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Weighing Bad Capitalism and Good Socialism

Recently economics professor Walter Block of Loyola University New Orleans wrote a great op-ed for The Wall Street Journal titled “Bad Capitalism and Good Socialism.” It helps clarify some confusion about the relative merits of different economic systems and the ostensible aspects of capitalism and socialism that people most often object to.

At the Competitive Enterprise Institute, we generally think capitalism is a pretty good thing. Voluntary exchange—coupled with a legal system that protects everyone’s rights—is the best system for producing prosperity and opportunity. But that system doesn’t work as it should when the government gives certain market players an unearned advantage, or saddles them with an unjust penalty. That’s cronyism and corruption, and critics everywhere on the political spectrum are right to call out such abuses. My colleagues have a theory on why there’s less such corruption that we might expect, but any amount is undesirable.  

Similarly Block makes a distinction between the usual definition of socialism—government control of economic production and distribution—and voluntary economic arrangements between consenting groups and individuals. The kind of central economic planning that we saw under the Soviet Union not only ignored the rights of individuals to own, use, and dispose of property as they saw fit, but was also an objectively terrible mechanism for allocating resources across society. Contra the claims of socialist theorists that communal economics would lead to a more humane society than one subject to market processes, the political control necessary to plan an entire economy meant that freedom of conscience and the right to dissent were also severely limited, as Friedrich Hayek’s The Road to Serfdom so memorably predicted and illustrated.   

But if we look, we can find examples of communal life and activity that are truly voluntary, like “the convent, monastery, kibbutz, commune, syndicalist association, [and] cooperative,” as Block suggests. Even if you’re not ready to join a monastery or a commune, you probably already participate in (or are at least familiar with) some aspect of voluntary communal economics in modern society. I live in a co-op apartment building, in which the residents are all partial owners of the corporation which owns the building and the property it sits on. I enjoy reading news produced by the Associated Press, a non-profit cooperative. I recently bought several ties from the St. Albans Opportunity Shop in Washington, D.C., a small church-owned thrift store. I’ve also enjoyed shopping at sportswear retailer REI, a multi-billion dollar business that is also a consumer co-op. If you belong to a credit union, you are also a member of a member-owned cooperative association.

Not every product and service need to be produced by a shareholder-owned for-profit corporation under a capitalism economic system. In a place like the United States, our economy can encompass everything from Google and Apple to Etsy crafters to community supported agriculture share programs to non-profit news organizations to for-profit restaurants that nonetheless provide homeless customers with unpriced meals. Every consumer is free to patronize any of those options. In a command-and-control system, however, the options are far more limited. In other words, a capitalist system will let you be a (voluntary) socialist, but a socialist system will never let you be a capitalist. That’s a big advantage for capitalism in my book.