Capitalism vs Socialism and Interventionism

Although there have many “isms” to designate the various social systems that have existed throughout history there are basically only three. They are Capitalism, Socialism and Interventionism. We can place all the “isms” in one of these three categories.

Capitalism is an economic concept of civilization that requires the private ownership and control of the means of production.

Socialism is a system of social organization that calls for public (state) ownership of the means of production. The totalitarian state owns everything and everyone’s life.

Interventionism is the practice of government interference in the marketplace. The government legally hampers the market economy.

I owe the above definitions to Percy L. Greaves’ book “Mises Made Easier.”

Understanding the Great Mises!

We must determine which of these manifests as an open system…and reigns as the most effective one for individuals to achieve their dreams and desires.

The Law of Entropy

Since I am not a physicist I am keeping this simple with a short explanation of how the law of entropy works. Let’s say we’re converting coal into energy to power a steam-driven piston. Most, but not all of it is turned into motion. Some of the energy will be lost.

Also another effect is that eventually the machine wears out from the movement of the piston. So you have the effect of lost energy and the machine eventually breaking down.

The law of entropy also explains that the universe is expanding into a state of increasing disorder or increasing entropy.

The question is: Why does it seem that some things in the universe tend towards increased order? Doesn’t this violate the laws of entropy (second law of thermodynamics)?

Open Systems

Ilya Prigogine solved and answered the above questions. He discovered order emerges because of the disorder (chaos). Evolution and growth are the inevitable consequences of open systems falling into temporary chaos and then reorganizing at higher levels of functioning.

Open systems take in energy and matter from their environment…then dissipate the resulting entropy into the system and the environment. You can conclude that the system handles both growth and adversity to reorganize at a higher level.

When any system reaches it limits (threshold), it either becomes chaotic and breaks down…or reorganizes at a higher level. Which route it takes is determined by how efficient and adaptable the system is. An inefficient system collapses in chaos. An efficient system reorganizes at a higher level.

I would like to thank Bill Harris for the above information which I adapted from his book “Thresholds Of The Mind.”

Before we proceed I would like to remind you that physics is an inductive system. Human action (economics) is a deductive system. You can’t apply mechanical laws to economics…although many mathematical and Keynesian economists have tried. Fortunately we can apply the concept of an open system to both deductive and inductive reasoning.

Now let’s discover which social system is an open system that best meets the needs of its men and women.

Socialism

As stated, socialism is a system where the state owns the means of production. Individuals can only follow the orders of those in charge. The privileged few who run the show restrict the actions men and women can take to improve their well-being. Instead of the decisions of millions determining the organization of society, only the politburo and its cohorts make the decisions.

Can you imagine how stifled a system becomes when only a few people are able to freely use the information that is necessary for successful action? Plus when a socialist government eliminates the economic calculation of free markets…it stamps out a vital source of information for the growth of a society. The compass of successful action vanishes, eliminating the gauge of success and failure. Eventually the system goes into chaos and shuts down. Total collapse means it doesn’t reorganize at a higher level.

It is obvious that socialism sinks as a closed system. It tends toward chaos and disintegration…causing hapless men and women to live in poverty and deprivation. A few benefit at the expense of everyone else. I could supply you with thousands of pages of economic theory explaining why socialism is a social system doomed to failure. However I think the facts speak for themselves. It actually did collapse because of its inability to adapt to change.

Socialism can’t and never will work because it is a closed system that quickly stifles and chokes off individual initiative. The impossibility of economic calculation in a purely socialist system is enough to permanently cripple it. The fact that socialism prevents the free flow of information dooms it to chaos and eventual collapse.

Socialism is Death to the Individual.

Interventionism

In a system of interventionism the government interferes with the market in order to benefit some at the expense of others. Government officials and altruists tell you they are only trying to improve the efficacy of the marketplace by eliminating injustice. However I think the negative results of their interference show this is absurd.

Economic theory demonstrates that all government intervention in the economy violates Economic Law and has undesirable consequences. One intervention on top of another eventually moves the system towards chaos. The time comes when the political and financial establishment must choose either laissez faire capitalism or full scale socialism.

As will be demonstrated, capitalism stands tall as an open system. All interference with it cuts off its “vital force” moving it closer to the closed system of socialism.

Interventionism is futile and self defeating because it gradually sabotages the smooth functioning of the system. And it destroys people’s hopes, dreams and ambitions.

All government interventions delays progress, limits the systems adaptability and lowers its threshold. The laws of praxeology (human action) demonstrate this. The results…a violation of individual rights, limiting of individual choice, destruction of currency, corruption, wars, etc. Of course as interventionism hampers the systems adaptability, it also hampers the individual’s adaptability. Lowering the system’s threshold for change, lowers the individual’s threshold for change.

Once a system of extreme government intervention breaks down, which it must inevitably do, something worse usually replaces it. This doesn’t bode well for the Western World. The only reason the fall of communism led to a semi free market renaissance was because of the existence of semi free markets in the Western World. Otherwise it would have crumbled into hopelessness and despair.

Government interventionism leads to a breakdown of the system. Since it is a restricted system that finally becomes closed, there is no reorganizing at a higher level. A totalitarian system replaces it. This is why countries end up with a Stalin, Hitler, Mussolini etc..

Of course it is always possible in a democracy that the citizens will rebel against government interventionism and demand their personal liberty and economic freedom. The ensuing chaos could then lead to laissez faire capitalism or even anarcho-capitalism.

Capitalism

In a system of laissez faire capitalism everyone captures the freedom to choose their destiny. All voluntary exchanges are legal…which makes it an open system. The government’s only function is to protect the individual’s life, liberty and property. Involuntary exchanges are illegal because these types of anti-social activities interfere with an individual’s freedom of choice. Violating someone’s freedom of choice limits his opportunities for success. When the government begins interfering with men and women’s personal liberty and economic freedom…it pushes the system towards chaos because of the adaptability problem.

Economic theory conclusively proves that laissez faire (unhampered) capitalism is the only system that results in the happiness and prosperity that individuals desire. Realizing the social system of unhampered capitalism is the only arrangement of society’s activities that constitute an open system…we can conclude that all other systems will eventually result in the misery, poverty and degradation of the masses.

Only unhampered capitalism is an open system that can grow and thrive. If it ever does reach a breaking point it will evolve to a much higher state of organization.

Although supporters of capitalism consider Karl Marx as one of its greatest enemies, he was correct on one point. A system of pure laissez faire capitalism will lead to a new “utopia”. What must be understood is the new system would also have to be unhampered for it to evolve into another higher state of organization.

When an open system such as capitalism finally reaches its threshold what replaces it is vastly superior. Basically it is still unhampered capitalism, but at a much higher state of existence. The productivity of labor and the standard of living is so high that what follows is a society based on whatever the minds of men can create.

Imagine this: Instead of having to work 40 to 60 hours a week you only have to work one hour to accomplish the same standard of living. It is almost hard to envision what would follow. What does an incredibly advanced society produce? One thing for certain is that men and women unleash superior mental and spiritual powers that result in a standard of living unheard of in our present state of development.

Laissez faire capitalism excels as an open system that corresponds to the needs of individuals. It allows them to greatly expand their mental powers and create a glorious today and tomorrow.

RA Meyer – The Objectivist Masters the Social Maze

Author: PraxisBob

RA Meyer possesses an extensive background in many areas. For years, he has studied economics, philosophy, psychology and metaphysics, integrating these disciplines into a coherent philosophy of life. Ayn Rand and Ludwig von Mises influenced him the most. In addition, his customer service (sales) career supplied him a deeper understanding of human nature. He realizes there are basic principles of Objectivism and Human Action that will help people become successful at achieving their goals and desires. His knowledge that life is to be lived on a physical, emotional, mental and spiritual level allowed him to discover “Mind-Expanding Journeys Through the Social Maze..”

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