Socialism always collapses and capitalism doesn’t really exist

The grand narrative of the 20th and 21st centuries (so far) has been that of capitalism countries growing spectacularly wealthy while socialist countries slide inevitably toward crushing poverty. It’s a neat story, but it starts to evaporate under close inspection; every capitalist success story comes with at least a pinch of communism in the recipe.

The launch of South Africa’s very own Capitalist Party, replete with purple cow logo, merits a gentle reminder that unadulterated capitalism has never really existed. Collective use of resources is fundamental to any successful society, from a simple family unit all the way up to a full civilization.

If we measure a political system’s worth by its ability to generate wealth for its people, then there are two key measures to focus on . The first is how effectively it incentivizes people to create things of value, and the second is its capacity to provide them with the means to do so.

Socialism fails fatally at the first test. People aren’t highly motivated to build things, be they houses or farms or businesses, if everything is just subsequently shared out evenly. If you’ve ever been frustrated during a group project at school then you’ve seen socialism’s failure at a low level. Capitalism, on the other hand, performs admirably here. It’s a simple phenomenon. I will work far harder to build something if I get to keep it. This is true for most people, and so capitalism encourages productivity in a very direct way.

It’s the second measure where things get more complicated. Let’s take the example of roads, and apply the concept of Nash Equilibrium. We all need roads, and if the cost is divided up among everyone then the cost of a road network is tiny compared to its collective value, so it’s fairly clear that pooling our resources to construct roads is a fairly sensible thing for a society do.

However, if paying for the construction of shared roads is a matter of choice then the rational choice for any individual is to contribute nothing. This is the first problem with pure unadulterated capitalism — there are certain services and items of infrastructure which are essential for a society to be functional, let alone prosperous. Mobility is one of the most important factors in a person’s ability to escape poverty, so if road use were restricted to people who could afford the capital to contribute to their construction, the result would be an inescapable poverty trap. Without collectivism at some level, society’s overall productivity is crippled by restricted access to critical resources.

Besides - roads don’t generate revenue, toll gates do, which brings up another plot hole in the grand success story of capitalism. Capitalism inherently depends on personal ownership of property which, in turn, depends entirely on having rule of law and a police force. A fully privatized police force is, quite rightly, an unsettling concept, because it’s easy to envision a society revolving entirely around rich people’s personal armies seizing everything valuable.

Without a strong, centralized rule of law, capitalism loses its greatest strength. I will not work hard to build something which will just be taken away by someone bigger and stronger or, failing that, someone smaller and weaker who owns a knife and knows where I sleep.

True unadulterated capitalism would result in widespread seizure of all products of labour under the threat of violence which is, ironically, the basic premise of socialism. It’s classic horseshoe theory; the polar extremes on a spectrum are quite similar in practice. In practice, just about every successful society has utilized some blend of capitalism and collectivism.

Ultimately then, the great political debates is not ‘communism or capitalism?’ but rather ‘how much of each?’