Capitalism vs. Socialism: Part 2

(Before reading this post, if you haven't already, read my original Capitalism vs. Socialism post, where I asserted that in a liberal democracy capitalism and socialism are strongly dependent on each other, and that decreasing one also decreases the other.)

The great recession that started around 2008 has been declared a failure of regulation. Deregulation in the decade before led to a massive failure of the economic system. A compromise of socialism (deregulation) led to a compromise of capitalism (market failure.)

My views on this are strongly influenced by one specific book by Jane Jacobs, called "The Nature of Economies." In that book she shows how small communities start off by importing and exporting, but as they grow and their economies diversify, the less and less dependent they become on export and import. A small town might only be able to get microwave Chinese food mailed to them. However as that town grows, its economy will become strong enough to support their own Chinese restaurant. 

Let's consider the Chinese Restaurant Owner and Operator, who we will call "Chang," verses the local food inspector, who we will call "James." Chang doesn't like it when James stops by, sticks his nose in Chang's freezer, runs around talking temperatures of random food items, and slaps a bunch of warnings on the wall in Chang's prep kitchen, and finally sends him a minor fine in the mail. Chang, capitalist extraordinaire, would just assume James stop wasting his tax money and go find another job.

But let's look at the CAPITALIST consequences of not having food inspectors. First word would get out that there were no food inspectors. Now people are going to be far more hesitant to go out, and the more exotic and daring the food, the less likely they will be to try it. Chang's restaurant definitely takes a significant hit on customers. Second all the food inspectors are out of work, and their salary is no longer contributing to the economy. This only results in less customers for Chang.

But what is especially concerning to me is how many progressives I talk to think that Chang's business isn't important. If his business folds, there are two catastrophic consequences: 1) his small town is now back to ordering microwave Chinese food and 2) his business no longer contributes to the tax base of his community. Both outcomes are terrible, even for socialists.

The implication of all this going forward, is that more government involvement to build more business is what you want to do. For example:

• Instead of doing too-big-to-fail business bailouts, you should establish a small-business welfare system that bales out small businesses in hard times, especially considering that they are the USA's foremost source of employment.
• You should be asking for more small business grants and loans - massively more. We do not have enough to go around until the top students in each DECA club in high schools across the country are able to try out entrepreneurship once they graduate. Microloans should not be the exclusive realm of private NPOs!
• You should be asking for more regulations, not less. Every part-time cog in a government bureaucracy is another potential customer for these businesses. Also, a magnifying glass taken to the new industries popping up will make customers have more confidence in trying out the new things these new businesses come up with.

But here's the punchline: I am not pro-capitalism or a socialist. I am a Technocracy Inc./21-hour work week type of guy. I don't think capitalism, socialist dogma, unions, careers, etc. are even a good idea. However IF you want our current system to work, you should be asking for MORE of it, not less. Capitalism vs. Socialism is a false dichotomy in liberal democracies, they are in fact the only things that prop each other up.