Feudalism vs. Capitalism vs. Communism vs. Socialism
I will post the actual meme I’m arguing with below because I don’t want it to be the main photo on this article.
My mother once told me that I would argue with a fence post. It was probably unwise to point out that the phrase is a cliché. But she was absolutely right.
Therefore when a friend — with way too much time on her hands — linked to this on Facebook, I had a strong urge to argue.
I’m no conservative. I’d love to believe the meme is true and blame it all on capitalism. But it’s not true.
Capitalism creates wealth
I’ve described the rudimentary outline of basic capitalism before, but I’ll repeat it here.
- You take come kind of raw material.
- You shape it into something, adding value.
- You sell it to someone who doesn’t want to go to all that trouble, but do want the end product and is willing to pay you for it.
My usual example is soap. I know how to make soap. The process is messy, smelly and time consuming. I’d rather just drop by the local grocery store and pick up a bar or a bottle. I also don’t like to sew and would rather buy clothes. I wouldn’t want to cure my own bacon or make my own furniture. I can do that stuff, but would really, really rather not.
Capitalism’s effect on poverty
I blow hot and cold on sweatshops. I hate them. They are exploitative and cruel. But imagine an area where everyone is living on a few cents a day, trying to scrape a little food out of the ground. Children dying of malnutrition is a commonplace.
But … someone moves into the area, buys or builds a large building, moves in some equipment and hires people to run the equipment. Now people can afford to buy food and maybe fix some of the holes in their shacks. It has a ripple effect in the entire area. Little stores pop up where people can buy their food. There are carpenters who will fix the shacks for a few cents an hour. Perhaps people can pool their pennies and hire a school teacher or get a traveling nurse to drop by once a month. Life isn’t good, but it’s no longer terrifying.
Capitalism and entrepreneurship
Everyone is familiar with Silicon Valley startups, etc. Warby Parker or whatever. But most entrepreneurship is pretty small. If you can’t find a job, you might start a fruit stand. Or a lawn mowing service. Or a taco truck. Micro-lending promotes micro-entrepreneurship in places where no jobs pay more than sweatshop wages or where there isn’t even that.
Capitalism lifts people out of poverty. It can, of course, keep them in poverty. In the sweatshop example above, the capitalists will fire or murder anyone who breathes a word about unionization. Take your $2 per day and shut up — or else.
Is that really capitalism?
My argument for fair pay for fast food workers is they should have a living wage. You shouldn’t have homeless full-time workers. The response is that it would make burgers really expensive. Employees are being paid what they are worth.
That argument falls apart when you find out that the price of burgers has risen with inflation but the wages for the workers have not.
My response to “pay what they are worth” is this: Why should the worker pay for part of the customer’s burger? In real capitalism you find the actual cost of the added value and you pass that cost along to the customer. If it costs me $5.00 to make a burger, including a fair wage, and I take an additional $2 as profit (without profit there would be no point to this exercise), that means a burger costs $7. If I keep the wages low to keep the burger at $6.00, that means the customer is paying a dollar less than the burger is actually worth. The employee who served the burger is paying the extra dollar.
If you believe nobody will pay $7 for a burger and therefore you MUST under-pay your employees to keep the burger at $6, then perhaps you need to examine whether or not this business model is viable.
The inevitability of poverty
Poverty has a lot of causes. Capitalism isn’t one of them. Low IQ, lack of education or training, lack of available jobs, corruption, discrimination, generational poverty.
The last one, generational poverty, sounds odd, but if your parents, grandparents and great grandparents lived in dire poverty, they have no way to help you nor can you inherit anything from them. People of modest means usually get their start in life with help from parents or family and usually inherit wealth and property, even if it’s not much.
So poverty is and is not inevitable.
Feudalism vs. Capitalism vs. Communism vs. Socialism
Communism is a slippery word. Is North Korea communist? Not really. It’s a feudal society. Technically, the government owns everything, which is communism, but actually a few wealthy families own everything which is feudalism. Everybody else owns nothing. The Soviet Russia wasn’t exactly communist either. Only the government owned stuff. People pretty much just owned the clothes they stood up in. Like North Korea, the Soviet government attempted some very badly managed capitalism which is how they had any economy at all. Since the USSR fell, they have since collapsed back into an uncomfortable mix of capitalism and feudalism. Putin is the new Romanov Czar.
Socialism is an odd critter. When you go to the web for a definition, you actually get a definition of communism.
All the economies with the most economic freedom (the US ranks 18th) have among the lowest poverty rates (the US ranks 33rd). All the countries with the most economic freedom are usually what Bernie Sanders would call “socialist.” And with that economic freedom, as you expect, comes wealth.
It’s not capitalism
So what causes poverty? Not capitalism. Poverty is caused by all the things I listed above: feudalism, communism, corruption, low intelligence, lack of education, lack of credit, and poverty itself.
What lifts people out of poverty? Not laissez-faire capitalism. That’s just a fast-track to feudalism. It’s fairly clear, the richest countries and the countries that are currently lifting themselves out of poverty use a judicious mix of capitalism and democratic government control.
Democracy is key.
If government control was the only answer, North Korea would be paradise. If laissez-faire capitalism was the answer, more countries would try it. None do. All economies are managed by their respective governments to some degree or other.
All we have to do is decide how much we want the government to manage the economy and how poor we want to be.
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