This edition of Ethanomics is about one of my favorite topics: economic systems. Economic systems are highly stigmatized, especially in America. These stigmas lead to biases and opinions used as a basis for policy rather than theory and historical evidence. Before I get too far into why American politics are creeping towards socialist policy, it is crucial to understand what socialism, communism, and capitalism are, the connotations behind each, and modern policy examples of each.
For starters, capitalism in its purest form is extreme freedom, manipulation, and insufficient economic regulation. There aren’t many places on Earth that can boast a purely capitalist society. A capitalist society leaves economic activity and prices up to the free market (from brussel sprouts to heart surgery). Socialist economies rely on the same free-market but implement more equitable economic controls to prices, for example, setting a price ceiling on heart surgery regardless of how high demand may be relative to supply. Communist societies go a step further from capitalism by abolishing price and private property in favor of community/national ownership of all goods and services.
A better example to illustrate the differences between economic systems is the world of sports. In this case, we have an all-powerful Brooklyn Nets team with three top-10 players in the NBA, while teams like the Chicago Bulls, for example, don’t have the same fortune. In this example, points represent money and skilled athletes represent an individual’s ability to earn money (e.g. generational wealth, better education, race, etc…). A capitalist basketball game would give the Nets 25 points before the game starts because they won their last game by 25 (with such a lead compounding throughout the season). A socialist basketball game would have both teams start at 0 but maintain the talent gap. And a communist game would have no score because at the end of each game the teams share the points scored (effectively ending in a tie).
With such rules, the problems of capitalism and communism begin to show. In a capitalist NBA, the Nets would win every game of the season because of their high scoring and compounding lead. Such a league gives their opponents no chance to win any given game because, even if they outscore the Nets in-game, the Nets scored more points to that point in the season, so they win. Likewise, a communist NBA would disincentivize playing because the teams end the game in a tie regardless of how wide the in-game scoring margin is.
Capitalism, seen as synonymous with freedom and democracy (disproven in an upcoming Ethanomics piece), promotes work and innovation to the highest degree but enables an exodus of people into a perpetual working-class with low social mobility. At its worst, capitalism leaves a vast majority of the population working long hours for low wages to survive (sounds familiar). Retreating to the basketball example, the Nets (ruling class) have accumulated a level of talent (capital) so great that, even if they work one-tenth as hard as their opponent, they’ll still win day in and day out. If such a super-team did come to fruition in a capitalist NBA, the league (society) would cease to exist. In other words, the other 29 teams would refuse to play (general strike/revolution) if they have no chance of winning.
A socialist NBA seems like a perfect balance between capitalist and communist basketball (personally). In a socialist America, individuals start life granted the same opportunities as everyone else and rely on work to win the game. Socialist NBA allows the Brooklyn Nets, who have built up a fair amount of capital, to go out and win games while affording inferior teams a chance to win on any given night. The Bulls know that they are likely going to get outscored that night, but they have a greater chance of winning by starting the game level than assuming a deficit too large to overcome to start the game.
Communist NBA does not take as much explaining as the other two do. The Nets and Bulls play their game and split points at the end based on which team needs points to survive and live a quality of life as the others. A communist NBA that always ends in an equal score provides a slight disincentive to play but certainly will not end 0–0. With less at stake, teams are naturally less inclined to go out and shoot for 150 in a given night but encouraged to play because it is what they love. Just like we saw Marie Curie and Albert Einstein pursue their fields for love of knowledge rather than money, the players will play the game for the love of the game rather than winning. Though a communist system will not stifle humanitarian progress, it will slow down if incentives decrease.
With the case of socialism, it’s essential to realize why noneconomic programs like healthcare and education be made publicly accessible. Since the free market still having a say in economic activity under socialism, a wealth gap will inevitably exist. The goal of socialism is to reduce this gap so that those suffering as a result of poverty are made whole before others get unreasonably rich. Healthcare and education are vital to an individual’s ability to work, and if denied either of the two because of economic standing, the individual is denied the opportunity to succeed. For example, an individual who can not afford a college/trade education can not obtain the knowledge necessary to succeed in a higher-paying field. Likewise, if an individual needs a life-saving surgery but can not afford it, they are denied their right to life for being too poor.
If there is one conclusion drawn from this edition of Ethanomics, let it be that the stigma behind capitalism, communism, and socialism versus the systems themselves are two different things. The American school system often associates capitalism with democracy and socialism and communism with dictatorship. Recognizing the independence and differences between the two is essential.