A Theory of Socialism and Capitalism

In the last chapter I analyzed the orthodox marxist version of socialism—socialism Russian-style, as it was called—and explained its effects on the process of production and the social moral structure. I went on to point out that the theoretically foreseen consequences of relative impoverishment proved to be so powerful that in fact a policy of socializing the means of production could never actually be carried through to its logical end: the socialization of all production factors, without causing an immediate economic disaster. Indeed, sooner or later all actual realizations of Marxist socialism have had to reintroduce elements of private ownership in the means of production in order to overcome or prevent manifest bankruptcy. Even moderate “market” socialism, however, cannot prevent a relative impoverishment of the population, if the idea of socialized production is not abandoned entirely, once and for all.

In the two preceding chapters the forms of socialism most commonly known and identified as such, and that are indeed derived from basically the same ideological sources were discussed: socialism Russian-style, as most conspicuously represented by the communist countries of the East bloc; and social-democratic socialism, with its most typical representatives in the socialist and social-democratic parties of Western Europe, and to a lesser extent in the “liberals” of the United States. The property rules underlying their policy schemes were analyzed, and the idea presented that one can apply the property principles of Russian or social-democratic socialism in varying degrees: one can socialize all means of production or just a few, and one can tax away and redistribute almost all income, and almost all types of income, or one can do this with just a small portion of only a few types of income. But, as was demonstrated by theoretical means and, less stringently, through some illustrative empirical evidence, as long as one adheres to these principles at all and does not once and for all abandon the notion of ownership rights belonging to nonproducers (nonusers) and non-contractors, relative impoverishment must be the result.

The last four chapters have provided systematic reasons and empirical evidence for the thesis that socialism as a social system that is not thoroughly based on the “natural theory of property” (the first-use-first-own rule) which characterizes capitalism must necessarily be, and in fact is, an inferior system with respect to the production of wealth and the average standard of living. This may satisfy the person who believes that economic wealth and living standards are the most important criteria in judging a society-and there can be no doubt that for many, one’s standard of living is a matter of utmost importance-and because of this it is certainly necessary to keep all of the above economic reasoning in mind. Yet there are people who do not attach much importance to economic wealth and who rank other values even higher-happily, one might say, for socialism, because it can thus quietly forget its original claim of being able to bring more prosperity to mankind, and instead resort to the altogether different but even more inspiring claim that whereas socialism might not be the key to prosperity, it would mean justice, fairness, and morality (all terms used synonymously here). And it can argue that a trade-off between efficiency and justice, an exchange of “less wealth” for “more justice” is justified, since justice and fairness, are fundamentally more valuable than economic wealth.

An the preceding chapters it has been demonstrated that socialism as a social system implying a redistribution of property titles away from user-owners and contractors to nonuser-owners and noncontractors necessarily involves a reduction in the production of wealth, since the use and contracting of resources are costly activities whose performance is made even more costly as compared with alternatives available to actors. Secondly, such a system cannot be defended as a fair or just social order from a moral point of view because to argue so, in fact to argue at all, in favor or against anything, be it a moral, nonmoral, empirical, or logico-analytical position, necessarily presupposes the validity of the first-use-first-own rule of the natural theory of property and capitalism, as otherwise no one could survive and then say, or possibly agree on, anything as an independent physical unit.

We have tried to demolish socialism on the economic as well as moral fronts. Having reduced it to a phenomenon of exclusively socio-psychologi cal significance, i.e., a phenomenon for whose existence neither good economic nor good moral reasons can be found, its roots were explained in terms of aggression and the corruptive influence that a policy of divide et impera exercises on public opinion. The last chapter returned to economics in order to give the final blows to socialism by engaging in the constructive task of explaining the workings of a capitalist social order as socialism’s economically superior rival, ready for adoption at any time. In terms of con sumer evaluations, capitalism was indicated as being superior with respect to the allocation of production factors, the quality of the output of goods produced, and the preservation of values embodied in capital over time. The so-called monopoly problem allegedly associated with a pure market system was in fact demonstrated not to constitute any special problem at all. Rather, everything said about the normally more efficient functioning of capitalism is true also with respect to monopolistic producers, as long as they are indeed subject to the control of voluntary purchases or voluntary abstentions from purchases by consumers.