Last week I wrote about Democratic Socialist Alexandria Ocasio-Cortez.

She won a primary election to become the Democratic nominee in the 14th U.S. Congressional District in New York.

She’s a member of the Democratic Socialists of America, whose stated goal is the abolition of capitalism.

The basic difference between the two economic system is who gets to control the means of production.

In capitalism, private people control the means of production and can make a profit.

That opens up the system to things like competitive markets, accumulation of capital, labor for wages and price systems.

According to one definition:

“In a capitalist market economy, decision-making and investment are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.”

That makes sense to me. If there is a good idea, it will be profitable and it will get done. If there is a bad idea, it won’t be profitable and it won’t get done.

This system encourages the cultivation of good ideas because there is the simplest of motives – profit.

Socialism is characterized by social ownership of the means of production.

It can mean public collective or cooperative ownership, worker self-management, or governmental ownership and administration of the means of production.

In Marxist theory,  it’s a transitional stage between capitalism and communism.

The system takes profit out of the equation

 



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There are varieties of socialism. There are very few purely socialist countries. Most common is “democratic socialism,” which values democracy within the economic  and political systems.

A socialist country like Norway is a good example of democratic socialism. It has meaningful, competitive elections. The government there is well-run and takes good care of its people. The economy is stable and government services – like health care – are readily available.

There are other democratic socialist places, like Greece and Puerto Rico, whose economies aren’t so great.

And then there is Venezuela, which is socialist, but not at all democratic. The government there is more like a dictatorship. There are elections, but they’re rigged. The economy is in shambles and government services are  woefully inadequate.

There is a reason there are few pure socialist economies. There are problems associated with removing profits and losses from an economy because they are what guide and correct the people producing the things consumers demand.

With no profit or loss and no knowledge of the cost of production or demand, producers can’t  make any economic calculations. How much to produce? How much to charge?

Jonathan Newman is  assistant professor of economics and finance at Bryan College. He earned his Ph.D. at Auburn University and is a Mises Institute Fellow.

He explains:

“The inherent theoretical problems of socialism all emanate from its definition, and not the particulars of its application. However, the supporters of socialism define “collective” as no exchange of the factors of production. And without exchange, there can be no prices, and without prices there is no way to measure the costs of production.

“In an unhampered market economy, the prices of the factors of production are determined by their aid in producing things that consumers want. They tend to earn their marginal product, and because every laborer has some comparative advantage, there is a slice of pie for everybody.”

The places where democratic socialism is working well – Norway, for example – are small. Norway has fewer than 6 million people. The entire country is only two-thirds the size of New York City. I’m not sure how democratic socialism would translate across a country of 330 million people. How would you turn over all that production to a social entity or the government?

All things considered, I believe some form of capitalism better for America.

But regardless of what economic system a country is under, the government has to make the rules.

And that’s where I see problems with the U.S. form of capitalism. I can see where problems with our rules drive people to demand a more socialist approach.

The problem in the U.S. is simple. The people who own the means of production also get to make the rules. That can’t be a good thing.

I know, I know. Congress makes the rules, you say.

But seriously. Who are members of Congress beholden to? The voters?

I don’t think so. I think they’re more beholden to lobbyists. And lobbyists are beholden to corporate interests.

I think the most damaging Supreme Court ruling in my lifetime was the campaign finance case called Citizens United.

In that ruling, the highest court in the land ruled that corporations are people and money is speech. This unleashed untold amounts of corporate cash into the political system.

And it gave corporations – the ones who own the means of production – an outsized role in writing the rules they must live by.

All you have to do is look at the rules. Who thought it would be a good idea to allow corporations to park profits overseas to avoid paying corporate income taxes? Voters?

Who thought it would be a good idea to allow corporations to outsource jobs to save on productions costs? Voters?

Who thought it was a good idea for cash subsidies, tax concessions, exemptions, credits or deferrals, government assumption of risk, loan guarantees, government procurement policies that pay more than the free-market price, bailouts and stock purchases that keep a company’s stock price above market levels?

You think voters wanted these rules?

In your mind, has corporate law tilted the scales toward the boardroom or workers and consumers over the last 30 years?

If you said the boardroom, is that because that’s the way the voters wanted it?

You know better.

I can see why folks might think some form of socialism is the answer.

But I think meaningful campaign finance reform that truly removes corporate influence from the legislative process would go a long way toward getting us back to a free-market, capitalist system that works for everybody.