A Question of Morals

The debate between systems of political economy is not about economics – here’s why Capitalism? Socialism? … Communism?


Ah, the logical and civilized debate between the different camps of economic organization - a glorious showdown - that has never shown signs of stopping.


Indeed, many of us are quick to attach labels to ourselves and our ideas. You want the trains to run on time? There’s a name for that. You want the government to stay out of your way? There’s a name for that. Think that people from other countries, nationalities and genders are somehow lesser than yourself? There’s a name for that too, although, I don’t think I’d get away with using such language here.


The thing is, people like to argue. That’s it, end of story, we argue. But the arguments that we have are a result of long marches of time, the inevitable development of ideas and the context in which they reside. In fact, the very idea of socialism hardly existed 200 years ago, whilst some of our ideas are as old as the hills. One particular development is the change in the debate between such ideologies, and how a nation’s political economy should be arranged (or rather, not arranged, if you’re the free-marketeering type). That debate has evolved from one simply debating systems of economic organization, to being one that questions the morality of such a system, and the humanity of its flagbearers (there are a lot of flags, and how they are produced and distributed is all up to the system advocate for).


Of course, this has not gone unnoticed. Milton Friedman, in his heralded speech, Is Capitalism Humane? [1] Focuses on the opposition to capitalism and that such opposition is often rooted in the questionable morality of the system. Friedman goes on to say that the problem with such a view is that moral values are individual – he says “capitalism, socialism, central planning are means not ends” [2]. In and of themselves, these systems are neither humane nor inhumane, and thus, we must look to their results, says Friedman.


He is careful, however, and says that in order to look for these results, one must not listen to the words of the proponents of one system – we must look for REAL results. In this speech, Friedman says socialism has appealed to many people because of its objectives of equality and social justice, through the means of government ownership of the means of production – some nice objectives, everyone loves a bit of equality and social justice, don’t they? But does it do what it says on the tin (said tin is publicly owned, by the way)? Friedman, as it will not come as a surprise being the free-market-thinking, liberty flag-waving, Nobel prize-winning economist that he is, thinks that socialism has not delivered on its objectives. Let’s just see, shall we?


In a University of Birmingham blog, [3] there is a graph (see below) which shows the effect of capitalism, embodied in the industrial revolution that took place in the 19th century, on GDP (Gross Domestic Product) per person. Ok…what’s GDP? Don’t worry. I’ve got you covered.

Gross domestic product or GDP is a measure of the size and health of a country’s economy over a period of time (usually one quarter or one year). It is also used to compare the size of different economies at different points in time [4].


Basically, if GDP is going up, it’s a good thing. Businesses are producing, people are spending, and the amount of goods and services being produced is rising. Ok...so we’re making more things, so what? A fine point indeed dear reader, allow me to show you.


The industrial revolution of the 19th century saw technological innovation and economic empowerment in the world, especially in its birthplace, Britain. Such change and momentum altered how people lived and worked. An article published in 2016 shows how technology, visualised through the reduction in agricultural employment, improved the welfare of the people throughout the past 200 years.

Such change and growth throughout our recent history (yes, 200 years can be considered recent) has meant that extreme poverty no longer dominates 94% of the population, rather, only 10% [5]. So, perhaps, we can consider capitalism as being the system with the most humanity, because a system that delivers people from destitution and poverty must be a good one, right? …Right?


Introducing the socialists, we met this lot earlier, and they think that industries should be nationalized (brought into government ownership) and that society should be viewed and treated as if it were a collective, not as lots of individuals. Workers’ rights, economic equality (i.e., no fat cats) and social justice are among the dots on their ‘to-do’ lists.


Have these ‘dots’ got ticks next to them? Well, it’s hard to say. Indeed, many right-wingers (those free market types who base their ideas on classic liberals from the 18th century, let’s call them neoliberals) cite that socialism is a ‘utopian’ ideal, meaning it is ‘too perfect’ for any human society, which is riddled with frailty, problems and the limited reach of human rationality. As such, “socialism” has never been done properly, hence why many socialists claim that we can’t criticize something that has never been done. But what about the Sovie- I’ll have to stop you there, that’s communism, a whole different ball game, and the subject of another article soon.


Socialists boil when hearing of corporate greed and international firms (we finance folks call them blue chips) making huge profits and paying their workers the lowest they can get away with, and it is because of such boiling effects that they don’t believe it should happen at all. Rich people should not get to keep ALL the money they make when there are people struggling to get by. What do you think?


However, our neoliberal friends argue that socialism wouldn’t prevent the greedy and self-interested human condition from exploiting others in society. Perhaps one of the most famous classic liberals is a man named Adam Smith. Widely considered to be the father of modern economics, Smith wrote that the free market and individuals pursuing their own interests actually deliver the best, and most efficient outcomes for society, as voluntary exchange increases the wealth of countries [6].

What do you think? Leaving aside which one is more efficient, the debate between capitalism and socialism is more about morals and humanity, rather than GDP growth and resource allocation, and so the argument is not altogether clear. But don’t take it from me, look at the facts, look past what proponents of one system say (myself included, as a classic liberal and free-market advocate) and decide for yourself which camp you sit in before you fan flames in another direction.

 

Edited and Reviewed by Tanish Bagga.

 

References/ Further Reading:


[1] https://youtu.be/ORQtnQRqOKc

[2] https://youtu.be/ORQtnQRqOKc?t=439

[3] https://blog.bham.ac.uk/cityredi/capitalism-and-its-impact-on-global-living-standards/

[4] https://www.bankofengland.co.uk/knowledgebank/what-is-gdp

[5 https://www.theguardian.com/commentisfree/2019/feb/04/capitalism-is-having-an-identity-crisisbut-it-is-still-the-best-system

[6] https://en.wikipedia.org/wiki/Adam_Smith

Charts (in order of appearance) https://blog.bham.ac.uk/cityredi/wp-content/uploads/sites/15/2020/03/Graph-2.jpg

https://www.aei.org/wp-content/uploads/2016/02/020916Deloitte1.jpg?x91208

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