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Economics is not free from the effect of the curse. Capitalism and Socialism both have, at their core, both positive and negative aspects that drive them, and in debate, the proponent seeks to bolster the positive while ignoring, or downplaying, the negative.
Capitalism
The positive of Capitalism is that it rewards hard work and presents opportunity for everyone. If it makes money, do it. If you are willing to put in the hours, anything’s possible. People without college degrees can become millionaires by hard work.
The negative is when it is fueled by Greed. When what you have is never enough. When you’re consumed with wanting more. When you have to have more than the next guy.
Although Greed can benefit others (in the striving for more, inventions can be made that benefit all), Greed causes hoarding and excessive spending. And Greed is at the root of our financial crisis. The fact that we can spend tomorrow’s dollar today is what we’re now paying the price of.
Socialism
The positive of Socialism is that all are protected. Poverty is erased as the classes are evened out. There is none that goes without food, and all are cared for. Everything has a sense of fairness about it.
The negatives is that it is fueled by Envy. I see that someone has more than I have, and that’s not fair. Therefore, I must take what they have, or take their means to have more in order for fairness to be restored. This leads to the decline of incentive to be rich—because why should I be rich if all I earn will be taken away.
Applied to Today
In the recent Vice Presidential debate, each of the candidates specified their perceived endorsement to one of the two systems. Gov. Palin spoke about how the markets should be allowed to correct themselves while protecting the people. Sen. Biden talked about how it’s not fair that the rich got richer.
Neither of these systems is perfect; however, one has positive byproducts from its negative. Both of these systems need regulation, or they could spin out of control.
Let’s just not deceive ourselves about what they are, what’s at their root, and what they can lead to.
OK I just tried to leave a long comment and Firefox messed it up. Oh well.
Rachels last blog post..Monday Manna: Psalm 139
Capitalism and socialism cannot be so gently compared as if they were fundamentally equal. Socialism is morally wrong in that it is a system by which wealth is forcibly taken from the producers of wealth.
While this can occur under a capitalistic regime, socialism is a system which specifically prescribes it while capitalism is a system that does not specifically prevent it.
What we have today is not a capitalism, it’s a mixed market economy. Unfortunately, a little socialist yeast spoils the whole capitalist loaf. Currently we have a system that allows people (and corporations) to get rich by making investments and taking risks, but all to often does not allow those people (and corporations) to suffer the consequences when they make a bad investment or when their investment falls through for no fault of their own.
Capitalism does not require regulation, in fact, all regulation comes from socialist policies written into law.
Interestingly enough, it is precisely the rich few who have been working so hard to add socialist policies into the American economic lawbooks. The Federal Reserve for example is actually comprised of the big banks it was supposed to protect the public from including JP Morgan.
They were given the right to regulate the printing of money and to lend money to America’s banks in 1914. What this means is that if there is a credit lock or a run on the banks, the Federal Reserve can print off the dollars to pay the balance and keep the banks and other financial institutions from going bankrupt.
Money is created in America only when a new loan is issued. That loan must be paid back with interest, therefore the pool of money from which the debt must be paid is always smaller than the pool of the debt. And the size of the two pools must always grow.
In order to pay off one debt, more money must be created in the form of a loan that carries with it it’s own interest. By controlling the interest rate the Fed is supposed to be controlling the size ratio of the two pools. This is what’s commonly known as ‘elasticity’. It’s a nice idea, if the two pools become too disparate, the Fed just adjusts the interest rates at which they lend money to banks, and lending either speeds up or slows down at a nice even pace.
The main problem with the system is that money is never created to represent real goods and services that already exist, it is created to represent a debt of goods and services. It’s like when you spend all your paycheck on your credit card before your paycheck comes in. Except the option of paying off the credit card before it incurs interest does not exist. There is always interest, and so to pay the interest, each paycheck must be larger than the last by atleast the order of the interest.
‘Bubbles’ occur when too many banks and/or businesses overestimate what their next paycheck will be and take loans they cannot pay back. The ‘bubble bursts’ when the lender demands payment of the loan but many debtors do not have the funds to pay it.
Capitalism doesnt particularly mean that you can do whatever you like to make money. Stealing for example is not allowed under capitalism. The kind of ‘regulation’ that capitalists refer to in criticising socialism is the ability of a cental power to regulate the interest rate and the inflation rate (the rate at which new money enters the market.)
Most of the problems we see in our current economy would not be possible if a simple law was created and enforced to protect people’s savings. That is to limit the amount that banks are allowed to lend based upon their actual holdingss. Currently a bank is allowed to lend at ratios well over 20:1. In fact, you’ll see that the lenders who are failing in the market today are lending at gross ratios above their holdings.
Now, if you ask me, you shouldnt be allowed to lend what you don’t have. It’s a form of robbery in my reckoning. Imagine if I sold you the deed to a house in California and when you went there to move in you found an empty lot! Wouldn’t that be stealing? How is lending non-existant money any different.
The other thing needed to prevent the garnishment of people’s wealth is a hard currency. The paper money we have now, since it was taken off a hard-money standard, can be inflated or deflated by either printing money or refusing to print money as money decays and leaves the market. The more dollars exist, the less real value of each dollar. So, when the government pays an $810 billion bailout to failing corporations, it devalues the money you hold in your pocket and devalues the money you earn each year at your job. When more money enters the market, there is more money to bid on goods and services and unless the ability to produce goods and services rises at the same rate as the money supply, the cost of the goods and services must rise. This is what most people today call ‘inflation’ however, the Austrian School of Economics maintains that the rise in the costs of goods and services is actually a symptom of inflation. That economic theory holds that inflation itself is the actual increase of the money supply.
So if the dollar inflates and the real value of each dollar drops, where does that real value go? Does it just cease to exist? No. It is transferred to the recipients of the newly minted money, apportioned by the bailout plan.
What is the psychological effect of this transfer of wealth? Well, to those who realize it is occuring, it is demoralizing because they know they are being stolen from. Another effect is that greedy business owners have a further incentive to take greater risks, which may not be sound at all. Why? Because in the end, they will not pay the consequences of failure.
Ultimately, there is no security in money. However, that undeniable fact should not be used as a justification to cede polical control to those who would not seek to protect the fiscal security of each person under their care. While total fiscal security is not possible, it should always be the striving of the government and of the people to preserve (or indeed restore) economic freedom to the people. To deliberately subject a people to the slavery of debt is indefensible. As for the poor, the injured and those who cannot help themselves, do we not have our commandment from the Bible? Charity is to come from the heart, not a system of worldly government.
Only faith in God can give us ultimate security, but that does not justify endorsing systems that contradict the wisdom of His Word as revealed in The Bible. Remember that God tells His people through the prophet Isaiah to loose the chains of oppression. That is our call.
I predict the slavery passages being envoked. My response is this: The Constitution of The United States of America gives us the right not only to vote but to lobby the government with greivances. To make a strong stand against the status quo in America is not only permissible, it is prescribed by her founders.
Confiscation through inflation is nothing less than the deprivation of the masses of property without due process of the law.
Arthur Eisss last blog post..Confiscation Through Inflation
@Arthur Eiss: The sheer length of this comment makes it hard to respond to, so I’m going to just pick out some highlights.
In the New Testament, in the book of Acts, the Apostles lived under socialism.
So, I find it ridiculous to say that the system is immoral. Its implementation may be immoral (taking money instead of freely sharing it), but the system itself gains no morality until implemented.
I am with you that money should be backed by goods– like gold, silver, etc.– and not debt. This ability to just print more is ludicrous.
And I’ll go with you that inflation and taxation, and wasteful government spending are big problems that need to be solved.
The reason for my post, however, is not to necessarily put forth policy, but to once again highlight that it’s easy to go from a good system into sin, and that sometimes human sin nature is the force behind a system (and can be used by a system for the greater good).
–Begin Quote–
In the New Testament, in the book of Acts, the Apostles lived under socialism.
And the multitude of them that believed were of one heart and of one soul: neither said any of them that ought of the things which he possessed was his own; but they had all things common. – Acts 4:32
So, I find it ridiculous to say that the system is immoral. Its implementation may be immoral (taking money instead of freely sharing it), but the system itself gains no morality until implemented.
–End Quote–
The early church was not under socialism at all. Socialism is a system which compels by force what is described in that passage, but these people were not forced to live that way. My understanding of the political/economic structure of the time is that they were living under mercantilism, an early form of free market capitalism.
The Church of the new testament didn’t give to one another and share everything in kind because they were made to do it by a governing authority… they did it because they were inspired to do it out of love through the Holy Spirit. They had real ownership of all those things they gave up to one another.
Arthur Eisss last blog post..Confiscation Through Inflation
@Arthur Eiss: You need to do a tad more research before making statements of fact:
Dictionary.com for socialism:
The early Christians practiced socialism– they held all things in common, bringing their money into the church and had the church take care of distribution to those in need.
You need to be careful not to confuse the principle with the implementation. Just as the atheist says all Christians are like Fred Phelps or the abortion clinic bombers and they are wrong, you’re wrong when you say all socialism is as the Communists and Soviets enacted it.
I believe that even the Heavenly kingdom will be socialist to an extent– because envy and greed will not be present there and we’ll truly be more concerned for others than ourselves.
Good catch.
I actually did research the definition of socialism before I send that last reply but I decided to send it anyway.
I concede that the early Church practiced socialism amongst themselves. I maintain however that they were only able to do so because they lived within a larger mercantile-capitalist society which allowed them to do as they pleased with their money (in this case give it to the Church).
Socialism within a voluntary group and socialism as a compulsory system of government are two different things.
Voluntary socialism and capitalism are in no way at odds with each other. Capitalism allows for voluntary socialism. It is compulsory socialism (the kind advocated by our candidates) which conflicts with capitalism and the liberty of the people.
Arthur Eisss last blog post..Confiscation Through Inflation
@Arthur Eiss: Glad to see we’re on the same page. I’m attempting to compare and show what’s at the root of these basic economic systems, not attempting to discuss the incarnations.
Socialism even had problems when the early church tried it. Envy caused Ananias and Sapphira to lose their lives. Socialism needs a moral guidance much more than capitalism does. Unfortunately, it’s mostly the godless that want to forcibly try it on their people. True socialism will come from within, not from without.
@MIn: Yes, and along those notes, no system of government can truly make up for the sinful nature of humanity.
I just feel very strongly that the best bet is a system that places liberty and accountability on individuals over a system that forces the people to behave in one way or another.
The principles of individual liberty, accountability and responsibility (etc) are laid out in the constitution and the various letters of the founding fathers. We are lucky in America to live in a country that was wisely and carefully founded. We shouldn’t be now, less than 300 years later, groping around in the dark looking for some new hope. We have by no means risen above or otherwise progressed beyond our foundation. It seems to me that if more people really studied that foundation… they might not argue to abolish it or undermine it so much.
Here’s another thing about American socialism. We capitalists want to give liberty to every American to do as they please with their money, we don’t prevent people from being charitable. But the socialists want to deprive each American the liberty to decide how to spend their money, they will give the (supposedly) benevolent government the power to decide whether and when to be charitable.
In fact if you look in history, charitable institutions such as Churches have given less and less charity the more and more socialism the government has taken on. Yet, the poor are still among us. Fascinating huh?
Arthur Eisss last blog post..Confiscation Through Inflation