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The Social Positivists

 the society for the advancement of positive knowledge 

Why Capitalism Works

Socialism faces a similar problem to what Christians face. Every debate about Christianity is derailed by an atheist asking for an irrefutable proof of God. Capitalists likewise, challenge socialist for proof that socialism works while labelling everything that is not founded on the free market as in error. The assumption being, capitalism works, and socialism does not. For most right-wingers the issue is not up for debate. The question is asked as a joke rather than with the expectation of a reasonable reply.

A knowledge of human history makes it difficult to argue the capitalist position. Wealth and economic development are associated with capitalism. Assuming growth in GDP to be your bench mark of what it means to be a successful economy, capitalist nations have been successful. The socialist response to this dogmatic declaration of capitalism, that it wins the w contest, is to challenge the Capitalist concept of success. If capitalism is successful, why are so many living under the poverty line? Is capitalism successful when people live on the streets and cannot afford basic health care?

Socialists can point to notable achievements like universal health care and education. There is a great deal of merit in giving all persons a decent life. Capitalists counter this by saying many of those who enjoy benefits offered by socialism never added anything of value to the economy. Protecting people from the consequences of their actions encourages indolence. Socialism does try to ensure people enjoy a given quality of life but at the cost, say capitalists, of those who worked hard to benefit themselves and their families.

There is something unfair about people who reap without sowing. The response people have to cheaters is so basic children understand the issue. Children’s story books and ancient myths are replete with the theme. The injustice of reaping without sowing is intrinsic to worlds Scripture, also. The bible declares that the man who does not care for his own family is worse than a non-believer.

But this does not help a socialist trying to win points for socialism. Yet, these issues must be addressed. Until we figure out why the accusations against socialism are so powerful, we cannot understand just what socialism has been doing wrong. And, lets admit to our selves, if no one else; socialism has in many ways been a history of failure.

Even in its most dramatic successes, socialists’ victories have given us cause to wonder. The Soviet was not a normal person’s vision of an ideal society. China and Cuba may have features that can be lauded but ultimately, how many people are emigrating to these places?

We may know there is a need for universal health care; at the same time, it is not difficult to imagine the program being exploited. To turn a blind eye to the possibility that hypochondriacs are the ones who will gain the most from free health care is to weaken one’s case. If all we can see is the upside perhaps we have not developed a strong positive argument. It is never wise to allow the other side to expose one’s weaknesses. We need to be less concerned about finding flaws in the arguments of the oppositions point and be fanatical about looking for weaknesses in our own position.

So, lets throw caution to the wind and ask why capitalism works and socialism does not? Let’s not worry about the outcome and simply worry about truth. But, what is the point in asking a question we do not even understand? What is the measure of a successful economic system? Surely GDP or similar ought to suffice but these common economic indices leave much to be desired. GDP and other gross indicators do not say anything about how the wealth of a nation is shared. If the entire GNP is or could be, concentrated in the Balance Sheet of one company, it is not much of a measure of economic success.

On the other hand, indices that focus on income equality are absurd if they do not tell us anything about the dynamics of the economy. For socialists if the economy is not bettering everyone the purpose of the economy is lost. For capitalists if wealth is not being concentrated in a few hands then investment is not likely to happen. The issue for capitalism is that most people prefer to consume what they earn and only a few people will delay gratification to accumulate the savings needed to create new businesses.

It may appear that socialist governments think themselves vindicated if they over-see the equal sharing of an ever-decreasing pie. But if infrastructure decays and no new wealth is created surely this cannot be and ought not to be how we define economic success.

Its not the desire of the author to assign blame here. But we do need to confront head on the claim that capitalism works, and socialism does not. Income equality may well represent the moral high ground, but it cannot serve as the ultimate goal of economics. There is a reason the world chooses capitalism as its preferred economics model or the disparity would not endure.

It is at this point that the discussion becomes derailed, as do all arguments between socialists and capitalists. How can we even argue that socialism is better at creating wealth than capitalism? It is impossible to point to a socialist economy that produces more wealth than the capitalist nations. Even the argument that socialists’ economies are equitable, fair and represent economic justice becomes problematical when the justice and equality comes at a high economic cost.

It seems to me that a dispassionate observer ought to give capitalism the point here. We need to admit that indeed between capitalism and communism it has been the capitalist nations that have produced the most wealth overall.

Does this mean socialism has no credibility? Actually, no, far from it. If we have agreed that so far as wealth goes capitalism has been the more successful system, it is fair to ask what capitalism is and how has it produced this success? We might be surprised at what we find.

Capitalists will say that capitalism is a system of private ownership in which buyers and sellers are free to buy and sell unhindered by anything other than the mechanisms of the free market. We all know that such an economy does not exist. Regardless of the country all the world’s nations have a mixed economy. They are capitalist in name only. The free market is given lip service but much of the economics of the West is socialist. Why is that, if capitalism is such an effective system?

It is one thing to say socialism does not work and Capitalism is the more effective system but if this was truly so why does the contest still continue?

Let’s be clear what we are saying here. There is a battle going on between capitalism and socialism. The weight of evidence has always seemed to be on the side of capital because the major economies are all based on the free market. At the same time there are no countries that do not regulate businesses. So, despite the claims to the success of capitalism no nation actually employs what we might say is pure capitalism, or libertarianism.

If regulated capitalism is so effective why would governments not gradually reduce the amount of regulations over time to create a non-regulated free market? According to the theory any nation that moved towards this end would become more and more effective, until it was the most efficient economy on earth. But we do not see this.

So, lets admit capitalism is the most efficient system for creating wealth and yet, lets also realize that its greatest supporters, its greatest advocates, do not support libertarianism or at least are unable to convince even those whom it benefits to unleash it on the world

What is simpler than a free market. A free market is buyers and sellers buying and selling without any regulation or oversight. If the most effective system is also the simplest system would it not automatically emerge the winner in any competition? Any state that adopted a free market economy would wipe out economies that maintained its regulatory mechanisms. Like a gang who has been hauled in by the police, the first one to talk gets to go free; yet no nation breaks trust. All the world economies retain regulatory oversight of the alleged most efficient economic system ever conceived.

It is good to be honest, to give the devil his due. Only by looking at the reality of the free market and capitalism can we understand why it works and why it does not work. If we simply look at its faults we cannot understand the problems created by its strengths. It is not enough to be critical of a sprinter for not being able to shoot straight, we have to analyze why he is able to run so fast and look for ways to beat him at his own game.

The problem with the debate between the left and right is that they have constantly talked past each other, capitalists are critical of socialisms reliance on government intervention in the market and socialists decry capitalism for its lack of compassion for those who do not measure up to the demands of the competitive market. Yet, upon further investigation socialists’ resort to government to overcome the forces of greed arrayed against them and capitalism despites its appeal to an unfettered free market are dependent on governments and socialists to supply that which the market cannot or will not, for example care for orphans. Putting every other consideration aside, are we prepared to unfetter capitalism to the degree that orphans have no recourse but to starve to death?

The weakness of the conventional process or approach is that capitalists are not swayed by appeals to compassion or they would not be free market libertarians. Socialists are not defeated by retorts that socialism only works by transferring wealth from the productive sector to the less productive because they think compassion ought to take priority over the accumulation of possessions.

We have two different kinds of people promoting two different ideologies, each cannot persuade the other because each camp holds to a different set of values. Condemning them for what they think is their strength is counter-productive.

Its not the model that is really the issue it is the mindset of the people holding to the belief system. It might even be considered irrational to discredit socialism by telling a socialist their views are compassionate and just as futile to try and discredit capitalism by telling capitalists that the free market is too competitive. Each side attacks the redoubt of the other and so ends up confirming the values of the opposition. Telling a capitalist that the free market is all about the survival of the fittest is not likely make him gasp in astonishment. That is precisely why they support capitalism.

We ought to have learnt by now our approach to disseminating information is not effective. We might also wonder if we are even promoting a real solution. If capitalism cannot gain much of an edge over its opponents or even over its supporters in its purer form it might also be good to realize socialism has not found the masses enthusiastic despite theoretically being the ones with the most to benefit from its adoption.

It is not just that capitalism has produced most of the wealth of the world it has also produced the most results from the perspective of successfully marketing their position. Even Russia and China have conceded the heretofore communist economy to capitalism.

But why this insistence on looking at why Capitalism works? Why ought we to care? Like Antony cautioned the Romans be assured we have not come to praise capitalism but to bury it. If in so doing, we see its good points it is as a new creation one that reinvigorates socialism.

The key element of capitalism and the feature capitalists come back to is the avarice of human beings. Few socialists would deny that most people are greedy, self-centered and interested primarily in their own best interests. Few socialists would argue that one of the main problems that socialists have is lifting people beyond their immediate self interest to see the longer term and larger picture. But we must admit it is nigh on impossible to turn a Scrooge into a St Francis.

 But this is the very point Capitalists focus on. Humans are naturally inclined to care most about themselves and their immediate family. All attempts to sacrifice their own welfare for some greater good will be doomed to failure. Capitalism concentrates on the lowest common denominator of human behavior, our own selfish greed. For all intents and purposes, they ignore the St Francis of the world as irrelevant.

No matter how socialists may talk about what ought to be or how good things would be if only humankind was different the reality is we are as we are, and we are not likely to alter our nature any time soon.

So, have we just buried socialism and left capitalism as ugly as ever but still alive?

What we have done is realized that capitalism works because it panders to the sin in human kind. Socialism fails because it asks man to rise above the flesh and be better. But it takes very little to dissuade most people of the wisdom of this. People prefer to follow the bad example over the good.

If capitalism works, it is only because of sin and capitalism’s ability to justify giving free rein to some of our worst impulses.

Capitalisms argument is that men are naturally selfish and so we need to accept this and try and benefit from it. This is not true. Not all men give into avarice. Study after study have demonstrated that in any organization of free persons 80% of the work will be done by 20% of the people. This is a very stable phenomenon. In capitalism it is this 20% that steps up to the plate and fills in the gaps where paid renumeration is not possible. Without this socialist 20% capitalism would have collapsed into chaos many years ago. Greed is really not a sustainable foundation on which to create a society. So yes, capitalism really does work but only because 20% of the population are socialists and see to it that the need for volunteers and charities and that extra effort that goes unrewarded is done.

But, 20% of the population cannot create a society and when socialists attempt to take 100% of the population and give it a socialist base 80% try to freeload. If they cannot exploit the system and take more than their share they prefer to dog it and take more than they earned by doing less than the rest. Socialism becomes a contest to see who can do the least for the same level of renumeration. This is why communist countries fail to succeed in the way capitalist nations do.

We know capitalism succeeds because it unleashes greed and yet gives socialists an outlet for their charitable inclinations. On the other hand, socialism fails (lets be honest) because it legitimizes the empathy and generosity of socialists but does not hinder the other 80% from taking advantage of the more charitable segment.

So, socialism fails not because it is inherently bad it fails because mankind is inherently bad, just as capitalism tells us. The 20% who are virtuous or try to be; overcome the weakness of the flesh and rise up to a condition that is not reflective of the natural state of mankind. Let’s be honest here, if being empathetic and charitable was natural socialism would work and capitalism would be shunned.

The only way socialism will work is if we encourage the less moral to rise up to the level of virtue a socialist exhibit. This is going to take more than educating the masses on the merits of moral justice.

In capitalism those with higher education practice as doctors and obtain large salaries, those with access to the technology and capital build medical labs and drug companies so as to profit from the demand for medicines and medical procedures.

Socialists line up to volunteer at hospitals and blood clinics, so costs can be kept lower, and the medical profession can operate within the parameters that allow the poor access to medical care. This simply illustrates the problem socialists have. Capitalism works because socialists support the capitalist model even when they do not agree with it, whereas socialism fails because capitalists do everything they can to bring it down.

Because socialists have never fully analysed why capitalism works they have never established an effective response against capitalism and the greed of man. We can rail against the injustices of the capitalist system, but we are railing against those who see greed as a moral good. We may as well be critical of sprinters for running fast.

But, lets be clear here about what is being said. Capitalism works because it rewards one of the most powerful lusts mankind has, that of greed; aided and abetted by one of the highest moral virtue’s mankind is capable of, the virtue of charity. What must also be recognized is that competition of any kind rapidly devolves into a survival of the fittest scenario. Greed unfettered likewise must ultimately create chaos. The argument capitalists make is that the free market imposes a degree of civility on Capitalism. If a certain degree of concern for others is not manifest the market will turn against the seller and cease buying from him. But, this is a disingenuous if not downright dangerous argument. Think of a meat plant that is unregulated. What is the mechanism of control, considering that the market is said to have only two factors, supply and demand. If a supply of hamburger is tainted how is demand decreased other than the death and sickness of customers? If a ferry boat over loads how is demand for its service reduced except by sinking?

The drug business is governed by supply and demand. If supply is limited the price goes up and if the supply increases the price goes down. This includes alternatives. So, a greedy supplier may well lose business if there are alternatives available to the customer but the more difficult it is to be supplied with alternative sources the more the customer will be willing to pay and the more harm he or she will endure as a part of the costs they pay.

If an island has only one ferry to service, it the customer will put up with a lot and indeed to some degree with see his or her status as a customer something to be protected at all cost.

How many businesses are sheltered from the full impact of an owner’s policy by workers concerned about the needs of the customer that even cause them to risk losing their job and oppose the policy of their employer?

This then is the problem; how does socialism stop sheltering capitalism and start looking out for its own best interest.

In other words, how can we be more like a capitalist and look out for our own best interest without compromising the tenets of socialism?

Socialism is first and foremost the belief that the means of production ought to be owned by the worker. However, this was never really explained in the sense of how this was to be achieved. The only ownership we understand is the legal kind and all law requires a legislature which invariably turns out to be the state. This poses something of a problem for socialists. Capitalists tend to be unfriendly towards the state. By linking socialism with state intervention in the economy socialists create a steep uphill gradient for winning converts from the right.

But this is not the end of socialist’s problems. Socialism is not just community ownership of the means of production. It is a social system created in response to capitalism. Instead of being motivated by profit, socialist economies are geared towards satisfying the needs of people. This means that the society is not all about producing goods and services. Socialism is a way of living in which there is a deeper concern for the quality of life. But this production of goods and services for the satisfaction of needs requires organizing the means of production towards the actual needs of society, rather than artificially generated wants. This is easier said than done. How do we determine how many shoes of each kind to make; not to mention all the many other goods and services society uses that need to be produced?

There is always an infinite amount of needs, even in a community directed towards sustainability or low impact living there are always questions about the allocation of resources. Even to questions about what temperature to heat houses and how many hours ought to be dedicated to each activity.

With capitalism the owner of a facility makes all the choices, either directly or by proxy through a manager. Politics and religion both attempt to replicate this situation one with leaders and party’s and the other with ecclesiastical authorities. But the transition was never effective because the owner of a business owns the resources he allocates and redistributes. Priests and politicians do not own the resources they allocate, and these assets are not earned by them either, so the choices are not of the same quality. This is the elephant that haunts socialism. We may say the community is owned by the residents but if the citizen can dump garbage in an alley and have the mess and the bill picked up by the community then he or she is not in the same situation as a person who has to pay personally for garbage removal.

This problem is not unknown to capitalism where it is called externalization of costs, but the bulk of a business’s choices are contained within the economics of the business.

The business has a certain amount of money coming in from sales and a certain amount going out as expenses. Business owners are forced to prioritize and do it sensibly or be out of business. Socialists may not like the greed that motivates or constrains capitalism, but it makes everything so much simpler. Owners either do what makes money for the business or they go broke.

Socialism has all too often regulated ownership to politicians and politicians either directly as in nationalization or indirectly as in communism. However, these kinds of proxy ownership do not put the political leader in the same position as a capitalist. State owned enterprises cannot go bankrupt, but they can bankrupt a nation.

The nature of proxy ownership shelters a politician from any direct impact their choices might generate. The impact of a state-owned enterprise is downloaded onto the community as a whole. By virtue of being typological managers, politicians have no standard to adhere to or to answer to. They have no quantifiable method by which they can judge the success of failure of their actions. Compared to the position of a politician managing a nationalized corporation the free market is a paragon of efficiency.

There are various indices used to measure the health of an economy, but their very number suggests their relative impotence as guides and irrelevance as standards. Gross market indicators do not substitute as a serious impediment to groundless responses to random stimuluses. Politicians are always free to make any decision they wish and dredge up some justification from the numbers available to them.

Thus, there is always substantial amounts of waste when it comes to nationalized businesses and no real way to even know what constitutes waste. The standards just do not exist.  Is a decision a foolish waste of resources or just a usage of resources that one does not agree with? There is no objective method of knowing which it is.

One of the main reasons why capitalism works is not just that it panders to the worst and more insidious of human sins, avarice, but that it does this in a very simple and direct way. Greed, in business terms, translates into profits and profits are easily measured in terms of dollars and cents. After all is said and done and all the claims and counter claims made a business is able to sit down and develop a year end Balance Sheet. These business reports clearly set out the amount of profit gained for the money spent, so the business owner can determine just how efficient he as a business owner is. If there are issues with the numbers, the issues pale in comparison with the guideline’s governments must work with. No politician gets such a clear evaluation of his governance. If we see each dollar as a choice made by the business owner and each cent of profit as a percentage of the dollar assigned, then the business owner can view the rate of profit as a quantified measure of his business acumen.

Is this provision of what is a moral standard defining right and wrong, not superior to anything socialism offers? Socialists will say they have helped a large number of families out of poverty through their programs, but capitalists will say the same thing. But capitalists will claim they did this through creating wealth, not simply redistributing it. Indeed, there is nothing a socialist can say that a capitalist cannot, rightly or wrongly, repeat. Capitalism does lift people out of poverty. The fact that there are huge disparities of incomes under capitalism, can be explained away by the fact that the business owner owns the company and seems to have a right to claim whatever share of the profits he wishes and still operate a successful business. Most capitalists will also claim these profits are used to create more jobs.

Socialism is especially weakened by needing, it seems, capitalism to create the jobs and wealth to redistribute it. Yet, we cannot say this without reminding the reader that without some redistributive mechanism capitalism would likely devolve into revolutionary chaos.

To summarize the situation as it stands, capitalism works because it is highly focused on a measurable index that clearly defines the level of success a business achieves. There is not much a socialist can say that cannot be repeated by a capitalist with the rider that capitalism does this without the need of government interference in the economy. The death blow comes with the claim that socialism is only able to redistribute the wealth made by capitalists.

However, we are not saying capitalism works in an objective sense. It works in terms of the index’s it uses. The profit motive is as said a moral standard. Profits are good and loses are bad. Because socialism and regulations generally lower profits they are by definition bad. Socialists have not invalidated these measures of good and evil capitalism has developed nor developed any of their own or none that are comparable, Capitalism has managed to dominate the economic field. Nothing written by socialists replace the observations we make regarding how the economy works, on a daily basis. Capitalism works because it is the process making the money. The fact that this happens partly because socialism or socialists’ policies provide a stabilizing function dos not disprove the argument or invalidate our day to day perceptions. Indeed, if the worst thing that can be said about capitalism is that it has the support of its most serious opponent what more need be said about the power and success of capitalism?

Now, we can say socialism needs to stop propping up capitalism, but realistically it cannot do this without first replacing capitalism. Socialists need to develop an alternative measure of success to the profit motive. It not sufficient to counter greed simply by blocking it. We need to empirically demonstrate the superiority of the socialist model. To do this we need more than narrative and hyperbole and political posturing. Most of all we need to admit capitalism has been more effective, both in generating wealth and in promoting its way of operating an economy. Until we do this socialist will remain incapable of developing an alternative economic model.

We need to understand that in looking at the strengths of capitalism we also expose its weakness. It is a major point of the discussion that in being too focused on the weaknesses of capitalism Socialists have failed to address the real issues.

Capitalism is dependent on mankind’s greed at the low end and on mankind’s ability to rise above the flesh and do what is right even at the expense of their own best interest, at the high end. The state that capitalists reviles offers a cocoon of legislative protection. Its ownership model is based on the legitimization function of the state. Yet, libertarians argue the existence of the state imposes costs on the economy and lowers efficiency. It does but these costs are what pays for compliance from the dispossessed. This reliance of the stabilization activities of the state cannot be used by socialists because socialists are dependent on the state to act as a surrogate owner of the nation’s resources. In many ways then this left/right divide is largely a matter of accentuating one feature more than another?

In capitalism the free market is given more free play and in socialism the charitable tendency is promoted but neither is missing, and both are always present regardless of the system we say we support or live under.

The interesting thing about this is that socialists tend to attack the free market and capitalists attack the charitable desire to help others, and if the state is mentioned it is more about pandering to either the free market or the charitable desires of socialism. The capitalist does not want to see the state vanish it just wants it to stop helping the poor.

To understand the solution, we need to stop looking at the two systems as discrete ideas and look more closely at what they have in common, which is the state.

What we see is that what the state does is impose itself onto the basic economic function, the relationship between the buyer and seller or what is known as a rational exchange.

A rational exchange is a transaction in which both buyer and seller equally benefit, and neither would change the terms of the transaction even were they privy to absolute knowledge.

This exchange is common to both socialism and capitalism. Part of the issue of socialism is that labour is not given its fair share of the production. Capitalism admits this might be true in some abstract sense, but capital has to be accumulated if new investments are to be made.

Indeed, the foundation of capitalism, its moral justification, is the time and effort it takes to acquire capital, this is the same reason professions use to justify the income those with a university education enjoy.

But, lets say we paid students to become doctors. If society choose the students proven to have the aptitude and desire to be doctors and hired them, in fact, to become doctors would they have any legitimate reason for demanding excessive pay rates? I say no. If businesses were no longer started by individuals using capital created by delayed gratification would there be the need for returns on investment? In fact would there be any need for profits or capitalists?

The whole argument justifying greed disappears.

Profit is supposed to compensate capitalists for the investment in capital and for the risk he or she experiences by investing this capital in an enterprise which could fail. But what if there was no risk? Why would there be a need to compensate people for a perceived risk if it was demonstrated there was no risk? But can society eliminate risk and indeed the need for capitalists willing to delay consumption in order to invest in a business?

The justification for profit is based on a lot of erroneous assumptions. These assumptions are in turn based on a very deep misconception.

When mankind originated we had personal ownership. There were no businesses and so there was no need to morally justify one’s position as regards capital. One might make a bowl or spear or kill an animal or reap some food stuffs and this belonged to you. The ownership might be contingent in that acquisition might simply give you the rights of allocation. What you got was shared with the tribe or/and family. But you were credited with the gift and could expect recompense at some time in the future.

Even when mankind became an agrarian homesteader the finding and cultivating of land was still basically on the level of the individual producer. If more was produced than was needed it was traded locally. Perhaps money was used but more likely than not credit was utilized.

The issue of ownership always existed but it was not until capitalism came into vogue that the true nature of ownership became something that generated moral injustice.

It is a key pillar of capitalism that a capitalist has a right to a share of the proceeds because he or she invested capital into the enterprise. In this thinking the laborer invests time and labor and the capitalist invest capital.

But lets take an extreme example and say a pool of oil is discovered. Only one person has any capital and so purchases the licence to drill for a small sum of money and hires the local residents to work the drill. A large pool of oil is found, and the capitalists reaps billions of dollars whereas the laborers are paid a basic rate and after 40 or so years are forced to retire with little to show for it.

How is this just? Because the other villagers were a few dollars short they end up doing all the work for next to nothing and one man because he happened to have a few surplus dollars turns this small investment into a king’s ransom?

For capitalists this is just the breaks. It may not seem fair but that is how the market works.

But think carefully about what happened here. Fred, the capitalist, has a few extra dollars and so purchases a licence to drill oil.

Why was the licence needed and if needed why was it sold to one person? What dictates that a licence has to be sold to an individual or paid for using domestic currency of bank debt. Why couldn’t that government sell the concession to the town for a 1% share of the profits?

Alternatively; why has the government the authority to issue licences for something they have no intrinsic claim to?

To give a right or licence on has to possess the right or claim initially. Unless we are going to subscribe to a might makes right philosophy where does the state get its right to assign charters and permissions to private parties? The system works because we have all agreed to it. Yet, even if this is so what does an agreement mean if there are no other choices. We agree because to do anything other than agree will result in serious repercussions. Thus, the system is by definition fascist. We are free only so long as we abide by the parameters set up by the state to define and subscribe our freedom. We can have private property so long as we go through the proper procedures of obtaining property.

But let’s kick this back a stage or two. In a rational exchange two people transact business. Within the confines of a single transaction you and I agree the arrow head belongs to you and the bear skin belongs to me. We agree because to disagree is not rational and produces no benefit. We agree because this is why we engaged in the exchange of arrowhead for bear skin.

Lets assume you have now killed a deer. In one sense the deer belongs to you but in another it is community property. It is thought of as community property because you cannot eat a whole deer and because you want to insure yourself against those times when you fail to find meat. So, you share the meat with the rest of the tribe. This prevents the meat from being wasted and buys you security from those periods when you are unsuccessful.

Lets say we move into agriculture. We each have our plot that we till and seed and harvest. However, with grain the processing is time consuming and best done as a community effort. So perhaps we combine our grain fields and we all plow, plant, reap and process the grain together. The community sees each person does their share to the degree they are able. The community assigns jobs according to ability because each person knows what each other can do.

There is mutual dependence. The individual cannot survive without the community and the community needs all of its members to thrive. So there is mutual cooperation. The accounting is informal. Each person does what they can and receives an equal share though a single man will of necessity work as much as a married man and receive less in proportion to the share received by the family of a married man.

The village looks after its own because in the end it is the community that is the real economic unit not the individual.

Personal ownership is based on the individual person, but this has led to a misconception. There is no such thing as personal ownership in reality. What we own is part of the family and to some degree possessed within the family unit. The family is invariably part of a larger conglomeration called a community but might be better seen as a social network as a community can be too large to be considered a uniform body. A social network is those people to whom we are connected with.

They can be considered people whom we have accounts with. They help us and we help them and we maintain a set of informal books that tell us what we have done for others in our network and what they have done for us. We know who we owe and who owes us, which allows us to call in favours and which allows others to ask us to make good on the debts we owe.

Our house, car and other assets belong to us but on the other hand if a friend needs a ride or somewhere to stay they feel free to ask for a ride or a place to stay.

These are not likely to be things people outside of your circle are likely to ask.

Capitalists take this idea of personal ownership and transpose it onto a pipeline, waterfall, factory or a whole range of licenced rights and claim your socks and Fred’s 3 billion stock portfolio are substantially the same.

Socialists know owning a camera and owning Facebook or twitter are not comparable. A lemonade stand, and Walmart are not equivalent in any sense of the word. To understand this, we need to revisit the maker of arrowheads and the dilemma of ownership.

We own what we create, this is a universal and unassailable principle. It is true only because the inverse is also true, we do not own what we have not created. The exception is that which has been bequeathed to us by the owner.

Why is this even important? If true it renders null and void a materialist-based model of ownership. It may seem obvious and inarguable that you own your car and house and socks and so on but think about it. No matter how much labour and design went into these things they are made from natural resources, none of which humankind has had a hand in producing. Irrespective of if one believes in God and Creation the reality of this cannot be denied.

You may deny God but that does not give you or anyone else the right to claim you own a tree, or forest for example.

While we can and do ignore this issue when it comes to food and clothing and shelter when it comes to issues such as who owns a waterfall a lot of heretofore problems surface with a vengeance. We do not care how much money Mr. X paid to get a deed to the property, we the people who live beside and who enjoy the waterfall veto any and all claims by any individual or state to modify or reassign this public good.

Where do we get this right from and why do we not all fall in line behind what the state says is so, when all of our personal property is said to be of a similar nature?

We know in our heart that the conventional teaching about ownership is flawed. For day to day transactions the issues are minor and can be ignored. When it comes to significant resources such as a waterfall or forest or river the conventional errors loom large and cannot be left alone. But we need to reconcile the distinctions and come to a better understanding as to what ownership is.

Understanding that we do own what we create solves one issue, if gives us a foundation to work from, but it also brings another issue into focus. If we own what we create what do, we do about that portion of all we create that belongs to the natural world? A design we imagine is 100% ours because it is totally conceptual. Even when put on paper the design can still be said to belong to us. When we build a building or other structure the design remains ours but what of the brick, mortar, wood and so on that went into the building, who owns this?

So, far as the labor goes we can concede that labor is created by the worker. The worker is worthy of his wages. People ought to be paid for what they do. This is their contribution to the total project. This gives us a way to make another step forward. The design is a created object, but it is also a piece of work done by the designer, so as a designer he or she deserves being paid for the design.

Thus, we can fashion a labor theory of value (LTV). All work deserves to be paid and all work consists of value added to a natural resource.

If we think about creation as adding value to what already exists it gives an entirely different way of looking at ownership. In a family the members help one another. This adds value in that it makes the family more efficient. This can be more clearly seen in a tribe which to some extent is really an extended family.

If we see the tribe as an economic unit what each member does adds value to the resources available to the tribe. Members do not get paid directly, the accounts are informal, the meat shared today is matched by meat shared tomorrow by someone else. All members of the tribe contribute something to the upkeep of the tribe, thus in an informal sense the accounts of the tribe are kept in balance. The tribe can then be look at as a kind of economic unit of business.

The social network operates in much the same way. We do not think of it but the informal accounting of a network makes it into a kind of business. We can then transfer this kind of thinking to what we more normally see as being a business.

The individual is not the social unit, this is an error that previous thinkers have consistently made. A single human cannot maintain his humanity nor be effective. We are social creatures. The social network or what is called a church in other contexts is the true social unit. Ownership has been put into the hands of individuals because we think private capital ownership is the same as personal ownership. But we have seen personal ownership is a fictitious concept though a fiction that for the most part can be ignored. When it comes to personal ownership we can pretend we have absolute authority over what we have.

But this kind of sloppy thinking cannot be transferred over to capital. It is those who possess by their presence who own the capital of a place. Ownership then is the right of possession. Social ownership is ownership based on possession.

This does not explain how possessions become capital or how personal possessions are turned into the assets of a business.

In conventional economics an owner of an asset simply uses it to make money. Socialists do the same thing but with a slight twist. A capitalist simply assigns what was private to business use, for example a car becomes a taxi. Time spent on private pursuits is turned into time spent on making money perhaps doing the same thing that was a hobby but has now become a money-making enterprise.

It may not matter much in the grand scheme of things if a private motor car is transformed into a taxi or other personal goods and skills become a way to make money. But what if five people want to star a taxi service with 2 cars? There remains the problem of ownership of the resources that go into making of the capital but a bigger problem is how to allocate work and earnings in a fair way? The capitalist solution is for one person to own the cars and hire the others as drivers, paying them whatever he thinks is a fair wage. Communists would do much the same thing only they would nationalize the cars. The state would own the assets and they would pay whatever the state thought was a fair wage.

Socialism needs a better response based on true social ownership. In this example it is the five persons who will operate the taxi service who represent society. They are the owners of the business. But how does the capital represented by the cars become turned into capital?

Anything owned by the partners that will be used as part of the business is sold to the business. Localists do not use conventional currency. This is because conventional currencies are not owned by society. In the capitalist system currency is a private asset owned by banks.

 Socialists cannot entrust the creation of money to banks nor to the state. The creation of money has to be retained by the people, for the people.

Money is just a standard of measure in the way a ruler or odometer is. Dollars measure a unit of value which is, as with all measures a random unit defined by humans. It’s a conceptual unit in the way inches and pounds are.

The problem with money as presently conceived by capitalist economies is that money becomes defined by a circular process. A dollar is worth what a dollar is worth. The unit of account measures the unit of account. So we have currency trading in which one currency buys another and in fact one can by one currency with the same one if a delay mechanism is employed as to when the purchase is finalized.

Money is created by labour, that is by the Labor Theory of Value. When labor produces something of value that labour is paid for with units of account. This eliminates the need for banks and state printing presses. It also eliminates the need for gold and silver caches to back currencies. Currency in the socialist economy is backed by labor.

Under capitalism a person’s work is validated by a person with property. As a property owner you can hire someone and determine how much their work is worth to you. If you did not have the ability to acquire property, then you lack the means to hire anyone and determine their value.

In socialism a person is paid for the value they create for the social unit. This is in accordance to the LTV.

Socialism needs a clearer understanding of society. Society is not the totality of all human kind. Nor can it be an individual. Society is a social unit, a unit of society, a group that is socially viable, this could be as few as three or so people and as much as twenty but 7 to 12 is a more likely number. It is not the precise number that is important but the purpose of the group and the number of persons that are best able to fulfill that purpose.

A social unit is what some might call a business or component of a business. A social unit is defined by those who work together and interact to achieve a specific aim, thus a social unit may serve a support function in much larger business or on the other hand may be a self-contained business such as an art gallery.

Those who wish to contribute to the business set up or capitalization provide assets of some kind, this could be goods or services, for which they are paid at a pre-agreed upon rate. They are paid with units of account created by the social unit itself and backed by the goods and services provided. Thus, if Bill provides 5 hours of work he is paid for five hours of work using the units of account established by the group. These units are created by the value produced by Bill’s labor as represented by the units of account or monetary bills.

These units of account give Bill a credit which he may then use to purchase goods and services from the group or other related groups.

Socialism when it comprehends why capitalism works is able to establish a more workable method for generating wealth. We only need to see that capitalism makes wealth largely by feeding off of the charitable impulses of socialists and socialism only seems to fail because of the greed of so many people. When we realize greed can be contained and neutralized socialism can find better ways to create wealth than the solution offered by capitalists.