Since the beginning of mankind, poverty has been one of our greatest adversaries. We are faced with limited resources and unlimited wants. Even in our post-industrial society, poverty is still very much a problem.
It was this problem of poverty that led the first thinkers to formulate theories of socialism. They blamed capitalism for the continued woes of poverty and proposed socialism. Whereas capitalism thrives on competitive private ownership in production of the goods in society, socialism expresses cooperative public ownership.
Historically, however, it doesn’t seem socialism has been great at delivering on its promise of freeing the workers from poverty. The Soviet Union was once the world’s great socialist superpower, but after its fall, the economic realities became known to the world. What many thought was a model for economic policy in the West turned out to be an impoverished wasteland. Ridiculous problems such as the inability to get the correct size nails for construction and a toothbrush shortage, not to mention widespread starvation, beset the Soviet Union.
So what happened? This falls into what economist Ludwig von Mises called the “economic calculation problem.” This is essentially that prices in a system of private exchange act as feedback for what is needed in the economy. When something becomes scarce, prices go up and people are more willing to sell, thus producing more. However, in the centrally planned socialist economy, there is no immediate feedback mechanism which leads to easily avoidable shortages.
But hey, most socialists aren’t exactly praising the greatness of Stalinism or even communism. Maybe we can have a little bit of socialism and a little bit of capitalism. However, it is a free-market which fuels a productive society and interventions in the marketplace work only to distort its efficiency.
The poor in capitalist countries tend to be better off compared to elsewhere. Nations with freer markets consistently have higher standards of living compared with those with less economic freedom. This is because competition does not work against our common interests but rather for it. When businesses compete they are forced to do their best and deliver the best goods and services at the lowest price. All consumers benefit from this competition, as they are able to purchase more of the goods and services they need.
Ultimately, it is the free-market system which is the most efficient at distributing resources in a modern economy, not a planned socialist one. It was under a relatively free-market that we saw an explosion of wealth in the western world. It is a free-market system we need to return to in order to save ourselves from the current economic disasters facing our nation.