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What is Socialism? Part #2

Why Do People Even Think Socialism is a Good Idea?  

This is the second post in a series about socialism—what it is, why people are afraid of it, and whether they should be. You can read the first post in this series here.  

The question is why exactly some people are so favorable to socialism and even find it preferable to capitalism. After all, capitalism is about making money and generating wealth, and isn’t that a good thing? I mean, who doesn’t like money? 

One way to understand why some people favor socialism over capitalism is to remember that the primary, and indeed the only, goal of capitalism is to make money. (See the first post in this series.) In fact, pure, unregulated capitalism has no other value or ethic than making money, maximizing profits, and generating as much wealth as possible.  

Picture by Micheile Henderson, courtesy of Unsplash

Some people believe that this is the strength of capitalism. For instance, I have heard some people argue that capitalism works because its focus on wealth coincides well with natural human greed.  

People debate whether greed is the heart of capitalism. (This article argues that free markets encourage altruism.) However, we should note that if the only value and goal of capitalism is making money (and it is), this goal will at least sometimes, and possibly quite frequently, be at odds with human well-being.  

For example, if you own a business, and you are interested in making as much money as possible, this may force you to pay your employees as little as possible and work them as much as possible in order to maximize profits. This will most certainly be at odds with the mental and physical well-being of your employees.  

Now, some people will argue that a good and ethical business owner realizes that his or her business can only thrive if he or she (we will say it is a he, for the sake of example) treats his employees well. I agree that a good and ethical business owner realizes that, but here is a problem: capitalism, in itself, does not encourage any ethic besides making money. Indeed, treating people well may actually interfere with the goals of capitalism.  

Does it Pay to Treat Your Employees Well in Capitalism? 

Let’s say that this business owner, I will call him Paul, owns a hardware store. Let’s say that in his city, there are several other hardware stores. Paul is a good and ethical business owner, and so he decides he will pay his employees more, increase employee safety measures, and give his employees more vacation time, benefits which cost Paul money. But Paul also must do repairs on his store, and purchase advertising and inventory. In order to cover all of this and make a profit, he must raise the prices on the goods in his store.  

Photo by Todd Quackenbush, courtesy of Unsplash

Meanwhile, the other hardware stores, whose owners are not ethical, do none of these things. They can reduce the prices of their store goods by not treating their employees as well (for instance, cutting back on vacation time or heatlh benefits). Their customers care about cheap prices, not how employees are treated. In fact, most of them haven’t really thought about how employees are treated. So, people flock to the hardware stores where prices are reduced and start buying items there and not at Paul’s store.  

Paul eventually goes out of business.  

Now, it may seem like this story merely illustrates that Paul is a bad capitalist and business owner. Perhaps, some folks might argue, Paul deserved to go out of business. It may indeed be that Paul is a bad capitalist, but I would like to point out something else that the above story illustrates: completely unregulated capitalism often punishes (or disincentivizes) employers to care practically about the well-being of their employees.  

So, I would like you to imagine a society that is largely dominated by completely free-market principles. There is little to any government regulation about how industries treat their workers, and there is little to no safety regulations in the workplace. What would businesses and industries in this society look like? What would workers’ conditions be like in a society like this? (By the way, the US is not completely dominated by free-market principles. One of the reasons this is so is that we have worker protection laws, which voters put in place and understandably so because they protect workers and limit the hours employees can be forced to work without overpay.) 

To imagine this, it is helpful to think about the Industrial Revolution that occurred in Britain in the late 18th and 19th centuries.

Let’s Revisit the Industrial Revolution 

Capitalism was coming into its own in England during this time and becoming a powerful force in the world. Private investors were creating business and becoming wealthy in the process. There was also very little market regulation at the time. As a result of this, it was very common for men, women, and children to be required to work 12-16 hours a day for wages that barely kept them fed and clothed.  

Women and children were forced to work as long and in as dangerous conditions as men, and they were compensated half the amount as men were. It was really common for both boys and girls to work in coal mines and fabric weaving factories in such dangerous and unsanitary conditions that many of them died at an early age or were killed in work accidents that could have easily been prevented but were not because there were little to no workplace safety regulations at the time. (You can read more about this here.)  

These are just a few examples of the way almost completely unregulated capitalism functioned in the Industrial Revolution. You can read more about this here and here. There is no denying that the Industrial Revolution and the capitalist forces that drove it raised the standard of living tremendously for some in society. You can read more about this here. But there is also no denying that the workplaces created by the industrial revolution were often if not almost dangerous for most workers and that most of the workers worked inhumanly long hours for very little pay, while the companies they worked for generated enormous profits. 

Photo by Austrian National Library, courtesy of Unsplash

How This Changed 

Eventually people became so concerned about the miserable conditions of workers in cities that legislators passed various laws like child labor laws, workplace safety laws, minimum wage laws, and maximum hour workweek laws. All these laws were intended to protect workers so that, ideally, everyone could enjoy the benefits of a growing capitalist economy, rather than a few enjoying the benefits at the expense and great suffering of the many. 

We should note that laws like child labor laws, workplace safety laws, etc. are a form of public and government control of public wealth and market regulations, and therefore have aspects of socialism. Nevertheless, at least in countries like the U.S., people have decided to implement these laws through our democratic voting process for the betterment of everyone. Labor unions developed for this reason. (You can read more about the history of labor laws in the U.S. here.) 

This takes us back to socialism.  

The Concerns and Goals of Socialism 

It might seem that given the labor laws people have enacted, and the way that capitalism has raised people’s standards of living, that everyone would be happy now, and socialists’ concerns would all be addressed.  

The problem is that the fundamental reality of capitalism still exists: remember, capitalism has no other value than making money.  

So, businesses and business owners who are driven by purely capitalist values (or who are trying to compete with other businesses that function this way) will make as much money as they can legally, even if it hurts others. 

And this may seem like it’s not a problem, but the unfettered pursuit of money (even a legal unfettered pursuit) can cause a variety of problems, two of which I will address below.  

Reduction in Happiness and Quality of Life 

Did you know that there is something called the World Happiness Report? It is a report that ranks countries according to how happy the citizens of a country report being. The report has found that the more the citizens of a country report characteristics like trust; generosity; social support; freedom to make life choices; perception of low levels of corruption; and high life expectancy, the happier they are. (The World Happiness Report uses the World Happiness Index to measure happiness, and you can read more about this here and here.) 

Given how wealthy a country the U.S. is, we might expect it would be at the top of the World Happiness Report. It’s not. It’s not even in the top ten happiest countries. In 2019, the U.S. came in 19th, which was a five-point drop since 2017 and the lowest the U.S. has ranked since the report first started coming out in 2012. (Interestingly, Costa Rica scores ahead of the U.S. in happiness).  

 The top ten happiness countries are (in order) . . . 

Finland 

Norway 

Denmark 

Iceland 

Switzerland 

Netherlands  

Canada 

New Zealand 

Sweden 

Australia 

Photo by SaiKrishna Yaketh Yellapragada, courtesy of Unsplash

Now, it is important to note that that all of the countries at the top of the list do tend to be wealthy, and at least some wealth is an important part of cultivating happiness and well-being. It is hard, for example, to cultivate physical health and have freedom of life choice if you do not have some wealth.  

Nevertheless, what is really important to note about the top ten happiest countries in the world is that they place a high emphasis on the well-being of their citizens, even more so than on being the wealthiest country in the world or on being one of the superpowers of the world.  

For example, all of the Nordic countries, which have consistently rated at the top of the happiness list, invest heavily in the well-being of their citizens. For instance, most citizens of Nordic countries have multiple weeks of payed vacation, extensive payed maternity and paternity leave; free college education; free medical care; and extensive unemployment benefits if they are layed off from their jobs; and free elder care.  

As you probably guessed, all of these social services are provided by taxation, and these countries do have high taxes, which were decided upon democratically through the citizens of the country. These social services go to benefit everyone. The taxes are considered an investment in the citizens and the country’s well-being. 

Because of this, the citizens of the nations feel cared for and supported; there is a strong feeling of trust; and they feel like they have more freedom over their life choices. They also have a higher life expectancy, and their stress levels are low. In addition, while there is still income inequality in these countries, there is less severe income inequality. (See my next point on the problem of income inequality.) 

Most, if not all, of these ten happiest countries have mixed economies that lean towards the socialist end of the economic spectrum. They are democratic countries in which the public has decided the wealth of their country will be used primarily to provide a basic standard of well-being for all the citizens of the country.  

It is important to note that the U.S. could very likely boost the overall happiness ratings and well-being of its citizens by providing the same kind of social care structure that these nations have. We could decide this democratically through the voting process. We could vote to increase taxes to pay for free health care for everyone; free college; free vacation time; extended maternity and paternity leave, etc.  

Why haven’t we done this yet? There are several reasons, but one reason is that there is a pretty strong idea in the U.S. that the fewer the taxes the better and that the less we tax the wealthy and businesses, the better off we all are—perhaps because we believe that the wealthy will then reinvest all of their wealth voluntarily into society to create jobs.  

Here is what often happens instead.  

The Threat of Significant Inequality  

One of the greatest concerns of socialists is that unregulated capitalism leads to significant wealth inequality which causes problems for everyone.   

Ideally, capitalism allows everyone to compete freely and equally on an open market, which (again) ideally rewards hard work and innovation. Unfortunately, this is not how unregulated capitalism works, especially in a large, global economy like our own.   

What happens more instead is that a few businesses (owned by individuals or families) become extremely successful and wealthy. There is nothing wrong with that per se. They then develop brand name recognition. There is also nothing wrong with that per se. The wealthy businesses are also able to out-advertise and outcompete their competitors, not always because they have the best ideas or because they treat their workers the best, but because they amassed wealth and influence first.  

This becomes a problem. 

The wealth and success of a business allows them drive competitors out of business. In cases like this, workers can lose their job or have no other work option than to work in miserable conditions, even though they are hardworking, intelligent folks.   

In addition, if a society lacks strong safety nets because (for example, the public doesn’t want to support such safety nets), people who have worked hard their whole lives can lose their jobs; not be able to find another one; and lose everything they have with no one to help them. And without a strong safety net, people fall into poverty, which encourages addiction, health problems, and severe depression. 

This system fuels significant inequality. Here are a few statistics about inequality in the U.S. that might surprise you.  

  • Wage inequality has increased dramatically in the US in the last 30 years, and income disparity now approaches levels of disparity seen before the Great Depression.  
  • CEO’s in 1965 made about 20 times more than the average worker; today the average CEO makes about 185 times more than the average worker, while wages in the U.S. have generally remained stagnant.  
  • We have a significant homelessness problem in the U.S. despite being one of the richest nations in the world, and a majority of the homeless are men and veterans.  
  • “In the United States, 21 percent of all children are in poverty, a poverty rate higher than what prevails in virtually all other rich nations.” 
  • People in the U.S. are working longer hours and taking less vacation, and they are becoming less happy. You can read more about this here and here.  

So, in the last thirty years or so, the U.S. economy has continued to grow, but fewer and fewer people are reaping the benefits of it.  The U.S. has the highest rates of inequality of all the G7 nations. You can read more about this here.

Extreme wealth inequality is a significant problem because it creates significant power imbalances, which leads to diminished quality of life for a great proportion of the country. The more money you have, the more you can influence politics by, for example, donating a lot of money to candidates you like who will support policies that benefit you personally, or by paying professional lobbyists who pressure politicians to support similar policies.  

Of course, it is appropriate in a democracy to vote for a candidate that you think is the best candidate. It is unvirtuous and myopic, however, to vote for candidates simply because they help you or your business make more money, regardless of how these policies affect most of the people in the nation. Such myopia increases poverty, crime rates, sickness and suffering, especially for the most vulnerable in a country. This hurts everyone because it decreases the very things necessary for people to be happy: trust, generosity, feelings of control over one’s life choices, a longer life expectancy, etc.  

What’s the Point of All This?  

The purpose of this post was to explore why some people think that socialism is preferable to capitalism. As I have explored in this post, the primary reason is that many people believe, and there is evidence to suggest, that when a country focuses on the well-being of all its citizens first, and allocates the wealth of a nation accordingly (e.g. through taxation and providing free social services), everyone prospers and becomes more happy and healthy. On the other hand, if a country focuses primarily on making money and equates well-being solely with wealth generation, this leads to significant inequality and other sorts of problems that can drastically reduce the well-being of the citizens of a country.  

Of course, you may be aware that there are some socialist countries that do not fare well and whose citizens are not happy. (People often bring up the country of Venezuela as an example.) This leads us to wonder if socialism works in all countries or just some. It may also lead us to wonder if there is a dark side to socialism. We may also wonder if a more strongly capitalist system, despite some of its disadvantages, is a preferable system. That will be the subject of the next post. 

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