Why Capitalism vs. Socialism is an entirely wrong debate and dichotomy
(originally posted on Twitter @denisehearn_ on June 8, 2019)
Recently I was asked to appear on a conservative TV news show for their “capitalism vs. socialism” week. After explaining the basic premise of my argument, I was rescheduled and then canceled.
Here’s why capitalism vs. socialism is an entirely wrong debate and dichotomy:
First off, no one agrees on (or even seems to understand) definitions of both systems. To quote Michael Bloomberg in an address at Harvard:
“Anyone who believes that unfettered capitalism works hasn’t read history.” — Michael Bloomberg
I would add that anyone who believes socialism works also hasn’t read history.
I’ll spend more time debunking free-market capitalism as a reality (regardless of whether you actually agree with it or not), as that seems to warrant more explanation.
KEY POINT: No country in the world exercises totally unfettered, free market capitalism.
Let me explain why: Hong Kong is consistently listed as the world’s freest economy on the Index of Economic Freedom by The Heritage Foundation and the Wall Street Journal — this sounds great, but is unfortunately laughable. HK’s economy is controlled by oligarchical family dynasties/tycoons, and increasingly, pressure from China (as the last six months of protests have made abundantly clear).
HK is at a 45 year high in economic inequality, with soaring housing costs that have many people living in illegal subdivided flats. Clearly this ‘economic freedom’ applies to a subset of the population and is not widely shared. Oxfam released a HK inequality report you can read here.
Moving onto Singapore, which often ranks 2nd on the list. Singapore (where I lived for 3 years as a child) is a highly state-controlled experiment in urban and economic planning. 80%+ of Singaporeans live in state-owned housing through the Urban Redevelopment Authority of Singapore. Private property ownership is rare for native Singaporeans.
Singapore’s Sovereign Wealth Funds GIC and Temasek have large holdings in a number of state-owned enterprises and these play a large role in their economy. GIC and Temasek are 2 of the top 10 SWFs in the world by AUM (note: no North American SWFs are in the top 10 globally).
By comparison, the US ranks 18th. As my co-author @jtepper2 and I detail in our book The Myth of Capitalism, free market capitalism as we envisage it is not a true representation of today’s US economy. Our economy is dominated by monopolies and oligopolies that control entire industries — big tech, beer, airlines, kidney dialysis, and many others.
So even in the ‘freest economies in the world’ — unfettered free market capitalism is a figment of imagination and economics textbooks. It does not exist, nor should it.
The reality is that most countries in the world employ the use of MIXED economies — seeing the necessity of both open markets with some regulation to ensure we don’t all end up in corporate servitude under trusts and robber barons (too late??).
In the case of the US, we outline why antitrust and other regulatory measures are needed to restore competition and a more equal playing field that will stimulate more innovation, higher wages, lower consumer prices, and less inequality. But this is only step 1…
Here’s the thing: we should always be skeptical of too much concentration of power in both directions: with corporations (corpocracy) and with government (i.e. centrally planned economies or ‘command’ economies that have been labelled ‘socialism’). Power should be distributed and shared, as should prosperity and wealth.
So let’s all agree that capitalism vs. socialism is intellectually dishonest and unhelpful in fostering the generative conversations we really should be having: conversations about how to structure our societies and economies to promote human and ecological flourishing for all.
This is not to say we shouldn’t reward innovation, hard work, and ingenuity. Of course we should — but the economy, despite what we’ve been told, is not a zero-sum game. We’re all better off when there is shared prosperity. Great video by @MaxCRoser here:
Step 2 — We need to move beyond win-lose dynamics, looking to the natural world and our prosocial cooperation as humans to begin rewarding win-for-all economies that propagate human flourishing. This may sound pie in the sky, but it’s possible.
Read @NickHanauer’s great piece on why ‘Homo Economicus must die’ here. And supplement with work by SheEO, Nwakama Agbo, Boston Ujima, Kate Raworth, Common Futures, and so many others pushing us to think differently about a new kind of regenerative economics. To properly do justice to this emergent movement, I’ll need a new article so I think I’ll leave off here.