Bryan Caplan  

Capitalism vs. Socialism: The Bruenig-Caplan Debate

Compassionate Jordan Peterson... Of Diet Cokes and Brain-Focuse...
On Saturday at LibertyCon, I debated Elizabeth Bruenig of The Washington Post on "Capitalism versus Socialism." Here's my opening statement.  Here's hers.

"Capitalism" and "socialism" - what do these words even mean?  You could just say that capitalism is the economic system of countries like the United States, and socialism is the economic system of countries like the former Soviet Union.  In that case, I'd say that capitalism is at least ok, while socialism is hell on earth.  Perhaps my opponent would even agree!  It's more fruitful, though, to treat capitalism and socialism as positions on the ideal economic system.  Something like: the capitalist ideal is that government plays very little role in the economy - and the socialist ideal is that government plays the leading role in the economy.  In that case, I say that capitalism is awesome, and socialism is terrible.

What's so awesome about the capitalist ideal?  It's a system based on individual freedom and voluntary consent.  You're allowed to do what you want with your own body and your own stuff.  If other people want to cooperate with you, they have to persuade you; if you want other people to cooperate with you, you have to persuade them.  Can consent really be "voluntary" if some people have a lot more to offer than others?  Absolutely.  Some people are vastly more attractive than others, but that does nothing to undermine the voluntariness of dating.  Under capitalism, how people use their freedom is up to them; they can try to get rich, they can relax, they can help the poor, all three, or none of the above.

Society by consent: Capitalism is such a compelling moral ideal that I'm tempted to rest my case right now.  But there's a looming doubt: Is capitalism one of those ideals that sounds wonderful, but works terribly in real life? 

How can we even begin to answer such a sprawling question?  Simple: Start by looking at the most capitalist countries that actually exist.  Next, weigh the probable effects of the main policy reforms necessary to bring those countries into harmony with the capitalist ideal.

By usual rankings, the world's most capitalist countries are Hong Kong and Singapore; other exemplars include the United Kingdom, Canada, and the United States.  By world and historic standards, all are incredibly rich and pleasant countries.  This wasn't true for Hong Kong or Singapore in 1950, but after decades of top rankings, they're two of the richest and most pleasant countries on Earth. All of these countries still have relatively poor people, but there's very little absolute poverty.  Indeed, the poor in these countries have such a nice life that people around the world eagerly immigrate there to work in hard, low-skilled jobs.

The reason is clear.  Free markets channel the fundamental human desire to better oneself in socially productive ways.  If you can deliver a product that people like at a price they find attractive, you get rich.  This doesn't just lead to mountains of cheap, amazing products.  It also leads to constant innovation, a ceaseless effort to do more with less.  Of course, most of us aren't huge successes in business.  But since business competes for both customers and workers, most of the benefits ultimately go to us.  Amazon has got to be the best store in human history, providing a cornucopia of great, convenient deals.  But its lifetime profits sum to just a few billion.

To repeat, none of the world's most capitalist countries actually live up to the capitalist ideal.  But they still provide a useful benchmark.  How is the status quo likely to change if government's role drastically shrinks?  I've only got time for the highlights:

1. Even the most capitalist countries heavily restrict immigration.  Non-citizens need government permission to live and work there - and such permission is almost impossible for most of humanity to attain.  If these laws were repealed, there would be massive international migration.  People around the world would move from countries where their labor produces little to countries where their labor produces much.  A standard long-run estimate is that this would double the production of the world - and drastically reduce global poverty and inequality in the process.

2. Even the most capitalist countries tightly regulate construction, especially in high-wage areas.  If these laws were repealed, there would be a massive increase in the supply of housing in the most prosperous areas of the country, soon followed by massive intranational migration.  Standard estimates of even modest housing deregulation say it would raise U.S. GDP by 10% - and markedly reduce poverty and inequality in the process. 

3. Even the most capitalist countries engage in massive involuntary redistribution.  Strangely, however, this redistribution focuses not on the poor, but the old.  If these laws had never existed, a large majority of people would have simply taken care of their own retirement - and taxes would be so much lower that saving wouldn't be hard.  What about the minority who can't take care of themselves?  It would cost so little compared to the status quo that it's not unreasonable to leave it to private charity.  If that seems like wishful thinking, just retain a small welfare state for poor children and the severely handicapped.

4. Even the most capitalist countries heavily subsidize education.  In my new book, The Case Against Education, I argue that the main effect of these subsidies is not to prepare people for good jobs, but to spark fruitless credential inflation.  If these laws were repealed, we'd still be literate and numerate, but become independent and self-supporting years earlier.  What about poor kids?  Again, my preferred answer is private charity; but if that's not good enough for you, then a means-tested voucher program solves the problem.

Now what's so terrible about the socialist ideal?  It's a system based on government authority and coercion.  Democracy is a decent way to mitigate the mass murder and slavery of socialist dictatorships.  But even under democratic socialism, the individual is at the mercy of popular opinion.  And popular opinion is not pretty.  Just look at the shameful way American democracy treats peaceful immigrants like criminals - to popular acclaim.

Socialists like to compare their ideal society to a family.  But in actual families, you don't have to support your siblings if you don't want to.  Indeed, you don't even have to support your parents who gave you life.  Why should your moral obligations to complete strangers be any stronger?  The idea that the rich are morally obliged to give away everything they don't need until poverty is vanquished has some superficial appeal.  But objectively speaking, almost all of us have vastly more than we need, especially if you remember the market value of all your free time.  I loathe hyperbole, but if a socialist government enforced the obligation to give away all your surplus to the poor, you would literally be a slave.

Once again, though, there's a looming doubt: Is socialism one of those ideals that sounds terrible, but works wonderfully in real life?  To resolve this, let's return to my same two-step procedure.  First, start by looking at the most socialist countries that actually exist.  Next, weigh the probable effects of the main policy reforms necessary to bring those countries into harmony with the socialist ideal.

By usual rankings, the world's most socialist countries are North Korea and Venezuela.  No decent socialist upholds these hell states as ideals, and I certainly am not accusing my opponent of doing so.  There are many praiseworthy ways to bring relatively socialist countries into harmony with the socialist ideal, starting with: stop murdering and jailing people to keep the ruling plutocrats in power.  But as long as the North Korean and Venezuelan governments play the dominant roles in their economies, they'll remain impoverished and oppressive societies.  How would democracy fix that, short of abandoning socialism?  To be fair, if I were a socialist, I'd want to start with Sweden as my benchmark - and work from there.  But that's crazy; by most measures, Sweden is only modestly less capitalist than the U.S.

People often mock socialists for insisting that "true socialism" has never been tried.  I'm not going to say that, because I don't think "true capitalism" has ever been tried, either.  But if we want to forecast the effects of the true version of either system, it still makes sense to start with the closest existing approximations, then analyze the probable effects of bringing their policies into harmony with the ideals.  When we do so, we see that capitalism is a wonderful ideal that's likely to work wonderfully in practice, and socialism is a terrible ideal that's likely to work terribly in practice. 

COMMENTS (16 to date)
Martin L writes:

Thanks for the post, Bryan.

Regarding Sweden, its productivity and comparative prosperity has only declined in recent years. Sweden was very well off in the 60s, but then the Swedish government massively hiked taxes. See fig 3.2 here:
Sweden has been trailing behind in economic rankings since then, especially after the 80s.

If one is looking for political reasons for Swedish prosperity, I would point to the liberal Swedish thinkers and politicians of the 19th century, who reformed and deregulated much of the economy.

David R Henderson writes:

I just read Elizabeth Breunig's piece. I was surprised by how little she knows about capitalism or socialism.

T Boyle writes:

Breunig basically seems to argue that capitalism is liberty-destroying, because instead of doing what would please themselves without regard for others, people are compelled to consider what others - those who pay them for their time - might want.

She argues for socialism (her variant) on the grounds that it frees people from the tyranny of others' priorities, and is thus the ultimate form of liberty.

I think.

Fascinating, as Mr. Spock might have said.

Brendan Hodge writes:

Is there a recording or transcript of the rest of the debate? I'm really curious about it.

Mark Z writes:

T Boyle,

It would appear Ms. Bruenig thinks capitalists invented scarcity? Under socialism we could all choose to write sonnets all day long and food and medicine would manufacture themselves.

robc writes:


I think it was PJ O'Rourke who said that Swedish socialism worked because the socialist party got elected and never implemented it.

Hence the growth thru the 60s. Then they actually implemented some socialism and it stopped.

BC writes:

@T Boyle, Ms. Breunig's argument reduces to saying that *mutual* consent can't truly be consensual. The fact that a worker must convince an employer to pay the worker somehow means that the worker's agreement to work can't be consensual. That would seem to be a strange definition of consent, but it's fairly typical of those that promote socialism. My experience is that it's not very fruitful to try to convince socialists that mutual consent is consensual. It's arguing tautology.

Focusing on that tautology, which is the basis of the anti-capitalist argument, distracts from the flaw in the pro-socialist argument, "freeing people from the tyranny of others' priorities". Under socialism, the *government* decides which economic arrangements one can enter. That doesn't sound like freedom to me.
I notice that the word "government" doesn't appear in Ms. Breunig's entire opening statement. That's probably her statement's most noteworthy feature.

Thomas Sewell writes:

I'd also be interested in a transcript, or video of the full debate.

Congratulations to Bruenig on being willing to subject herself to this debate and put herself on the side of socialism.

That said, she appears to use "de-commodification of certain goods" as a shorthand for complete government takeover of an industry for the purpose of isolating it as much as possible from market forces. Of course, see Venezuela (and other places) for what could possibly go wrong there. She seems to have fallen into the trap of thinking that passing a law magically repeals basic laws of economics, like supply and demand.

She cites Strand approvingly that "Once labor is liberated from the pressures and caprices of the market, Strand also observed, 'then the nature of the market itself changes: it ceases being a realm of imperatives, and instead becomes one of opportunities.', but utterly fails to inquire of reality if his theory actually bears itself out.

Would most people working in education in the U.S. say that it is not "a realm of imperatives, and instead" become "one of opportunities"? How about health care? How about the oil industry in Venezuela? Or the dozens of other nationalized industries in Venezuela? As a theory, Strand's is good in that it is very susceptible to being disproved empirically pretty quickly.

"... will reduce social and personal alienation by transforming the overwhelming competitive impulse in capitalist society into a cooperative impulse." She blames this competitiveness on the "story" which capitalism sells us, but doesn't consider:
1. If people "cooperate" in this way, normally progressives like Bruenig complain about how terrible it is and call for anti-trust laws against it.
2. The government attempting to transform people's basic human nature leads to some pretty dark areas of history. Research similar attempts in the USSR and China before proposing to follow their lead.

As I see it, the biggest flaw in her reasoning is that she complains about the history of capitalism, but in the process completely ignores how we got to where we are. It's as if that part of history where people's lives improved happened in complete isolation to how their lives improved. Her stated preference is to return to the system before "a historical condition in which economic and political power are arrayed according to the interests of capital owners". I'm fairly certain most of her readers, if given the choice, would take the present society over the one which preceded all this "dominance" by merchants and capital.

Thomas Sewell writes:

At the risk of a second, pithier comment, her argument can be boiled down to suggesting people should be freed from the requirement to benefit anyone else with their labor. She argues that legally, everyone should be able to be completely selfish with what they do and not have any need to exchange labor to anyone else in order to get what they want. She goes even farther to argue that people should be prohibited from using their labor to directly benefit others!

This way lies madness, self-destruction and power-hungry dictators determining everything for everyone else based on the politics of the moment.

john hare writes:

"Workers are paid to obey' was the quote that stood out for me, especially as the alternative is coerced to obey.

Maniel writes:

This debate is a reminder of the key to victory in so many contests: opponent selection.
Still, I would award the runner-up a sojourn in one of the socialist havens mentioned. If that seems harsh, consider a turn on a communal farm - quite educational as I discovered one long hot summer.

Rocinante writes:

She did say government wasn't the only option - voluntary socialist communes were also socialism. So part of the debate hinged on the way she defined capitalism. If capitalism means money is the ultimate end, then she's defending capitalism at its worst against socialism at its best. See Brennan.

Gene Epstein writes:

The four objectives Bruenig favors could be brought about within a few years through voluntary formation of communes. There are plenty of precedents in U.S. history--and of course, the Amish opt out of certain offerings of American capitalism, as do the Hasidic Jews. David Friedman outlined a plan for voluntary socialism under capitalism in his book THE MACHINERY OF FREEDOM, first published in 1973. Bruenig ought to read that chapter in Friedman's book. But she would then reflect that, while the voluntary commune she wants is quite achievable, there still seem to be too few volunteers to bring it about.
Libertarian philosopher Robert Nozick once proposed Israel as a good test case of what portion of the population would choose socialism, and I recall he put it at 5%, based on the share on the Kibbutz. In light of events since, even that 5% seemed to be an exaggeration.
But the whole point is that, we who defend capitalism should not have to argue with Bruenig about human nature. We just have to say that her ideals are fine, so long as they aren't brought about through the coercion of government. Capitalism is a serious of choices, and if that's what she chooses, all she need do is convince a reasonable size minority to join her, and we'll all wish them well.

john sloan writes:

Ms Bruning's ideas are so wrong that it would take pages to show why. But Caplan is describing the popular view of what capitalism is. And his description of its superiority is valid. But this is not what real 'capitalism' was all about. Until early modern times everything that was produced was consumed - no surplus - they built pyramids or temples or castles or whatever whenever they did not have to eat or wear it - Capitalism was the new concept that producers should set aside a measure of surplus profit from production for the NEW and revolutionary purpose of creating more capital. This was first realized by late medieval monks in Western Europe. Investment to create more investment using even the initial small surpluses available was revolutionary. And the idea had to overcome Aristotle's objections as well.

Philo writes:

Bruenig and Caplan think so differently that I doubt whether a fruitful debate between them would be possible. How did it actually go?

Steven Hankin writes:

Gene Epstein,
I don't think it is fair to use those people in Israel, who choose to live in a Kibbutz, as a valid demonstration of people who would prefer a socialist system of government. Of course, socialism is a political system in which people have no choice whether to live or not live under socialism. But in Israel, people do choose either to live or not to live in a Kibbutz.

My guess is that only a small portion of those who chose to live in a Kibbutz would favor their country adopting a socialist system of government. Personally, I don't want to live under socialism, but I have no problem with allowing people to choose to live in a commune (e.g., a Kibbutz).

Steven Hankin


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