Economic Definitions? Really? How could that be important, or even not crashingly boring? In a world where we are seeing headlines that appear–appear–to advertise the clash between socialism and capitalism, we need to have at least basic definitions of those deeply misunderstood terms. And we are seeing more people and organizations wanting to abolish profit. Try these thoughts on for size: 1. Capitalism is necessary for democratic socialism to have anything to redistribute and 2. Profit is necessary to make any economic system’s engine run.
How are money and wealth created? All individuals and societies need both. Individuals and private groups must generate profits in order to make money and create wealth. Governments tax that money and wealth.
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Economic Definitions? Really, Will? How could they be important, or even not crashingly boring? In a world where we are seeing headlines that appear–appear, mind you–to advertise the clash between socialism and capitalism, we need to understand at least the basic definitions of those deeply misunderstood terms. And at the same time we are seeing more people and organizations wanting to abolish profit. Try these thoughts on for size: 1. Capitalism is necessary for democratic socialism to have anything to redistribute and 2. Profit is necessary to make any economic system’s engine run.
How are money and wealth created? All individuals and societies need both. Individuals and private groups must generate profits in order to make money and create wealth. Governments tax that money and wealth. The exceptions are communist governments and governments that use the classic definition of socialism. And we’ll get to that. In both types, the government owns the means of productions. But no matter who owns what, the enterprise producing the goods and services that a society consumes must take in more money that it costs to produce those items and services. That’s called a profit.
Here are the key definitions:
- Democratic Socialism: I believe that Senator Sanders and others are talking about something other than the traditional definition of socialism. They are not talking about the government owning the means of production. They are not talking about the government owning entities like Ford and Facebook. Not yet, anyway. Democratic socialists are talking about massive income and wealth redistribution. Even more than we have now. The Scandinavian countries are an example. Democratic socialism is capitalism with heavy income redistribution.
- Traditional Socialism. See above, democratic socialism, with the government owning Ford, Facebook and most everything else of size. You can keep your ice cream store if you have one. See Venezuela, Cuba and others.
- Communism: Traditional socialism with the addition of prohibiting any private property.
- Capitalism: A system wherein people, individuals or groups, including corporations, own the means of production and engage in voluntary exchanges of money for goods and services.
- Profit: Selling things, taking in income, for more than it costs to make them, drives everything; capitalism, democratic socialism, traditional socialism, communism, no matter. We are not talking about taxes or what you do with taxes; we are talking about how you make the money and wealth that is taxed in the first place. The gozindas have to exceed the gozoutas or nothing works in any system.
Question: Which economic method or principle, either type of socialism, communism or capitalism, is the best approach to making and selling products and services for more than they cost? Answer: Capitalism. Absolutely no question. Remember, democratic socialism is successful capitalism, capitalism with profits, with heavy income redistribution.
Even with appropriate governmental rules and regulations, any economic engine needs to be run by people who have a moral compass. Capitalism does not come with a built-in compass, and neither do any of the economic systems. That subject is dealt with in other podcasts on Results With Reason.
The two key points in today’s podcast:
- We need to recognize and say out loud that the socialism being touted by Senator Sanders and others is not the traditional, failed and failing government-owns-big-business socialism as practised in Venezuela, Cuba and in other countries. We could start with Mr. Sanders himself making that clear. Drawing that comparison, saying that democratic socialism cannot work and citing Venezuela as an example, is ignorant and/or unfair.
- Capitalism is the engine that drives wealth. That’s been made clear by various Scandinavian leaders. We also see countries like Russia, China, Vietnam and others introducing capitalist principles and practices in order to shore up their economies.
So, Will, if capitalist-driven socialism works in Scandinavia, why can’t it work here? Or can it? The next podcast, entitled “Family Communism” will tackle that question.
Let’s apply the two Results With Reason main tenets to today’s issues. The two main tenets that we believe in at Results With Reason are:
- Personal Responsibility; practice it, teach it and
- Be Your Brother’s Keeper.
Today’s application is again straightforward:
- Personal Responsibility. Engage in the political conversation. Heck, be an activist. I am. But first, know what you are talking about. That’s your first responsibility.
- Be your Brother’s Keeper. Be patient with each other; some will understand what you saying immediately, others will not. Teach and encourage; don’t criticize and reject. Love and lead. Remember, we are all in this together.
Now it is time for our usual parting thought. For us at Results With Reason, it is not only change your thinking, change your life. It is change your thinking, change your actions, change the world. And if you can do it in love and enjoy the people around you at the same time, all the better. And if we, you and I, don’t do something, then the others who are doing something, will continue to run the show.
Remember: Knowledge by itself is the booby prize.
Will Luden, writing to you from my home office at 7,200’ in Colorado Springs.