alienating, and ultimately enslaving.
The intellectuals’ mantra runs something like this: In theory socialism is the morally
superior social system despite its dismal record of failure in the real world. Capitalism, by
contrast, is a morally bankrupt system despite the extraordinary prosperity it has created.
In other words, capitalism at best, can only be defended on pragmatic grounds. We
tolerate it because it works.
Under socialism a ruling class of intellectuals, bureaucrats and social planners decide
what people want or what is good for society and then use the coercive power of the State
to regulate, tax, and redistribute the wealth of those who work for a living. In other
words, socialism is a form of legalized theft.
The morality of socialism can be summed-up in two words: envy and self-sacrifice. Envy
is the desire to not only possess another’s wealth but also the desire to see another’s
wealth lowered to the level of one’s own. Socialism’s teaching on self-sacrifice was
nicely summarized by two of its greatest defenders, Hermann Goering and Bennito
Mussolini. The highest principle of Nazism (National Socialism), said Goering, is:
"Common good comes before private good." Fascism, said Mussolini, is " a life in which
the individual, through the sacrifice of his own private interests…realizes that completely
spiritual existence in which his value as a man lies."
Socialism is the social system which institutionalizes envy and self-sacrifice: It is the
social system which uses compulsion and the organized violence of the State to
expropriate wealth from the producer class for its redistribution to the parasitical class.
Despite the intellectuals’ psychotic hatred of capitalism, it is the only moral and just
social system.
Capitalism is the only moral system because it requires human beings to deal with one
another as traders--that is, as free moral agents trading and selling goods and services on
the basis of mutual consent.
Capitalism is the only just system because the sole criterion that determines the value of
thing exchanged is the free, voluntary, universal judgement of the consumer. Coercion
and fraud are anathema to the free-market system.
It is both moral and just because the degree to which man rises or falls in society is
determined by the degree to which he uses his mind. Capitalism is the only social system
that rewards merit, ability and achievement, regardless of one’s birth or station in life.
Yes, there are winners and losers in capitalism. The winners are those who are honest,
industrious, thoughtful, prudent, frugal, responsible, disciplined, and efficient. The losers
are those who are shiftless, lazy, imprudent, extravagant, negligent, impractical, and
inefficient.
Capitalism is the only social system that rewards virtue and punishes vice. This applies to
both the business executive and the carpenter, the lawyer and the factory worker.
But how does the entrepreneurial mind work? Have you ever wondered about the mental
processes of the men and women who invented penicillin, the internal combustion
engine, the airplane, the radio, the electric light, canned food, air conditioning, washing
machines, dishwashers, computers, etc.?
What are the characteristics of the entrepreneur? The entrepreneur is that man or woman
with unlimited drive, initiative, insight, energy, daring creativity, optimism and ingenuity.
The entrepreneur is the man who sees in every field a potential garden, in every seed an
apple. Wealth starts with ideas in people’s heads.
The entrepreneur is therefore above all else a man of the mind. The entrepreneur is the
man who is constantly thinking of new ways to improve the material or spiritual lives of
the greatest number of people.
And what are the social and political conditions which encourage or inhibit the
entrepreneurial mind? The free-enterprise system is not possible without the sanctity of
private property, the freedom of contract, free trade and the rule of law.
But the one thing that the entrepreneur values over all others is freedom--the freedom to
experiment, invent and produce. The one thing that the entrepreneur dreads is
government intervention. Government taxation and regulation are the means by which
social planners punish and restrict the man or woman of ideas.
Welfare, regulations, taxes, tariffs, minimum-wage laws are all immoral because they use
the coercive power of the state to organize human choice and action; they’re immoral
because they inhibit or deny the freedom to choose how we live our lives; they’re
immoral because they deny our right to live as autonomous moral agents; and they’re
immoral because they deny our essential humanity. If you think this is hyperbole, stop
paying your taxes for a year or two and see what happens.
The requirements for success in a free society demand that ordinary citizens order their
lives in accordance with certain virtues--namely, rationality, independence,
industriousness, prudence, frugality, etc. In a free capitalist society individuals must
choose for themselves how they will order their lives and the values they will pursue.
Under socialism, most of life’s decisions are made for you.
Both socialism and capitalism have incentive programs. Under socialism there are builtin incentives to shirk responsibility. There is no reason to work harder than anyone else
becuase the rewards are shared and therefore minimal to the hard-working individual;
indeed, the incentive is to work less than others because the immediate loss is shared and
therefore minimal to the slacker.
Under capitalism, the incentive is to work harder because each producer will receive the
total value of his production--the rewards are not shared. Simply put: socialism rewards
sloth and penalizes hard work while capitalism rewards hard work and penalizes sloth.
According to socialist doctrine, there is a limited amount of wealth in the world that must
be divided equally between all citizens. One person’s gain under such a system is
another’s loss.
According to the capitalist teaching, wealth has an unlimited growth potential and the
fruits of one’s labor should be retained in whole by the producer. But unlike socialism,
one person’s gain is everybody’s gain in the capitalist system. Wealth is distributed
unequally but the ship of wealth rises for everyone.
Sadly, America is no longer a capitalist nation. We live under what is more properly
called a mixed economy--that is, an economic system that permits private property, but
only at the discretion of government planners. A little bit of capitalism and a little bit of
socialism.
When government redistributes wealth through taxation, when it attempts to control and
regulate business production and trade, who are the winners and losers? Under this kind
of economy the winners and losers are reversed: the winners are those who scream the
loudest for a handout and the losers are those quiet citizens who work hard and pay their
taxes.
As a consequence of our sixty-year experiment with a mixed economy and the welfare
state, America has created two new classes of citizens. The first is a debased class of
dependents whose means of survival is contingent upon the forced expropriation of
wealth from working citizens by a professional class of government social planners. The
forgotten man and woman in all of this is the quiet, hardworking, lawabiding, taxpaying
citizen who minds his or her own business but is forced to work for the government and
their serfs.
The return of capitalism will not happen until there is a moral revolution in this country.
We must rediscover and then teach our young the virtues associated with being free and
independent citizens. Then and only then, will there be social justice in America.
Capitalism
Capitalism means the complete separation of economy and state. Capitalism is the
social system based upon private ownership of the means of production, which
entails a completely uncontrolled and unregulated economy where all land is
privately owned. But the separation of the state and the economy is not a primary, it is
only an aspect of the premise that capitalism is based upon, which are individual rights.
Capitalism is the only politico-economic system based on the doctrine of individual
rights. This means that capitalism recognizes that each and every person is the owner of
his own life, and has the right to live his life in any manner he chooses as long as he does
not violate the rights of others (Shadab 1).
Capitalism has a main philosophical view. "Capitalism is implicitly based upon a world
view which upholds that man’s mind is competent in dealing with reality, that it is
morally good for each person to strive for his own happiness, and that the only proper
social arrangement for men to live under is one in which the initiation of physical force is
banished" (Shadab 2). This is the ideological basis upon which the United States was
founded. The importance of recognizing the philosophy upon which capitalism rests upon
lies in the fact that no social system can be properly understood or defended apart from
its broader philosophical framework (2).
Socialism:
Supporters of Socialism believe that the ideal condition of mankind would be an
equal distribution of all consumer goods available. "As the most practical method to
achieve this end, they advocate the radical expropriation of all material factors of
production and the conduct of all production activities by society, that is to say, by the
social apparatus of coercion and compulsion, commonly called government or state"
(Mises 1). Socialists believe that the inequalities that exist in our society are unjust and
that the minority of the population should not own the vast majority of the wealth (Julien
1).
Group Member Names: ________________________, _________________________,
_______________________, _______________________, _______________________,
Stalinism (Socialism)
__ good ___ bad
vs.
Capitalism
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__ good ___ bad
_______________________________|______________________________
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