Proponents of capitalism often claim that their system is the only viable alternative to socialism. This doesn’t make any sense to me; it sounds like saying that we should go downstairs to avoid reaching the basement. I think that any nation which adopts a capitalist system and a dedication to capitalist ideals begins a process that leads inevitably to a large government role in the economy.
To begin with, we need to understand that “capitalism” means both the laws and the philosophy. In other words, a capitalistic economy must have a government that defends property rights, but it also requires having people who form businesses. Those businesses work towards the goal of maximizing their own profits.
The process works like this:
1.) In a capitalist system, variations in personal wealth must exist.
2.) The rich people will gain a disproportionate share of control over the government. This can’t be avoided. Money is only a form of power, power is the ability to make other people obey your will, and the government is made up of people.
3.) Rich people in a capitalist society are self-interested, meaning that they look for ways to maximize income with minimum effort. Arranging for a government handout will almost always bring a higher income/effort ration than honest labor. Consequently the rich will devote more and more attention to getting government handouts. Having control over the government, they will get their handouts.
4.) Once the process of handing out government pork begins, it can only grow. Increasing spending will always be easier than decreasing it, because the rich people are personally interested in maintaining their handouts, while no one’s very deeply interested in ending those handouts.
5.) Consequently, government spending continually rises.
Some but I would instead say that Capitalism is what provides most of the socialist democracies with the economic backbone necessary for their social programs. That’s just my opinion though.
A large government role compared to what? Mercantilism under Louis the XIV, the economic system also adopted by many other European monarchs, predated what we think of as capitalism and consisted of governmental regulations of almost all the economy. Want to start an overseas trading company? Not without government permission because they’ve already granted another company a monopoly. What to become a baker? Better make sure you sell bread at the price dictated by the government and that you have permission to be a baker in the first place.
Sounds a lot like the poor and middle class as well. Why do examples 3 & 4 only apply to the rich? How do you define government pork or handouts?
Simple solution. Enact a constitutional amendment limiting the budget to X% of GDP. I suggest X = 10. But I could go a little higher or a little lower.
If the economic system is true capitalism, and the government is libertarian (i.e. no subsidies to corporations or businesses, very low taxes and therefore very little economic power or influence) then this slide to big government and subsidies to business (not exactly socialism, more like fascism really) would not get started.
Bear in mind (my opinion here, unsupported by citations) that much of the power that corporations have today is due to their ability to influence government, either through bribery or coercion, to give them an unfair advantage in the marketplace. Without that, lots of the biggest corporations wouldn’t last another 6 months.
No, in pure, laissez-faire capitalism, money is economic power, but not political power. The government would have no control over the economy, other than what is absolutely necessary to ensure a free market. Whatever influence the rich currently have over the government is due to the fact that what we have today is not capitalism.
Thanks for the snark. Perhaps my point was unclear. I was trying to say that capitalism is not the culprit with creeping government power, it is the nature of the government system. A different government system would produce a different result.
**panache45 ** said it better than I did, as it happens.
And I find I still didn’t finish the thought. Capitalism is an economic system that depends on a libertarian government to work properly. That’s why, as **panache45 ** said, what we have isn’t capitalism.
John Mace, I’ve never heard that proposition. Are there any cites that have taken that line of logic out? It sounds like it could at least be interesting.
Also, with the implication that just because the government has money means that they develop social programs with it sounds a lot like a trickle down economic theory.
Not that I know of. I’m an unapreciated genius at the moment.
I’m not sure what you mean.
BTW, there’s nothing inherently small governmentish about my proposal. Let X =40 if you like, but it still caps the creeping (creepy?) socialism postulated by the OP.
Well, it sounds like you need some research. Poke around, find the figures that are used and how they stack up againstcurrend GNP (or GDP) standards. It could be rather interesting.
If “Consequently, government spending continually rises” , I assume that this influx of spending would be attributed to social programs. I guess that’d complete the circuit to Socialism via Capitalism, I suppose.
It’s me putting words in ITR Champion’s mouth. Feel free to fix my mistake, if it is one.
My point is, Roderick Femm and panache45 seem to be defining “capitalism,” in a formal-prescriptive way, as something that never has existed; which is sharply at odds with the way the term has been used in economic, political, and historical discourse for almost 200 years now.
It comes down to the fact that the rich can do things which the poor and middle class cannot. The exact nature of those things varies from one society to the next, but the principle stays the same. The most common instance is bribery, which has plagued every civilization in history. Generally you have to be rich to bribe politicians. In the United States, the system of legalized bribery called campaign finance makes the problem particularly severe, but hardly unique.
More generally, entry to the political system is determined by money. To run a successful campaign, you need connections with politicians and political parties, connections to the media, and the ability to hire a good staff. That means the rich will always have a head start on the working classes.
Yes, but the current United States government evolved out of a government that did practice pure laissez-faire capitalism, or something very close to that. The experience of the United States gives an example of how the transition unfolds. The Constitution does not permit most of the federal programs that currently exist. Nevertheless, they exist. By various methods, programs not listed in the Constitution sprang into existence. Once created, there was always pressure to keep expanding those programs because people wanted more money. Once you’ve accepted a small, temporary subsidy for soybean farmers, they smell blood in the water. Every increase in the soybean subsidy means increased profits for soybean farmers. Meanwhile, nobody is very interested in fighting against the subsidy.
