Capitalism Vs. Socialism: Which Is Superior?


Throughout history, the economic ideologies of both capitalism and socialism have dominated the economic, and, indeed, the political sphere.

Some argue that capitalist economies are inherently superior, while others propagate the idea that socialist economic collectivism is the hallmark of a successful society. Although some Socialists argue that socialism is simply a theoretical ideology and that it has never truly be implemented in practice, the debate between the two would, therefore, be a zero sum game.

This is because the argument could go back and forth ad infinitum because capitalists could say that a pure form of capitalism has never been tested in the real world, which would, in turn, be rebuffed by socialists, and so on and so forth. It is important to realize, before the beginning debate, that there are capitalist and socialist elements in every economy, and so arguing that a pure form of each will never be found, although true, is pointless. I, myself, am in favor of the capitalist system, due to a number of reasons, chiefly the idea of a reward for labor.

In capitalism, the idea of labor is firmly attached to the prospect of reward. Contrastingly, the reward system detaches from labor in socialism.

It is an intrinsic fact of human nature that people will be at their most productive when offered a reward, and the socialist ideology denies people this reward.

Over time, when people realize that they are not gaining a comparative advantage over their fellow employees, despite working harder than them, they will lose the incentive to keep working at their most productive capacity.

The idea of artificially maintaining people’s standard of living, when those people have not worked as hard as they need to, is fundamentally flawed, and will eventually erode any element of substantial productivity out of an economy. When we juxtapose this with capitalism, there is a stark difference. People have an incentive to work in order to gain a comparative advantage over their counterparts, resulting in a substantial increase in productivity, which increases output and therefore results in the positive multiplier effect, growing an economy. This capitalist system is the reason why the USA has grown astronomically over the past century, with other Marxist socialist states such as the Soviet Union falling in their wake.

It is my firm belief that the markets alone allocate resources far better than a government scheme ever could. As such, I see the capitalist alternative as far better than the socialist one. In socialism, markets are not efficient in the slightest, and will not react to small shifts in supply and demand.

The efficient market hypothesis simply cannot be proved true when the state owns all the goods in any one economy. In addition, it is obvious that state-regulated prices mean that not everyone will get the goods that they want, as production will not increase for a highly sought after item until much further down the line. This leads to a highly inefficient allocation of resources.

By contrast, the capitalist system means that prices move in reaction to any small thing, immediately allocating the resources required to whatever good is in demand at the time. This is a far more efficient system than the socialist alternative, where you never know how long it will take before you can get the good that you want.

A key point often stated by proponents of socialism is that socialism results in a far more equal, fair society. They also state that socialism has a far greater regard for the environment, and other ethical issues, than the capitalist system. However, I would counter this by asking the question: what could be fairer than a society where one reaps rewards proportional to his or her labor? If the people of a particular state would want environmentally friendly alternatives, they would thus turn to the company with the most environmentally friendly means of production, and the revenue of this company would increase.

Is it not fair that the company with the least environmentally damaging policies reaps far more rewards than companies with less environmentally damaging policies? This shifting of revenue towards the company will also persuade its competitors to invest in more environmentally friendly means of production, thereby making the whole sector more “green.” This environmental example can be applied to any scenario where the consumers do not like the ways which companies are carrying out their business. For example, if people do not like companies using sweatshops, then they would boycott that company, forcing the company and other similar companies to revert to a more ethical form of production.

Of course, in this piece, I am not arguing that capitalism is wholly perfect. I also agree that a successful society needs elements of both capitalism and socialism to succeed. However, all I am doing in this piece is simply arguing as to why capitalism is by far the superior economic ideology to socialism.

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