Capitalism vs. Socialism

With the likes of Donald Trump and Bernie Sanders running for president in 2016, we are going to hear tons about why socialism is better than capitalism and vice versa. What I will explain here is that they are two sides of the same coin, or in other words, that they act as a yin/yang balance where one supports the other; successful capitalism depends on successful socialism, and successful socialism depends on successful capitalism. Together they form the ideal economic bedrock on which to build liberal democracy.

First let's look at how society has evolved:

1. In a primal state of hunter gatherers, we are not at the top of the food chain. With no significant government, issues around starvation and being eaten by apex predators trump all other concerns regarding right and wrong, family relationships, or anything else we might regard as morality.
2. Once we establish permanent villages - even if those villages are mobile - with strong central leadership that can make decisions for large groups in emergencies - right and wrong can now be considered. No longer at the mercy of apex predators and with a variety of adaptions for dealing with food shortages, meaningful family structures can now form. The problem for the primal village is other primal villages - mankind becomes it's own worst enemy.
3. Once we can establish nations with national leadership - traditionally most commonly monarchies, villages now stop warring with each other, and violence over all is massively reduced, death from natural causes now for the first time in this story becoming more common than being murdered. Most feel strong loyalty to the King and Queen, because they provide the stability everyone needs. Sure there are entrepreneurs in a Monarchy, but they are not able to transcend the peace keeping authority of the royal family. The problem now is that the Royal Family has to more or less decide what is right for everyone, and no matter how intelligent and virtuous they are, it is impossible to make the best decisions for other people.
4. Capitalism emerges as the entrepreneurs get enough power and influence that as a community, they can challenge the power of the monarchy. Now we have many more people involved in the decision making process of how everyone lives, with a wider range of products and services to help people live their lives. The problem is that if the people with money are the ones best positioned to make more money - and in capitalism they always are - the rich always get richer, and as a community the rich end up getting more and more control over all of the wealth. This can eventually end in a currency crisis where money only matters to those who have it, while everyone else resorts to bartering. This can massively degrade society throwing it back into Monarchy or even something more primitive.
5. Socialism arises to cure the ills of capitalism. They fix the problem of wealth concentration by seizing the means of production from the rich and making it all government property. The problem is that innovation slows down when all decisions are being made by the same great bureaucracy, and internal politics dictates what products and services are provided more so than what the people actually want or need to have.
6. Liberal Democracy puts the will of the people first. It is focused on balancing Capitalism and Socialism. The people want the goods and services Capitalism provides but they also want the stability Socialism provides. Liberal Democracies thrive far beyond the more primitive Capitalism of the Old West or industrial revolution because they use taxation and regulation to prevent concentration of wealth collapses. Liberal Democracies thrive beyond the old Socialism of the Cold War because the tolerance of Capitalism provides far more goods and services than a single bureaucracy can manage.

The more Capitalism a Liberal Democracy has, the more Socialism it can have, as there is more money to tax to provide universal stability for the people through social safety nets. The more Socialism a Liberal Democracy has, the more Capitalism it can have as taxes and regulations prevent oligarchies and wealth concentration collapses. My warning here is that in a Liberal Democracy, less of either Capitalism or Socialism leads to less Socialism AND less Capitalism, weakening the Liberal Democracy. If an Liberal Democracy is to grow, it should strive for MORE Capitalism AND MORE Socialism.

Contrary to popular belief, high taxes and robust regulations are exactly how we build Capitalism, while allowing people to embrace investment and consumerism is exactly how we build Socialism. Those who advocate for only one side or the other are ignoring how dependent the two rival systems are on each other when practiced within an Liberal Democracy:

Read Capitalism vs. Socialism: Part 2.