Capitalism vs. Socialism
Debate Rounds (5)
Capitalism: Economic system characterized by wage-labor and individual or state ownership of the means of production. Wage labor is to be defined not simply as labor done for an incentive, but rather labor paid for based on capital an employer feels to pay an employee rather than the social value of a product.
Capitalism does not just mean free-market capitalism, but also state capitalism (capitalism based on government nationalization of the economy) and mixed capitalism (capitalism based on government nationalization of key industries). Therefore, China, the USSR, Cuba and the like are not socialist, but rather STATE CAPITALIST.
Socialism: Economic system characterized by the collective ownership of the means of production, with economic decisions made democratically through "free associations" of producers. Socialism is to be DISTINCT from SOCIAL DEMOCRACY, a form of capitalism practiced predominately in Europe, especially in Scandinavia, to a lesser extent in Canada, and is emerging in Latin America.
Market socialism is to be clarified as an economic system characterized by the profit motive, but not by wage labor in the capitalistic sense, as profit from the sale of goods is distributed according to the contribution of individual workers to production.
I would also like to add that citing sources is completely optional, but recommended in order to make one's argument more convincing.
May the best debater win!
I would like to first address the misconception in your definition of a capitalist market economy. Wage labor is not defined by an individual producer, but by the aggregate markets of the economy, so the wage is considered by the collective "value" of the labor by the economy, not by the individual producer. This is a common anti market biased emphasized in the book "the Myth of the Rational Voter" by Bryan Caplan.
I will take your definition of socialism as a theory of socialism, because I have not heard or studied an economy that implements it the way you describe.
Instead of naming the number of benefits from a capitalist society which is demonstrated with the over all prosperity of many western countries. I will present fundamental flaws in the described socialist theory.
1, in a market economy, the consumer is the one that dictates economic policy, they essentially vote with their wallets. The producers then must compete with each other to gain the consumers business which then create a market demand, and a market supply. If the producers were to democratically decide the economic system, they would have no concept of the market demand, since the producer can not get into the minds of the consumers there is no conceivable way to anticipate the demand for a product. So it is best left to the consumer to "vote with their money" and create the economic system.
(I could have misunderstood you about what you meant by the producers democratically decide the economic system, but thats what i took it as)
2,The second problem I had with your theory of socialism, is the "profit motive", This is another common anti market biased,
a good quote from the book I previously mentioned, "They [the ones suffering from anti market biased] focus on the motives of business, and neglect the discipline imposed by competition". While yes looking at the profits of a company could be astonishing while comparing it to the wage of their workers. We must look at the reason behind those profits. profits are a means to growth, without profits business can not grow. If workers were to be paid not by the market value of their labor, but by the percent share of their contribution from the profit. There would be no room for business to grow, and that would make a stagnant economy.
Thank you! looking forward to your reply!.. ps. the information I gave about economies comes from a deep background of economic study, and policy study as a graduate student in economics.
Now, to begin with, I would like to devote this round to two prospects: rebutting and outlining the flaws of capitalism. In fact, I would actually like to take the time to rebuttal the COMMENTS made so far.
What are examples of Socialist countries, if China, USSR, and Cuba are not examples? You seem to be limiting yourself to the socialist countries that worked, not the socialist countries that didn't.
My response: Socialism is actually a period of development in which there is not a country in the normal sense of the word. So, China, the USSR, and Cuba are not socialist, at least not in the Marxist sense. They do of course, label themselves socialist, but they also style themselves as democratic. Should we give up on democracy just because these nations abused it? I think not.
Also, as for places where socialism worked or is working, I provide the following examples: Abahlali baseMjondolo(1) in South Africa, The Zapatistas in Mexico, and the Landless Workers movement in Brazil, as well as the Ukrainian Free Territory, and given a little more time perhaps, the Paris Commune. While these places do not conform entirely to my ideal definition, they do show that an economy built around equal decision making is viable.
"labor paid for based on capital an employer feels to pay an employee rather than the social value of a product." LOL
My response: By the "social value" of a product I mean its "use-value," that is, the actual use that a product has. In a socialist system, "wages" can be paid in relation to the products workers produce and their consumption as food, industrial stock, and housing, with leisure items being given value as well, just not as great as that of the former commodities.
You are defining socialism so as to pen yourself into the smallest possible definition. Your vision of socialism is one that is untested, and therefore untainted by reality. You can pick flaws in the capitalist system because it has existed, but any attacks on your vision of socialism are met with non-empirical, philosophical objections. Marxism is argued for in the same way as anarcho-capitalism.
My response: This is similar to 16kadams comment, so my response is the same as his, but with special emphasis on the last paragraph. I would also like to point out that capitalism cannot be said to "work" in that it increases living standards or industrial output, as there are only a few socialist economies in existence, and these are mostly small in scale and in the third world.
Now, as for my rebuttals to YOUR statements.
My response to your first statement: But against multinational corporations, the "cha-ching" of the cash register means very little. It usually takes an entire boycotting movement are other protesting effort to say, prevent an oil company from buying nearby land and drilling. Also, if only those with money can "vote" in the national economy, than what about the poor and moneyless? Do not their needs and wants matter as well? Not to mention suffering businesses that cannot operate at their full potential due to a lack of capital to buy material.
Just to clarify what I mean by "democratic planning"(you didn't seem to deviate from my meaning, just so you know), I mean an economic planning system in which the needs of people and industries are accounted for in industrial production, by accounting for the voices they have inputed. Not just their meager petitions and comments, but actually through a vote.
My response to your second statement: Workers do not necessarily need to receive the COMPLETE value of their contribution, as Marx stated in the Critique of the Gotha Programme, the products of labor should be deducted like so: "First, cover for replacement of the means of production used up. Second, additional portion for expansion of production. Third, reserve or insurance funds to provide against accidents, dislocations caused by natural calamities, etc."(2) Yet still, the greater a worker's contribution, then the greater they get out of the profit, because they still recieve their labor's value, and in even greater amounts as the productive forces expand, allowing less to be deducted from their labor.
Now, I shall outline the flaws of capitalism, and I shall even put them in number form so as to make them easier for you to respond to:
1. The capitalist market is unpredictable, and can lead to economic collapse by industries' perpetual desire for profit. If industries produce too much goods, then they will not be able to sell them all, resulting in inefficiency and waste, as well as a loss of capital. This hurts the economy, and occurs endlessly in boom and bust cycles.
Producers may charge too little for their goods as well, as economic collapses can occur due to a producer's inability to set a price below the rate of inflation. One of the causes of the housing market collapse was homeowners charging more for their homes than consumers could actually afford, causing them to lose money from their investments, as well as excessive borrowing to buy houses, whose sale could not be guaranteed. (3).
People often accuse socialism on relying on a flawed perception of human nature, but the stability of a capitalist economy relies on its participators to act rationally, which is difficult to ensure.
2. Regulation of business is often toted as both capitalism's remedy and its ailment, and is flawed due to the power of business in a capitalist nation, and the reportedly harmful effects of regulations on the economy. If say, the minimum wage increases, than either the economy can improve from increased spending, or it will suffer from a loss of employment. Even if regulations are beneficial, than capitalists can fight back, moving their industries and employment overseas in search of a less regulated environment.
3. Competition is very difficult to make fair, as larger corporations possessing larger amounts of capital possess a decisive advantage over traditional "Mom and Pop" businesses. Also, competition can only result in one winner, as one of two competing businesses will eventually capitulate and go out of business, unable to keep up with its competitors superior quality or lower prices. This again shows a consumer's inability to act rationally, as he or she may prefer products of lower price over those of greater quality, and might show little empathy in regards to supporting a smaller, more expensive business over a larger one.
4. Capitalism is contradictory in that it relies on private individuals producing products for their own gain to ensure that society receives its needs. As economist John Maynard Keynes once said "Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." An oil tycoon may drill near a lake, polluting a water source many depend on, hence failing to contribute to the "greatest good of everyone," yet increase his own personal profit.
I look forward to your response!
1, For your first rebuttal, actually if you look at any company that begins to treat its customers unfairly you will see a fall in that company. Perhaps in the short run a company can "screw" over its customers, but in the long run more options will become available through the free market system. For example look at what happened to Blockbuster, Its customers were becoming very unhappy about the ways it did business and so when Netflix came around blockbuster went belly up. That is just one example of people voting with their money. And its not that a single person has significant voting power, its the aggregate shift in demand for a good that everyone is apart of. i.e. if a lot of people see a company doing something bad then that company will do poorly.
2, Im going to make a second response to your democratic planning method, The problem with central planning(through government or through producers) is again that no matter how much expertise someone might have with a good they are selling, they will not have an accurate prediction of what is demanded of that good. It will cause surpluses in some areas and shortages in others, it is best left to the consumer market to say what is demanded. Rather than the producers.
3, My response to the labor theory of Value is a response from carl menger: Derived demand, "Goods acquire their value, he showed, not because of the amount of labor used in producing them, but because of their ability to satisfy people"s wants." (1), So an increase in productivity would not necessarily cause an increase in demand. And even a more intuitive example would be appropriate. We can look at labor as a demand curve, The more people looking for a job (i.e. low skilled jobs) the lower wage for the job. And wages are generally set by the aggregate demand for labor since their production does not contribute to the demand of the good.
Now my rebuttal about the flaws of capitalism.
1, Yes there is a natural cycle of recessions, and peaks of a capitalist economy, this is due to the self regulating nature of a capitalist economy, there are things the government can do to shorten a recession but never the less they are unavoidable. The stated alternative to this system would be to have a democratic planning system. This type of system would cause even more waste than the capitalist system, again the producers have no concept about what the public will demand of their goods, It is best left unto the individual producer to estimate the market for his good. (3)
Classical economics rely on the individual doing what is in his own best interests, that is what it means to be a rational person, and in doing so their is an invisible hand effect over the economy, (2)
2, That is true, the best way the government is supposed to operate is to make the economy as competitive as possible while making it business friendly. Many regulations today come from many market biases that skew how the economy really works stated from the book I mentioned before. The problem with a socialist economy is that incentives for the individual become smaller and smaller as the wealth is redistributed, which is only leads to poor innovations and poor economic growth. (3)
3,While I agree with you that it is difficult to make competition fair, it does not lay claim that a consumer is irrational, it simply means the individual values his money more than he does quality, and there are plenty of examples of small businesses that are very successful due to their high quality and high prices because there is a market for them. They just tend to grow very rapidly, and aren't considered mom and pop businesses anymore. Imagine a company like Rolex, While not a mom and pop business, people buy their products because of quality.
4, And that is what government regulation is for, so that it prohibits people from hurting the environment/people with their business practices. But keynes had a very skewed opinion of the invisible hand, Wicked men doing wicked things don't contribute to the greater cause, people in it for them selves contribute to the greater cause. (2) While it is a delicate balance between government regulation and a free market, Despite what people might tell you America has done a very good job at doing both, While there is room for human error, no other nation has had the economic prosperity America has had.
1. Well, when I cited my example of prices rising too high, I wasn't referring to corporations raising them too high, but rather HOMEOWNERS as they bought and attempted to sell their homes. And you are right, people cannot get away with charging too much, which is why the housing market collapsed!
2. But when you think about it, INDIVIDUAL PRODUCERS AND CONSUMERS would be the most capable individuals to determine the amount of goods necessary to produce or that they need to consume. While surpluses and deficits of goods may arise, these would be minimal as factories would have no reason to request more goods than they feel that they COULD ACTUALLY USE from the national plan, just as consumers would not request more food than they WOULD ACTUALLY CONSUME. That, and through the labor deduction method I outlined above, the national plan could also create a "nest egg" of raw materials in the event of a deficit or catastrophe, and if nonperishable goods are not used, then they can simply be returned to the stockpile.
3. I am only using the labor theory of value here to describe how workers would be compensated (i.e. through labor vouchers) in addition to the USE-VALUE of their product. The use-value can be determined based on how much of it is actually used in the economy. Also, just to note, generally, the more labor put into a product, the higher its quality, and the greater its ability to satisfy people's wants.
Also, one of the major flaws of a capitalist economy is competition between workers, which lowers wages, this does not always occur in proportion to a worker's reduced necessity to the market due to an increase of labor to satisfy a demand for products. An occurring problem is that many workers, most notably migrant workers, are forced to sell their labor at a lower price than even the market might normally bestow on it in order to compete with workers that an employer has a supposed preference over. Employment discrimination is a problem that can never be fully solved in a capitalist economy, and many complain that programs such as affirmative action are apply brute force to a hiring process that requires a skilled touch.
Now for my other defenses as to the flaws of capitalism:
1. My response to this is the same as my response to #2 above, but also pointing out that a capitalist economy relies on the decision making capability of a relatively small group of people (i.e. a board of directors). An economy planned from all producers, while by no means elimination irrational actions, would certainty reduce their probability considerably, as more voices could be heard at the table.
2. Actually, a recently found an EXCELLENT argument for incentives in a socialist economy on a Trotskyist "Marxist FAQ"(1), that is, that the incentive to innovate would be a reduction in the labor one has to perform. Innovations in production such as an improvement in machinery can reduce the time one has to labor in order to complete a finished product, and if products are valued according to the amount of labor they were required to produce before such an innovation, (through adjustments of labor voucher payments and costs) than the inventor would profit just as well as society.
Not to mention that in capitalist society, inventors often do not receive the fruits of their labor. (2) Take for instance, Eli Whitney, the inventor of the cotton gin, who had his invention stolen from him just as he created it. Even today, employees that create an invention receive very little of the amount that their corporations receive. The creator of pacman, T!3;ru Iwatani, as he stated in interview regarding compensation for his creation, he said "The truth of the matter is, there were no rewards per se for the success of Pac-Man. I was just an employee. There was no change in my salary, no bonus, no official citation of any kind." (3) And yet Pac-man was a tremendous success!
3. True, but this is more known to happen in the reverse way (that is, customers favoring cost over quality).
4. Economic prosperity? While the United States does have the highest GDP in the world, it is really the way that it is distributed that counts. In 2010, the US census bureau claimed that more than 16% of Americans (50 MILLION to be precise) lived in poverty, including almost 20% of American children! (4) Compare that to Sweden, a thriving Scandinavian social democracy (which, I have already stated, is closer to capitalism than socialism. HOWEVER, it does show that socializing certain industries, that is, taking the profit motive out of them and turning them to society, can be effective), which as this paper shows (5) has a much higher standard of living and better income distribution.
This time, I remembered my citations:
2.https://www.marxists.org... (at around page 100, question 13)
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