X.1: Capitalism, Socialism, and Communism

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Capitalism, Socialism, and Communism

What are the Merriam-Webster definitions of capitalism, socialism, and communism?

Capitalism: an economic system characterized by private or corporate ownership of capital goods … [and] by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

Socialism: a system or condition of society in which the means of production are owned and controlled by the state.

Communism: a final stage of society in Marxist theory in which the state has withered away and economic goods are distributed equitably. (Merriam-Webster)

Many confuse capitalism with greed. But Max Weber, a founder of modern sociology, clarified the distinction. That is, he said capitalism is the re-investment of profit for growth of a business, while greed is the accumulation of profit for personal spending. He said greed is common among capitalists, but it is just as common among all people. It is even common among beggars and socialists. (Weber [1930] 2005, xxxi)

A greedy capitalist can spend his profit on personal consumption when he needs to re-invest that profit in his business. In such a case, that business will probably fail.

There are two kinds of successful capitalists: entrepreneurs and manipulators.

Industry creates new wealth. And entrepreneurs succeed financially by being more industrious and creating more wealth than other people. So they increase the total wealth of society. Moreover, we all get richer by letting them get even richer than ourselves. It is extremely ignorant to hate entrepreneurs, thinking there’s only a fixed amount of wealth to be distributed. That is, we do not get poorer just because they get richer.

On the other hand, manipulators only increase their own wealth while decreasing others’ wealth. For example, they succeed financially by extracting favors from politicians, cheating their customers, vendors, and employees, and underhandedly destroying their competitors.

No nation has ever met the Merriam-Webster definition of communism by distributing goods equitably.

Some nations call themselves “communist”, but they have always distributed the best goods to the communist party leaders. These leaders succeed financially at their society’s expense, so they are pure manipulators.

So-called communist countries have actually been socialist, by Merriam-Webster’s definition. And the central planning economics of socialism, that is, state control of the means of production, has failed miserably in every nation that has tried it. That is, it has failed for the people, but not for the higher ranks of party insiders.

In recent decades, China has increased its society’s wealth by adopting some policies that resemble capitalism. In practice, that means some party insiders (mostly military leaders) have been allowed to run state-owned businesses. They have even been allowed to use profit-based and competition-based methods.

Welfare states do not meet the definition of socialism – they do not control the means of production.

Welfare states are those which re-distribute some of the wealth or income of some richer people to some poorer people. Many European welfare states did very well financially for a few decades. But after that, debt began forcing them into extreme austerity measures. In addition, America’s welfare system (which includes corporate welfare) is headed down the same debt-burdened road.

The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery. (Churchill 1945) – Winston Churchill

Socialist governments traditionally do make a financial mess. They always run out of other people’s money. (Thatcher 1976) – Margaret Thatcher

Why is there so much confusion and misinformation regarding the definitions of capitalism, socialism, and communism?

This site is for discussing how to improve our political system. It is NOT for discussing party politics or political figures. So if you have a non-partisan question or comment, feel free to leave it below.

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Churchill, Winston. 1945. BrainyQuote. Winston Churchill Quotes. http://www.brainyquote.com/quotes/quotes/w/winstonchu101776.html (Accessed July 4, 2017).

Merriam-Webster. http://www.merriam-webster.com/dictionary (Accessed January 8, 2016).

Thatcher, Margaret. 1976. “TV interview for Thames TV This Week on Feb. 5, 1976”. Wikiquote. https://en.wikiquote.org/wiki/Margaret_Thatcher (Accessed January 8, 2016).

Weber, Max. [1930] 2005. The Protestant Ethic and the Spirit of Capitalism. Trans. Talcott Parsons. London and New York: Routledge. Taylor & Francis e-Library edition. http://www.tandf.co.uk/libsite/productInfo/eBooks (Accessed July 4, 2017).

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