There’s a fight I hear more and more these days. “Capitalism is evil, and only Socialism can save us” versus “Socialism is evil, and only Capitalism can save us.”

Both Capitalism and Socialism however are ideological systems and do not reflect reality, which is always far more complex than theory. These theories fail to take into account the human element; the brutal realities of a system under attack by hostile elements.

However, fiction has enabled us not merely to imagine things, but to do so collectively . We can weave common myths such as the biblical creation story, the Dreamtime myths of Aboriginal Australians, and the nationalist myths of modern states. Such myths give Sapiens the unprecedented ability to cooperate flexibly in large numbers. Ants and bees can also work together in huge numbers, but they do so in a very rigid manner and only with close relatives. Wolves and chimpanzees cooperate far more flexibly than ants, but they can do so only with small numbers of other individuals that they know intimately. Sapiens can cooperate in extremely flexible ways with countless numbers of strangers. That’s why Sapiens rule the world, whereas ants eat our leftovers and chimps are locked up in zoos and research laboratories.

- Yuval Noah Harari: “Sapiens”

Worse, there is little to no agreement on what the actual terms mean. Very few people have actually read Das Kapital or The Wealth of Nations. I’m slowly working through them still myself. Instead, people use examples that again fail to take into account to human causes for the failures.

If you support Socialism, expect to have Stalin brought up as an example, and the deaths of millions. Don’t expect it to matter to Stalin was a narcissist who descended into paranoia.

If you support Capitalism then expect people to point to greed in Wall Street and the fact that it is getting harder and harder for Americans to get ahead, unless they are already successful.

SOME writers have so confounded society with government, as to leave little or no distinction between them; whereas they are not only different, but have different origins. Society is produced by our wants, and government by our wickedness; the former promotes our happiness POSITIVELY by uniting our affections, the latter NEGATIVELY by restraining our vices. The one encourages intercourse, the other creates distinctions. The first is a patron, the last a punisher.

- Thomas Paine — Common Sense

Supporters of either system fail to take into account that these systems depend on the character of the individuals involved.

Aristotle understood this problem thousands of years ago. He believed that an Aristocracy was one of the best forms of government, and an Oligarchy was one of the worse. The main difference between the two of them were the motivations and goals of the individuals involved; the “Greater Good” versus personal gain.

If your leadership is corrupt, then your system will fail to achieve it’s ultimate goal. Capitalism is the original Trickle Down Economics. Self-interest will spur growth, which rises all tides. Growth can be good. Just look at all we’ve been able to achieve as a species. That growth allowed us to overcome diseases, feed an ever growing number of people, and has led to amazing discoveries.

Ultimately physics steps in though.

All natural and technological processes, Proceed in such a way that the availability Of the remaining energy decreases.

In all energy exchanges, if no energy Enters or leaves an isolated system, The entropy of that system increases.

Energy continuously flows from being Concentrated to becoming dispersed, Spread out, wasted and useless.

New energy cannot be created and high grade Energy is being destroyed. An economy based on endless growth is Unsustainable

 — Muse: The 2nd Law

Industry leadership that demands constant growth in profits requires a constantly growing market or a constantly cannibalized workforce. As the world becomes more connected, the number of new markets decreases.

The newer markets contain their own cultures including their own ideologies. What often started with US business exploiting a non-industrial nation for cheap labor often results in the industrialization of that nation and perpetuation of our system. Their workforce grows while ours stagnates.

American Dream Redefined

People have been talking about the American Dream since the term was initially popularized by James Truslow Adams in…

A great example of this is China, which has leveraged our desire for cheap manufactured goods into an impressive amount of growth for their people. Since the 1970s, wages for the bottom two thirds of our country have been stagnant while China has lifted 500M of their own people out of extreme poverty. That’s almost 150% of the current total US population.

As their industry grows, our industry’s importance in their economy shrinks. A US company who outsources labor to a foreign country loses it’s own influence as the foreign country begins to fill the roles that remain here.

Why would you build phones to US defined specifications if you can both design and build them yourself?

When I say that Capitalism does not exist, what I really mean is that it merely exists as a theory. It was created as a description of the world of business and international trade that Adam Smith saw in in the 1700s. The world of today is so far removed from his time, that the concepts don’t apply in the same way they did when he originally proposed the theory.

Adam Smith: Philosopher of Capitalism

In theory the United States exists as a Capitalist society. In reality, I’m unsure how Smith’s description of the Wealth of Nations functions in a global economy with free trade.

In Smith’s time the wealthy could invest in a factory which would allow the business to grow and hire more people. This provided skills and income to workers and distributed products that solved a real world need. Yes, the wealthy would get even more wealthy, but they could be kept in check through competition.

Profits are waste from the perspective of consumers and growth of a business creates additional overhead in the form of bureaucracy. It would be difficult to compete against an upstart without that overhead. That upstart can even come from within your own business, given that an effective competitor would need to have relevant experience in the industry.

I believe this is the key of the Libertarian ideal. A free market can self-regulate, unless we allow it to leverage other forces like Government to keep the status quo. If we prevent the Government from getting involved, then the market will do the “right thing”.

This fails to take into account the results of globalization though. The lower the price of goods and services, the more we can consume. Expenses are antithetical to low prices, so industry find way to lower the costs of both labor and raw material.

Often this takes the form of leveraging both from underdeveloped areas. This can be in the form of buying raw materials from foreign companies instead of local companies, or in the form of outsourcing labor. Both of these actions have the effect of lowering costs which increases demand, which leads to higher profit.

Viewed from the perspective of community rather than industry, you get a very different picture. You can see private industry abandoning our towns for higher profit margins. Cities get more and more expensive as profit margins increase. Small towns get cheaper and cheaper as the workforce is made to compete against other countries with different ways of life.

How can an American factory worker compete against labor with far lower expenses?

How do you survive in a system that only cares about the GDP rather than the life experience of the people? Some can, but it is getting more and more difficult as time goes on.

Efficiencies of scale result in a decrease in overhead. From the perspective of the system, the biggest overhead is people. The most efficient industry of all would be the one that requires the least people and the least resources.

This efficiency goes directly against the lessons of Adam Smith.

According, therefore, as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniencies for which it has occasion.

But this proportion must in every nation be regulated by two different circumstances: first, by the skill, dexterity, and judgment with which its labour is generally applied; and, secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed. Whatever be the soil, climate, or extent of territory of any particular nation, the abundance or scantiness of its annual supply must, in that particular situation, depend upon those two circumstances.

The most efficient businesses by definition would spell the end of Capitalism as a system, as predicted by Marx.

Highlighting the failings of Marxist societies demonstrates the failing of his own ideology in the face of human nature. It does not however disprove the failings that he saw in the existing systems of then or today.