Summary:
Communism v. Capitalism is really equality (fairness) v. efficiency. In gov't, want more fairness. In business you want more efficiency so you can have a higher overall standard of living. But market failures lead to necessity of gov't intervention to fix some inequities.
A coworker and good friend of mine likes to make a show of her support for communism around me. I think in part she plays it up because it gets me all agitated - apparently people get a kick out of seeing me in an excited state. Each time she brings it up I make it clear that I think communism is unrealistic - that the theory obviously doesn't understand human nature. The point being that communism can never work without being propped up by authoritarian government.
What I really should point out though is that even if communism was implemented democratically, it would still be bad policy. In my mind, free market and communism represent opposite extremes of efficiency versus equity / fairness. I believe that government should be much closer to the extreme of equity and fairness, which is why I firmly believe in a government of collective decision-making (democracy).
In the business world though, I lean more towards efficiency because with more efficiency, you can have a higher overall standard of living. Communism has never been able to achieve the level of comfort and average wealth that free markets have. This is the case in part because in a free market you have a select group of people managing the assets and making decisions. The basic idea of communism is the opposite - collective ownership of the means of production. In this scenario, all workers make all decisions collectively and share the risk and reward. While collectives and co-ops can be successful, on the whole I think they are far less efficient. On a bigger scale where profit motives disappear, efficiency decreases.
I will acknowledge that I am oversimplifying economic theory significantly in places, but I think the overall point still stands. And I know I am not breaking any new ground necessarily, but if I were I would likely be in a Econ PhD program.
Now, one more point before I conclude. While I clearly celebrate the virtues of free market capitalism, we must also acknowledge what a lot of the strict free marketeers won't: Markets aren't perfect. There exist glaring market failures that government has a role in correcting. One obvious example of this is the environment. While our economy puts a price on land, it doesn't put a price on air. Without government intervention, businesses would not have worked to decrease their environmental impact in the 80s and 90s (we still have a long way to go). And without further intervention, businesses will not decrease their green house gas emissions.
Another example of a market failure is unemployment. While a certain amount of employment is necessary for a stable and efficient economy (theory holds that "Natural Unemployment" protects against wage inflation), any decent sense of fairness requires that government intervene to take of those that are left out. This is why social welfare programs are necessary.
There will always be a trade-off between fairness and efficiency. And like a good moderate, I believe that the only way to be successful is to keep both in mind. An efficient system allows us all to have the best life we can - to enjoy both comforts and necessities. And a fair system helps us take care of people and problems that the market doesn't value.
3 comments:
I must say that it is true that people like to see you in an agitated state, its very amusing.
Now i don't agree with you when you talk about collectives and coops not being efficient. I believe we had this conversation when we were talking about "Animal Farm" in this book once the animals had taken over i believe they were being very efficient (in the beginning at least, before the pigs got greedy). All of them worked for a common cause and not one grain was wasted. This does not happen in the business world, with all the "profit motives". As a matter of fact i believe they are less efficient because of the profits (profits=greed).These corporations waste significant resources. And only those in the high positions benefit from the profits.
i'm glad you recognize that free market capitalism are not perfect, they are far from it many of these Free Trade agreements cause nothing more than problems, especially in Latin America. (but that's another discussion)
I think that if co-ops and collectives were as efficient, then there would be more of them. In fact, talk to someone who lives in a co-op and see if they think that situation could possibly work more broadly in more situations.
But if you want to look at the bigger picture, look at China or Cuba. China is still authoritarian, but has achieved its growth though capitalism. Cuba is still communism, and while some argue its policies are more fair, they have never been able to achieve strong growth and higher standards of living.
The fact is, this isn't theory anymore. Communism has been tried, co-ops have been tried. They haven't succeeded. And one of the big reasons is that they don't deliver on efficiency and they don't raise the standard of living.
Since you mentioned free trade, let's be clear that one of the main reasons free trade causes problems is that it isn't two-sided. America continues to subsidize farming to prevent competition. If we actually practiced what we preached, we would see better results.
Actually, I also need to say something about your statement that profits = greed and leads to less efficiency. To me, that just doesn't make sense.
The fact is, the need for profits - to please current investors or to attract new ones - is never-ending. There is a continuous cycle where managers need to find ways to cut costs or increase production. In a market, the companies that can do this, succeed.
This aspect of capitalism leads to efficiency, but also unfairness and inequality. And I believe it is government's role to correct this - the 40 hour work week, child labor laws, and unemployment insurance are all great policies to correct for the extremes of capitalism.
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