On Saturday at LibertyCon
, I debated Elizabeth Bruenig
of The Washington Post
on "Capitalism versus Socialism." Here's my opening statement. Here's hers.
"Capitalism" and "socialism" - what do these words even
mean? You could just say that capitalism
is the economic system of countries like the United States, and socialism is
the economic system of countries like the former Soviet Union. In that case, I'd say that capitalism is at
least ok, while socialism is hell on earth.
Perhaps my opponent would even agree!
It's more fruitful, though, to treat capitalism and socialism as
positions on the ideal economic
system. Something like: the capitalist
ideal is that government plays very little role in the economy - and the
socialist ideal is that government plays the leading role in the economy. In that case, I say that capitalism is
awesome, and socialism is terrible.
What's so awesome about the capitalist ideal? It's a system based on individual freedom and
voluntary consent. You're allowed to do
what you want with your own body and your own stuff. If other people want to cooperate with you, they
have to persuade you; if you want other people to cooperate with you, you have
to persuade them. Can consent really be
"voluntary" if some people have a lot more to offer than others? Absolutely.
Some people are vastly more attractive than others, but that does
nothing to undermine the voluntariness of dating. Under capitalism, how people use their freedom is up to them; they can try to get
rich, they can relax, they can help the poor, all three, or none of the above.
Society by consent: Capitalism is such a compelling moral
ideal that I'm tempted to rest my case right now. But there's a looming doubt: Is capitalism
one of those ideals that sounds wonderful, but works terribly in real
How can we even begin to answer such a sprawling
question? Simple: Start by looking at
the most capitalist countries that actually exist. Next, weigh the probable effects of the main
policy reforms necessary to bring those countries into harmony with the capitalist
By usual rankings, the world's most capitalist countries are
Hong Kong and Singapore; other exemplars include the United Kingdom, Canada,
and the United States. By world and
historic standards, all are incredibly rich and pleasant countries. This wasn't true for Hong Kong or Singapore
in 1950, but after decades of top rankings, they're two of the richest and most
pleasant countries on Earth. All of these countries still have relatively poor people, but there's very
little absolute poverty. Indeed, the
poor in these countries have such a nice life that people around the world eagerly
immigrate there to work in hard, low-skilled jobs.
The reason is clear. Free
markets channel the fundamental human desire to better oneself in socially
productive ways. If you can deliver a
product that people like at a price they find attractive, you get rich. This doesn't just lead to mountains of cheap,
amazing products. It also leads to
constant innovation, a ceaseless effort to do more with less. Of course, most of us aren't huge successes in
business. But since business competes
for both customers and workers, most of the benefits ultimately go to us. Amazon has got to be the best store in human
history, providing a cornucopia of great, convenient deals. But its lifetime profits sum to just a few
To repeat, none of the world's most capitalist countries
actually live up to the capitalist ideal.
But they still provide a useful benchmark. How is the status quo likely to change if
government's role drastically shrinks?
I've only got time for the highlights:
1. Even the most capitalist countries heavily restrict
immigration. Non-citizens need
government permission to live and work there - and such permission is almost
impossible for most of humanity to attain.
If these laws were repealed, there would be massive international migration. People around the world would move from
countries where their labor produces little to countries where their labor
produces much. A standard long-run
estimate is that this would double the production of the world - and
drastically reduce global poverty and inequality in the process.
2. Even the most capitalist countries tightly regulate construction,
especially in high-wage areas. If these
laws were repealed, there would be a massive increase in the supply of housing
in the most prosperous areas of the country, soon followed by massive intranational
migration. Standard estimates of even modest housing deregulation say it would
raise U.S. GDP by 10% - and markedly reduce poverty and inequality in the
3. Even the most capitalist countries engage in massive
involuntary redistribution. Strangely,
however, this redistribution focuses not on the poor, but the old. If these laws had never existed, a large
majority of people would have simply taken care of their own retirement - and
taxes would be so much lower that saving wouldn't be hard. What about the minority who can't take care
of themselves? It would cost so little
compared to the status quo that it's not unreasonable to leave it to private
charity. If that seems like wishful
thinking, just retain a small welfare state for poor children and the severely
4. Even the most capitalist countries heavily subsidize
education. In my new book, The Case Against Education, I argue that
the main effect of these subsidies is not to prepare people for good jobs, but
to spark fruitless credential inflation.
If these laws were repealed, we'd still be literate and numerate, but
become independent and self-supporting years earlier. What about poor kids? Again, my preferred answer is private
charity; but if that's not good enough for you, then a means-tested voucher
program solves the problem.
Now what's so terrible about the socialist ideal? It's a system based on government authority
and coercion. Democracy is a decent way
to mitigate the mass murder and slavery of socialist dictatorships. But even under democratic socialism, the
individual is at the mercy of popular opinion.
And popular opinion is not pretty.
Just look at the shameful way American democracy treats peaceful
immigrants like criminals - to popular acclaim.
Socialists like to compare their ideal society to a
family. But in actual families, you
don't have to support your siblings if you don't want to. Indeed, you don't even have to support your
parents who gave you life. Why should your
moral obligations to complete strangers be any stronger? The idea that the rich are morally obliged to
give away everything they don't need until poverty is vanquished has some
superficial appeal. But objectively
speaking, almost all of us have vastly more than we need, especially if you
remember the market value of all your free time. I loathe hyperbole, but if a socialist
government enforced the obligation to give away all your surplus to the poor,
you would literally be a slave.
Once again, though, there's a looming doubt: Is socialism
one of those ideals that sounds terrible, but works wonderfully in real
life? To resolve this, let's return to
my same two-step procedure. First, start
by looking at the most socialist countries that actually exist. Next, weigh the probable effects of the main
policy reforms necessary to bring those countries into harmony with the
By usual rankings, the world's most socialist countries are
North Korea and Venezuela. No decent
socialist upholds these hell states as ideals, and I certainly am not accusing
my opponent of doing so. There are many
praiseworthy ways to bring relatively socialist countries into harmony with the
socialist ideal, starting with: stop murdering and jailing people to keep the
ruling plutocrats in power. But as long
as the North Korean and Venezuelan governments play the dominant roles in their
economies, they'll remain impoverished and oppressive societies. How would democracy fix that, short of abandoning
socialism? To be fair, if I were a
socialist, I'd want to start with Sweden as my benchmark - and work from there. But that's crazy; by most measures, Sweden is
only modestly less capitalist than the U.S.
People often mock socialists for insisting that "true
socialism" has never been tried. I'm not
going to say that, because I don't think "true capitalism" has ever been tried,
either. But if we want to forecast the
effects of the true version of either system, it still makes sense to start
with the closest existing approximations, then analyze the probable effects of bringing
their policies into harmony with the ideals.
When we do so, we see that capitalism is a wonderful ideal that's likely
to work wonderfully in practice, and socialism is a terrible ideal that's
likely to work terribly in practice.