You Decide: Which Economic-Ism Is Best

By Mike Walden

A renewed debate about the three -isms of socialism, communism and capitalism has been sparked by a proclaimed socialist candidate, who some claim is actually a communist, running in the New York City mayoral race. Currently, these are the three major competing philosophies of how societies can be organized. My goal in today’s column is to explain each -ism and its pros and cons, and then let you decide which makes the most sense for a society.

Several factors are used in comparing the -isms. Perhaps the most important is ownership of property, broadly defined to include resources used in making products and services as well as personal property like homes, clothing and vehicles. Also important is the role of government, in terms of what government controls and what control remains with companies and households.

In pure socialism, the government controls the “means of production,” the term for resources needed to make products and services a society requires to survive and prosper, such as raw materials, tools, machines, factories, hospitals, farms, food stores and others. Decisions about usage, prices, schedules, etc. are made by the government, which represents the society — hence, the term “socialism.” However, personal property like clothes, vehicles and homes can be privately owned by households.

Since the government is very powerful in socialism, a key question is how the government is formed. The most common method is through elections, called democratic socialism, where socialist organizations like the Labor Party in the United Kingdom compete for votes from the population to elect enough representatives to control the government. If successful, the socialists then work to implement their plans, as long as they maintain control. The socialist Labor Party in the U.K. has been in control during five different time periods since World War II, including today.

Communism is a form of government that takes control much further than socialism. In the pure form of communism, the government controls all aspects of economic production and distribution, leaving no room for personal private ownership. In theory, individuals are provided all their basic needs by the government, with the government deciding what constitutes those basic needs.

A major difference between socialism and communism is in how the groups obtain control of the government. In socialism, control is obtained through the ballot box — that is, through the voting process. This means socialism can be both voted in as well as voted out by the population. Communism is entirely different. Control is usually taken via a violent revolution, which has been observed numerous times during the last century. This also means for communism to be removed, counter-revolutions often must take place, as was seen in eastern Europe in the late 20th century when numerous communist governments were ousted.

Now on to capitalism, which best describes the -ism that dominates our country and much of the rest of the world. The word “capitalism” refers to the ongoing use of wealth and resources by private individuals and companies to provide products and services people want, while at the same time having some resources left over for the providers, also called profit. Another way to characterize capitalism is as a “free market system,” meaning government involvement is limited as profit-motivated companies make the major production and distribution decisions.

Now let’s look at the pros and cons of the three -isms. Communism is widely unpopular because where it exists, it has resulted in total control by a relatively few individuals often using rigged elections.

Socialism is attractive because it appears to strive to give people what they need, in many cases regardless of their ability to pay. There are no profits and big company executive salaries that use resources. The government makes resource decisions without being influenced by what it can financially gain.

Yet, the lack of rewards, or incentives, for government workers under socialism could be a hindrance to good outcomes. It’s natural for people to work harder if they are rewarded for that hard work. Without incentives, will socialism just lead to “good enough”? Without competition and the threat of failure and dismissal, will socialism fail to create improvements and better and more cost-effective products and services for households?

It’s in the area of making products and services better and doing so at the lowest cost where supporters argue capitalism shines. Companies in capitalism, especially when they face competitors, are constantly looking to deliver what buyers want, but at the most efficient and lowest cost methods. Fans of capitalism say it’s through innovations to improve products and services that results both in profits to companies and improved lives for people.

Realistically, there’s not a lot to recommend communism. Communism has evolved to be a dictatorial and often brutal system benefiting supporters and harming opponents.

Hence, the choice for most comes down to socialism or capitalism. Or does it? While many will correctly say the U.S. is predominantly a capitalist country due to private ownership of the resources of production, others say the U.S. really has a mixed system of capitalism and socialism. Indeed, total government spending (local, state and federal) today accounts for almost 40% of all spending, compared to 28% in 1960. Through a myriad of federal spending programs and regulations, governments in the U.S. are involved in influencing both the production and distribution of goods and services.

Today’s -ism debate is about socialism, capitalism and a mix. You decide your pick.

Mike Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.