Communism, Capitalism, and economic "systems"

Great Debates
1

The thread below seems to have gotten out of hand, so I offer this as a comment on some of the misconceptions permeating the discussion on economics.

Capitalism is not a “system.” Capitalism is the lack of a system. It is what happens when men are allowed to act freely, but are unable to use force against each other.

Communism is a “system.” Communism uses force to place certain individuals into positions from where they can exert artificially created power over wealth-generating entities. Communism requires a network of people thus empowered to maintain it. Capitalism requires nothing at all, it simply exists.

Communism is founded upon what is universally considered within the economics world to be a flawed theory. The Marxian theory of wealth, the labor-value theory, was shown to be flawed over 100 years ago, first by Bohm-Bawerk, then others.

Imagine this scenario: three men, each beginning with $1 worth of raw materials. One man can turn the $1 into a fine shoestring, worth $2. The second can turn the $1 into an excellent sole, worth $2. The third can turn the $1 into finely crafted leather, worth $2. Under the Marxian theory, the story ends there. Each man has used his labor-power to increase wealth by $1, for a total generation of $3.

Now this: another man desires to produce and sell shoes. He finds the three laborers, informs them of each other’s existence, secures a place where they can meet to combine their efforts, and the result is a shoe. Assuming for hypothetical that the labor involved in assembling the three pieces is negligible, $3 of goods is the cost. Few people desire to track down all three elements of a shoe themselves, so they pay $10 for a finished product. Instead of $3 wealth generation, there is $7 wealth generation. Yet the Marxian theory only accounts for the $3 which was provided by laboring on materials to produce more valuable materials. It does not account for the other $4. A share of this $4 is taken by the fourth man, who produced nothing by labor, and the rest is divided among the first three men.

Could the three men have simply found each other, and went into business themselves thus dividing the entire $4 amongst themselves? Certainly, that’s exactly what would often happen. A common misconception about Communism is that this is facilitated, cutting out the capitalist’s share and dividing the benefits among the laborers only. In reality, Communism supplants the capitalist and replaces him with a government figure. Government organizes people together in ways that it believes will best generate wealth (proving that even no Communist government has ever bought into Marx’s economic theory.) The capitalist’s share is not directly taken, rather the salary of the government official is taken from the entire population.

As an economic system, Communism replaces hundreds of capitalists working to facilitate the generation of wealth with one conceptual entity, staffed by hundreds of government officials with no direct stake in the results of their efforts. How does it do this? By the use of force. It puts a gun to our heads and demands we hand over control of our labor to government. This is a “system” in every sense of the word.

A position espoused often is that communism works in theory, but not in the real world. It doesn’t even work in theory. There is simply no way to efficiently supplant self-interested capitalists with government officials and retain the levels of wealth-generation that capitalism affords us.

2

I thought the in theory part about communism working referred to people caring about others as they care about themselves, which they rarely do in real life.

3

I disagree that capitalism is not a system. It IS a system, since, as you put it, it is what happens when people are allowed to act freely but are unable to use force against each other.

How can this happen without a system of laws or a social order that prevents the arbitrary use of force? Without this system then the guy who has a sword and a horse gets to threaten violence against everyone else unless they give him some of their stuff. And then we have feudalism, not capitalism. Government, the rule of law, civil society, a code of honor…call it what you will, but capitalism cannot function without some mechanism for preventing violence and enforcing contracts.

And so we have the military, the police and the courts, without which the libertarian capitalist utopia is impossible. Ergo, it is an economic system. Add in democracy, so the people can CHOOSE the best system of laws that capitalism requires for existance and you’ve got something that works tolerably well.

Of course I agree with the critique of communism and command economies.

4

I can care about people all I want, but caring won’t generate wealth. Even if I wanted to sacrifice myself for others, which is downright foolish and should never be forced upon anybody, I wouldn’t be able to do much for anyone in a communist state. There is less by far to go around under a communist system, so even if people were all happy to sell themselves into enslavement to their fellow men, they’d have only their raw labor-power to give. The additional wealth generated absent government interference wouldn’t be there anymore.

5

Caring can’t generate wealth? Ever hear of Valentines Day? :wink:

Value is relative. It is in the eye of the valuer. And anything that can assume a value can be considered a form of wealth.

And the communism shoots for no centralized government.

6

Hm. I’m not sure whether this deserves its own thread.

Lemur is correct that successful modern market economies depend heavily on the rule of law, which is certainly a system.

Anarchism, however, is not a system; however, I am not convinced that it is superior to capitalism. YMMV.

Marx considered capital to be congealed labor; I assume entrepreneurial effort was considered labor. Therefore, Marx had a complete accounting system. How useful it was is another question.

7

Capitalism is most certainly a system. The whole concept of “ownership”, on which capitalism is based is one that is created and maintained by society.

For example, you own an acre of land. You leave that land to go to the town square. Do you still own that acre of land? Why? Is there any good reason why I can’t build my yurt on that acre of land? It really doesn’t make much sense.

You only own that land because Bob the town recordskeeper says you have a deed to it. A deed doesn’t mean anything. It is a piece of paper that represents a concept. It is a concept that works in the context of a system. That system is capitalism. Nothing natural about it.

One of the first things any great paradigm does is posistion itself as natural. That is why the Soviets were so big on altering photographs, the early American settlers copied Roman buildings and racist look for “scientific” explainations for their hate. I see capitalism is doing a good job.

8

**

Um, how do Soviets, American settlers and racists have anything to do with capitalism? Sorry, but it just doesn’t follow.

If you want to hear about racism just look at France and Germany. The middle east crisis has people in those two countries attacking Jews. Are Americans attacking Arabs in the US? No.

As far as you beliving that capitalism isn’t doing a good job I have a question for you. Why is the US the leader in production of goods and, more importantly, the leader in inventions?

The reason is simple. The US rewards people, via capitalism, to think of and create new things.

Slee

9

Ummmm…I think you kind of missed the point.

One of the ways to get people to dig your way of seeing the world (paradigm) is to convince them that your way of seeing the world is the natural way of seeing the world.

Soviets altered photographs in order to make it look like their ideas had always been in power. For example, they’d put an image of Stalin next to a picture of Lenin in order to make it look like Stalin was a companion of Lenins, when in reality they rarely saw each other. It made Stalin look like the logical successor to Lenin. In this case the Soviets were making up a history in order to make people see their current situation as natural and right.

The American founding fathers used roman style architechture in order to make their government look like a natural continuation of Rome. Reminding people of Rome made them more likely to accept the legitamacy of the young American governement.

And racists of all kinds are constantly seeking “natural” explainations for their causes. People have been measured, tested, poked and prodded all to “prove” that one race or another is superior. This is an appeal to science to make it look as if racism is a result of natural differences. You can see the same thing going on with sexism, a la “Men are from Mars; Women are From Venus”.

Capitalism attempts to do the same thing. People are more likely to go along with capitalism when they believe that it is the natural way for things to be. Thats why we hear so much about “People are greedy by nature” or “Capitalism is what happens naturally when there is no system”. Human nature, whatever that may be, is pretty irrelevent for society, which by definition is what happens when we control human nature. A lot of the processes of capitalism (ownership, intellectual property, non-backed money) are actually pretty wierd, unnatural, and unintuitive. I’m not saying they are wrong (quite yet), just that they arn’t the natural, obvious things that we are taught to think that they are.

10

Capitalism, as we’ve discovered from the experiences of sweetly naive free marketeers in Russia and the third world, requires a whole series of institutions and cultural norms to make work to any significant degree.

11

You bastard. I was gonna start a GD (or possbily Pit) thread purely about this. Damn my procrastination!

12

Very nice post, sven. :slight_smile:

13

the idea that capitalism is “natural” is a delusion promoted by the capitalist propagandists. the Economic Wargame is a continuation of the Military Wargame by other means.

www.twaz.com/business

Dal Timgar

14

But it’s not irrelevant. Sure, society does control many aspects of human nature. For example, most people have surely had urges to attack somebody who has angered them from time to time, but they control those urges, perhaps because of societal reasons, or perhaps other reasons. Of course, there are always those people who don’t refrain from indulging in those urges. They get punished, which is another form of control, but that doesn’t mean that some people won’t still act in keeping with their nature in spite of the possibilities for punishment. This is important to keep in mind.
However, this does not mean that human nature is unimportant to society. Let us take another example. One could say that it is human nature to have an interest in using mind-altering chemicals. According to modern American society, this is a very bad thing and must be prevented. (Except for alcohol, but we tried that already and it didn’t work.) It’s such a bad thing that the government spends giant sums of money every year on the War on Drugs and threatens people with long prison terms for even using them. It’s pretty obvious that society is trying really hard to control this aspect of human nature. Does it work? It doesn’t seem to. Drug use is still significant in society. Just because society tries to prevent an aspect of human nature that it feels is undesirable, does not mean it will succeed in that suppression.
It seems to me that your position on this matter is that it is irrelevant if it is human nature to be greedy, because a communist society will control that aspect of human nature. But, assuming (for the moment) that it is indeed natural to be selfish, what do you propose be done with those people who will not go against their nature? As with the example of violence, even if most people go along with the society, there will be some people that do not. What will become of them? How will the new society attempt to control them?

15

Capitalism undoubtably does a “good job” if you define a good job as maximizing material wealth and goods for a select few. However, it doesn’t do a good job of distributing the rewards of society or of protecting the environment (and other problems that flow from externalities) or of maximizing what one might call non-material wealth.

This isn’t to say that capitalism is bad…But, I think it explains why capitalism needs to be regulated in a way that improves its deficiencies.

And I agree with those who note that it is quite nutty to claim that capitalism is not a system. As even sven pointed out, the concept of individual ownership of land and property is not entirely natural and is in fact different than, for example, what many Native American cultures generally believed. Then there is all of corporate law…from the limited liability of corporations to patent law, …

16

Well, i’m afraid sven stole most of what i was going to add to this post, and said it very well indeed.

If anyone’s interested in reading a very important book on this issue, which addresses the notion of capitalism as a system and also draws interesting conclusions about the economic viability versus the social and ideological viability of the system, i suggest Joseph Alois Schumpeter, Capitalism, Socialism, and Democracy (1942).

The interesting thing about Schumpeter is that he takes a rather iconoclastic position for someone who is a strong supporter of capitalism - he predicts what he sees as its inevitable demise. Yet, in Schumpeter’s formulation, capitalism will not collapse because of its inherent economic contradictions (and he spends a good few chapters attempting to refute Marx on this point), but because social and ideological factors will begin to work against it as the system becomes increasingly routinized and bureaucratized. Schumpeter, in short, believes that capitalism’s economic success will ultimately lead to its downfall.

Schumpeter has certainly erred (so far, at least) in predicting the downfall of capitalism; his teleological system failed in many ways to take into account the dynamism of capitalism and its ability to co-opt potential opposition, as well as underestimating the power of interest-group politics in a large and complex political system. He also made too much of the decline of the individual entrepreneur, and underestimated the way in which personal leadership and entrepreneurship could survive within bureaucratically organized (whether private or government) institutions.

However, many of his observations about the form that advanced or mature capitalism would take were startlingly prescient, especially his observations about the way in which innovation would become normal and accepted rather then unusual; that is, innovation itself would cease to be innovative. And the bureaucratic forms that he foresaw coming to dominate capitalism are certainly very important in the system as it exists today.

For anyone interested in this book, but without the time to read the whole 400-odd pages, you can get the main thrust of his argument by checking out the 100 pages or so that make up Part II: Can Capitalism Survive?

And, for what it’s worth, i think Schumpeter is an important read no matter where you place yourself on the political/economic spectrum. My own bent is towards a sort of libertarian socialism, but the fact that Schumpeter is a big supporter of the capitalism that i have so many problems with does not mean that his work is not valuable.