RICHARD J GRANT: Portrayal of socialism and capitalism as competing alternatives is an error

Several decades ago, at the height of the Cold War, the insightful US writer William F Buckley observed that, “the trouble with socialism is socialism; the trouble with capitalism is capitalists”.

I don't doubt that many socialists would object that the myriad problems of socialism are also caused by poor implementation and leaders who did not quite understand the systems they were implementing. Despite the repeated examples of the economic and social devastation left in the wake of socialist political victories, true believers continue to insist it was not “true socialism” that failed but only “actually existing socialism”.

It was just over 100 years ago that Austrian economist Ludwig von Mises demonstrated why socialism could never come close to fulfilling its promises. Not only does a socialist system destroy the essential and natural human communication system of the marketplace, it destroys social relations, degrading them with a philosophical straitjacket that subverts culture, theology and family structures.

The consequent economic and social failures trigger the political instinct to deflect blame towards scapegoats subject to punishment, thereby destroying trust and suppressing free expression.

Socialists spent many decades trying to prove Mises wrong in both theory and practice, but they failed repeatedly and ended in the embarrassing claim that a socialist government could avoid impoverishment by replicating the free market.

But it could do no such thing, and worse, it raised the question: Why not just have a free market and avoid the corruption and oppression that always comes with a socialist government?

The supposed alternative and precursor to socialism, capitalism, was recognised by Karl Marx himself as a highly productive system, but a system that would bring with it class conflict, exploitation and the roots of its own collapse into a new synthesis.

The term “capitalism” was in fact coined by Marx and signified a phase in historical evolution through which societies must pass to achieve true socialism. But so far all examples of “actually existing socialism” have been embarrassments to Marx’s legacy.

The modern portrayal of “socialism” and “capitalism” as competing alternatives has always been an error. Certainly Marx and most subsequent socialist movements styled themselves as materialists, insisting that emergent social and visible economic relations were driven and inevitably determined by the true underlying reality of material productive forces.

But just as “capitalism” was a subset of a more general Marxian worldview, socialist theorists have always (consciously or not) presented their systems as a replacement for more than merely economic relations.

When people describe someone as “a capitalist,” they do so in two common ways. First, they are referring to anyone who either has capital to invest or has organised people and capital towards a productive endeavour.

Second, they include anyone who supports the private ownership of property by individuals, and the right of those individuals to exchange voluntarily the rights to the property that they own.

Simply, they support private property and free markets. We must note in passing, however, that those two usages are not the same: members of one group are not necessarily in the other.

Buckley’s observation is illuminated by those type-one capitalists who lobby their governments for subsidies, special tax breaks, narrowly advantageous regulations and other selectively favourable treatment. This puts them at odds with the type-two capitalists, who see the growth of government beyond those activities necessary to protect the lives, property, and freedoms of their people, as anti-capitalistic.

Any discussion of capitalism that fails to distinguish between these two types is confused. One is a description of a person’s wealth at a point in time, and the second is a description of a person’s preference for free social relations, at least in the economic realm. But both descriptions are relatively humble compared to the elaborate Marxian and other socialist systems.

No common description of capitalism takes on the stature of a worldview. That is why Marx and other insightful socialists have consistently attacked religion, especially the Jewish and Christian traditions from which “capitalism” necessarily emerged and was justified.

It was those revealed traditions that ultimately ended the practices of slavery and apartheid, both of which remain features of real socialist systems. As those revealed traditions wane, however, we see mundane governments imposing aggressive social and economic restrictions and new pass laws.

With each new “emergency” and the ensuing well-cultivated hysteria, governments assume new powers and new restrictions are locked into place. People are less able to respond to life’s challenges or even to protect themselves. Yet the politically favoured grow wealthier and more privileged.

Buckley, as a Christian, recognised the fallen nature of man and, unlike so many socialists and progressives, was under no illusion about the supposed perfectibility of man. But even he might be surprised at the aggressiveness with which so many of today’s “capitalists” are trying to prove Marx right.

• Grant is professor of finance & economics at Cumberland University, Tennessee, and Free Market Foundation senior consultant.