by Yazid Suleiman
“…to make the state intervene to equalize wealth and keep everyone’s standard of living at a given level is to set oneself on the road to communism” – Frederic Bastiat, Protectionism and Communism.
“It is to be pointed out that protectionism, socialism, and communism are basically the same plant in three different stages of its growth.” – Frederic Bastiat, The Law.
Capitalism advocates freedom and private ownership in both production and distribution of wealth. Communism advocates equality and state ownership in both production and distribution of wealth. Modern Social Democrats, personified by the likes of Bernie Sanders and his ilk, advocate inequality and private ownership in production – to maximise wealth creation; but equality and state ownership in distribution – to maximise wealth confiscation and plunder.
The social democrats and their brethrens have renewed their calls for redistribution of wealth from the rich to the poor. However, this call for equality is conveniently restricted to distribution, not production, of wealth. These are not calls for equal labor in production, only in the distribution of the resulting wealth. These are not demands for equality in production over at Amazon, Microsoft or at the Big Banks (despite their many flaws); only the equal distribution of their wealth. These are not calls for equality in work hours, skill levels, risk or work ethic with the billionaires; only the equal distribution of their wealth.
That capitalism and free trade are the most effective, efficient and productive systems of wealth creation is a foregone conclusion. No one bothers arguing about the relative productivity and capacity for wealth creation between capitalism, communism and the rising social democracy.
Communism is now completely off the table. Capitalism is being derided as evil and immoral, but no one wants to replace it as a system of wealth production; however, social democracy is being hailed as a moral substitute for capitalism, but only as a system of wealth distribution.
Communist societies are organized equally in both production and distribution – although some more equal than others as aptly put by George Orwell in Animal Farm. Ownership of property is prohibited, making voluntary exchange impossible – there can be no exchange if no one owns anything. The only form of exchange is involuntary and 100% one sided – from the state to the masses (involuntary buyers) who have no choice in what they are exchanging for their forced labor.
The spectre of communism as a system of social or economic organization is over for good. The wholesale suppression of natural human instinct – and rights – to produce and exchange, rendered communist societies stagnant and lifeless. But the greatest factor against return to communism is the social democrat’s welfare state.
The social welfare state has opened the eyes of leftists and social democrats to a hybrid system: unequal production, equal distribution. The horror of communism to the social democrats is the ‘equality’ in labor and production part of it. Social democracy is the sweet spot for today’s Left. It gives them a mirage of high moral ground to confiscate wealth from the rightful owners to give to others in the name of equality, which is a mere noble falsity.
The social dems never advocate for equality in production, only in distribution. This hypocrisy is veiled behind the pseudo-morality of equality in distribution and the horrors of ‘maldistribution of wealth’ and inequality; and the sacrilegious immorality of ‘accumulating’ wealth – not ‘producing’ wealth, mind you.
The incentive system being pushed by the Left, the welfare state, has become a vicious cycle of creating evermore concentrated – intersectional – victim groups that demand financial, legal and social privileges due to some phantom form of social injustice. This has incentivized the move away from entrepreneurship and innovation to idle job seeking and eventually to paid indolence.
The result of this trend is to push an increasingly large number of people into misdirected choices in education and vocation; away from productive endeavours, with the false hope that all choices lead to wealth and prosperity; and if your choice does not get you that then you are oppressed. This increases the masses working less productively but demanding equality in income and wealth. They are misguided into pursuing less productive careers and vocations, leaving the few that do, to share a larger piece of the pie.
The capitalist system allows private ownership and freedom in production, exchange, distribution and disposal of wealth. Every individual has the inalienable right to fully exercise judgement of value and judgement of means. Individuals are free to apply, via their chosen means, their many different strengths, skills and resources to particular goals of their choice, including the means and goals in acquiring, distributing and disposing of their wealth.
Key to the capitalist system are rights to private property, exchange and association. These allow for the most efficient, effective and productive allocation of capital, organisation of markets and coordinating the structure of production in the economy. Impediments or barriers to any of the rights above – private property, exchange and association – renders the capitalist system inefficient, or even entirely inoperable, by leading to waste and misallocation of resources within the economy and distorting the production structure.
Placing the central tenets of freedom and rights in both production and distribution, the capitalist system achieves maximum efficient productive capacity and wealth creation. The wealth created is reinvested in the most productive way back into society either through the social or economic system.
Earners and wealth accumulators don’t hide their money under their mattresses. They purchase from others, hire more people, produce cheaper, save, invest or give out in philanthropy. It may not come as a surprise that the greatest period of philanthropy in history coincides with the time of liberal wealth creation marked by little to no barriers – taxes, subsidies, regulations and so on – to free distribution. Think Carnegie, Rockefeller, Vanderbilt and their numerous philanthropic activities in health, education, the arts, science and so on.
Putting up barriers (taxes and so on) on one end of the process – distribution, in order to confiscate and seize rightly earned wealth from producers, as is the social dems’ plan, will gradually lead to a) flight of capital, entrepreneurs and production; and/or b) terminal decline of the economy. This perversion of individual rights and liberties turns the incentive system inside out by plundering the rights, liberties and private property of productive individuals; while incentivizing non-productive individuals to remain indolent.
Yazid Suleiman is an Economist and Consultant. His areas of expertise in Economics are Macroeconomics, Banking, Finance and International Economics.