The Fundamental Difference Between Socialism and Capitalism

Two topics that rarely seem to collide nowadays are religion and economics. It seems Christians are content to separate “church life” from the world we live in every day. We may receive God’s Word on Sunday, but we receive whatever the world is feeding us the rest of the week. It’s all too easy to believe the TV and fall into whatever worldview fits our friend group the best.

But why do we do this? Why is it that so many Christians are content to view the world through the lens of the world rather than the lens of the Bible? I say we ought to apply God’s truth to all aspects of our lives and allow it to shape our worldview accordingly. Today, we’ll attempt to do exactly that regarding an important part of the conversation on macroeconomics.

“Thus says the Lord: ‘Cursed is the man who trusts in man and makes flesh his strength, whose heart turns away from the Lord.’ The heart is deceitful above all things, and desperately sick; who can understand it?”

Jeremiah 17:5, 9 (ESV)

The Problem of Evil

Everyone knows about the problem of evil, and I’m not speaking lightly. Literally everyone knows about the problem of evil. We’re surrounded by it every day. It’s in our very bones, slowly rotting us to death and aching beneath our skin. We know something is wrong. We know we aren’t what we should be. We know the world isn’t what it should be. We see it in war. We see it in homelessness and starvation. We see it in the greed and lust of humanity for money and power. We see it in the hatred between people groups. We see it in the abuse between a husband and a wife. We see it in ourselves in our selfishness, our carelessness, and our anger. What can be done about it?

Now, I don’t plan to answer that question today. It’d take a bit more time than either of us planned, I wager. Instead, let’s take this premise and apply it to another topic. What does the problem of evil mean for economics? That’s still a large question, but the idea is that it does matter. Evil affects every aspect of our lives. Surely it’s important when talking about our economy as well.

Capitalism & Socialism

Let’s take two economic systems and look at how they deal with the problem of evil. Note that I’m speaking very broadly here. This isn’t an economics class and I’m not an expert. This is philosophy class and your teacher needs to make a point.

Capitalism is known for greatly rewarding those who are ambitious and able to sell products or services to the masses. It also does a decent job of creating a fruitful society for those who just want to work for those people and take home a paycheck. It isn’t very favorable to those who are inactive in the market, as it’s centered on capital and trade between private parties. As such, the unemployed, broke, or disadvantaged can fall behind. The government usually focuses on enforcing law and order, fighting off outside threats, and maintaining things like currency, roads, and market competition. It’s historically the most successful economic system in the world. It promotes growth of economy and wealth of all citizens, though it does skew over time towards the rich and those with the most dominance in the market. We usually see it supplemented with social programs such as welfare and public services. Common criticisms include lack of care for the lower class, unfettered corporate greed, and unchecked profit motive leading to the abuse of the working class.

Socialism is known for taking power away from private parties and placing it in the hands of the government, though most realized forms of it utilize a pseudo-free market to a large extent. The government is generally in charge of the means of production and uses high taxes in order to provide goods and services to all members of society. It’s common to work for companies that are either integrated with the government or part of the government. This system rewards those who are in power in the government and attempts to treat everyone else as equals. This discourages ambition, but allows for the government to support the unemployed, broke, or disadvantaged with the money they make taxing the general populace. Sometimes the government uses its power and money to pursue social causes such as progressivism, feminism, or environmentalism. I think it’s safe to say this economic system has seen its fair share of historical failures, while also producing some successful outcomes when combined with a healthy dose of the free market, not to mention international support. Common criticisms include lack of motivation to innovate and produce wealth, unfettered corruption of the state, and unchecked wealth mismanagement leading to crashing economies and worthless currencies.

The Difference

The fundamental difference between capitalism and socialism is that socialism assumes man is basically good, while capitalism assumes man is basically evil. Only one of these is supported in the Bible.

Capitalism exploits the natural selfish desire to succeed and build wealth. It does this by allowing a free market to determine what rises to the top. Only the best (and most crafty) survive. It’s a terrifying, yet brilliant concept. Take the people who tend towards selfish ambition and put them to work for society by allowing them the space to work as hard as they want on whatever motivates them. Their success is determined by what the general populace wants. This usually leads to amazing leaps in technology and luxury. Just look at the rise of the smartphone. The only reason we have this tech today is because Apple decided to take the concept of a touchscreen phone and make it simple and marketable to everyday people. Their success in creating an appealing product led to a staple of modern life. Capitalism is effective at delivering new and exciting things while making the people behind them very rich. The two balances to this system are the market and the government. If a company does something reprehensible, they can be boycotted by the people or punished by the government. This keeps selfish ambition in check to some extent.

Socialism does not take this natural selfish desire into account. In fact, it willfully ignores it in favor of wishful thinking. Instead of creating a space for fierce competition to check itself, it tries its best to eliminate the chase for wealth by controlling the means of production for various industries, imposing high taxes on successful people, and eliminating some of the downsides of being lower class. The end result is that the most ambitious and successful people are active in the government (if they haven’t left for a capitalist country already). When you remove the profit motive, the only thing left to grasp is power. You see, socialism assumes that the state knows what’s best for the people. The state will provide for their needs. The state will restrict what is harmful. Thus, the state is given all the power. But this assumes the state is not corrupt. What is a government except a collection of people running a country? People are fallible and selfish. They will eventually turn to their own interests.

In capitalism, selfishness only works as long as you provide value to society. You will be abandoned and your profits reduced if you become unpopular with the masses. This cannot happen to a government because there’s nobody to compete with. There are no checks or balances. The government can hold a gun to your head and tell you to shut your mouth and get in line. They can take as much of your money as they want and use it to do whatever they want. The general populace has no say. It takes a coup or violent revolution to undo the effects of a tyrannical government. We’ve seen it happen time and time again throughout history. I think it’s safe to say market upsets are preferable to bloodshed and anarchy, but maybe that’s just me.

This is also the fundamental reason why government programs and services are usually stagnant, inefficient, and generally awful. Without a profit motive, there’s no reason to improve wait times at the DMV. There’s no reason for the USPS to stay out of debt. There’s no reason to fix the potholes all over Michigan. The government gets your money whether they use it to help you or not. This means they usually spend enough to keep you quiet, then take the rest for their own interests. Private companies only get your money when they’re actively creating value. They’re motivated to improve because competition is fierce and there’s profit up for grabs. This is why I lean libertarian when it comes to privatization of industry. Greedy businessmen always do better work than the government.

Now, you might say I’m being unfair here. Not every socialist state ends up in ruin. Not every capitalist society checks itself very well. That’s true. But the trends are unmistakable. Socialist countries that display success are inevitably using the free market in some fashion. They have to allow some aspects of capitalism in order to function properly. They’re usually smaller countries relying on outside help in regards to military power and innovation. Capitalist countries can struggle to keep corrupt businessmen in line, but this frequently goes hand in hand with government influence and corruption via subsidies, loopholes, and bribes. Keep the government smaller and you have less of these problems, though any government attracts corruption.

No matter what system of economics you use, society will never evolve into utopia. Both capitalism and socialism have major issues. My goal here isn’t to argue that capitalism is perfect. Only that it does a better job of taking selfish motives into account and harnessing them for the betterment of society rather than tyranny.

Man is Basically Evil

Let’s finish by taking a look at what the Bible has to say regarding evil.

“God looks down from heaven on the children of man to see if there are any who understand, who seek after God. They have all fallen away; together they have become corrupt; there is none who does good, not even one.”

Psalm 53:2-3 (ESV)

There are no exceptions. All of humanity is evil. If you ascribe to the Bible, this point cannot be argued. But what is evil? This verse gives us a clue by identifying those who do not understand and do not seek after God. What does this mean? We are all naturally inclined away from God. We don’t care to understand the mysteries of his nature. We seek to understand the world and how we can best exploit it for our personal gain. We see this in economics and we see it in our private sins.

“For there is no distinction: for all have sinned and fall short of the glory of God”

Romans 3:22b-23 (ESV)

Sin is how we demonstrate our evil. We actively oppose God in our actions of selfishness and hatred. This is what condemns us. Even something as “innocent” as hurling an angry insult is out of alignment with God and is enough to justify damnation. Jesus makes this clear.

“You have heard that it was said to those of old, ‘You shall not murder; and whoever murders will be liable to judgment.’ But I say to you that everyone who is angry with his brother will be liable to judgment; whoever insults his brother will be liable to the council; and whoever says, ‘You fool!’ will be liable to the hell of fire.”

Matthew 5:21-22 (ESV)

This was, no doubt, a shock to many of the practicing Jews in Jesus’ day. They followed the letter of the law, seeking to live a life technically meeting all the requirements to be in good standing with God. What they missed was the heart motive. Hatred may not produce the same earthly effects as murder, but it is equally as evil.

“For whoever keeps the whole law but fails in one point has become guilty of all of it.”

James 2:10 (ESV)

This might seem harsh, but it’s only right and just when we’re talking about a perfect and holy God. We have no right to stand on equal footing with our Creator, for we have all rejected him. Where does that leave us?

The Solution

“The stone that the builders rejected has become the cornerstone.”

Psalm 118:22 (ESV)

As Jesus makes clear in Matthew 21, this verse is a prophecy referring to him. We have all rejected Christ, but he has become the cornerstone, the foundation, the rock. This thread is woven throughout the Bible. You can read more about it in 1 Peter 2. What it boils down to is that Jesus is our only salvation. We can only hope to find redemption through him. Rather than deny or ignore our sin, we ought to acknowledge it, repent from it, and throw ourselves at the feet of the Lord. He promises to make us whole.

“If we say we have no sin, we deceive ourselves, and the truth is not in us. If we confess our sins, he is faithful and just to forgive us our sins and to cleanse us from all unrighteousness.”

1 John 1:8-9 (ESV)

“For the wages of sin is death, but the free gift of God is eternal life in Christ Jesus our Lord.”

Romans 6:23 (ESV)

Leave a comment if you have thoughts about the nature of evil as it relates to economics. Enter your email below if you want to be notified when my next post goes live. Thanks for reading. Godspeed.

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2 thoughts on “The Fundamental Difference Between Socialism and Capitalism”

  1. Dear Luke

    Hello from the UK. Many thanks for your post. Overall I think you are correct, but capitalism suffers from evil men just as socialism does and ultimately both are as bad as each other if mankind is bad.

    Make mankind whole and free from sin and whatever type of organisational structure will work (provided of course it is well structured!).

    Mega-corporations are as bad as mega-bureaucracy.

    Ultimately society is best run on the family basis with those leading being servants to all, Just as Jesus is. And the heavenly Father thinks like that too of course, which is why He loves and cares for His children sacrificially.

    Kind regards

    Baldmichael Theresoluteprotector’sson
    Please excuse the nom-de-plume, this is as much for fun as a riddle for people to solve if they wish.

    Like

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