Socialism, Capitalism & Free Market Theory

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I remember couple of months back I had said to ‘Soyyo’ about writing about my views on Socialism & Capitalism. And now when me and ‘Sher’ are discussing this topic, I finally got to write this one.

I find it quite difficult to explicitly term myself as endorsing socialism or capitalism. There are reasons for it. Having been brought up in a socialist country I have imbibed socialistic ideas and my education has inculcated capitalism. As a result, I am neither a perfect socialist nor a capitalist.

The heart of socialism is equal distribution of wealth and if it proceeds to communism then it becomes “means of production to be controlled by all of a society”. Marxism proposes a series of changes which ulitmately will lead to this. But Socialism for me is only ‘equality’. I see socialism as “to be given equal opportunities to acquire skills”.

The heart of capitalism is “means of production are owned by individual or privately owned”. But capitalism for me is the one which breeds entrepreneurs. If a person hasthe skill and opportunity then he(she) be allowed to reap the benefits of his(her) hard work.

I am completely at peace because ‘my’ idea of socialism and capitalism are not in conflict with each other. Socialism gives everyone equal opporutnity to acquire skills and then capitalism allows them to exploit their skills. One should not be limited to derive less benefits of his(her) skills cause others are not doing so. The fault lies with the one who has less skills cause there was equal opportunity to gain skill.

It is in here that I place the concept of “free market”or laws of demand and supply. The only way I think skills could be valued properly is to let the market decide and not what some cartels or governments think of it. If you have been given equal opportunities then there should be no need of regulation. Take for example – you are given equal opportunity of taking coal and gold. You want to take coal and then want some regulations to price coal more to gold. Isn’t this trying to cover your wrong decisions ? Would it be fair to make others who chose gold to pay for your wrong decision ? If you think that those who chose gold did it by fluke, then this is not true. They would have invested in market intelligence and getting the pay off for it.

It is only free market that can deal with inefficiencies. Those who do treasury operations know that arbitrage gains are possible only due to inefficiency of two markets. It is much like there are two different water levels and the only way to make them come to the same level is to have a free flow.

I agree that a welfare state has certain social obligations. There can be two ways to handle deficiency. Either make everyone deficient so that it ceases to be a deficiency or work to overcome deficiency. Unfortunately most of the time governments tend to go by former. Putting controls and regulations are way to do this. This is the reason ‘free market’ theory is not popular with ‘psuedo welfare’ governments.

To summarise, I consider the socio-capitalism in a ‘free market’economy to be the best choice.