What is the Difference between
Capitalism and Socialism?
By Larry Romanoff, October 18, 2019
Some
aspects of the American style of competition become more clear when placed in a
broader context, in this case the underlying socio-economic system, so let’s
take a quick look at the difference between capitalism and socialism. For at
least the past 100 years Americans have been taught to hate and fear socialism
and socialist governments, without ever understanding what they were really
against or why they were against it.
The
situation is not different today, where any mention of socialism produces a
flood of moral condemnation, yet few Americans could likely provide any
coherent explanation of socialism or an intelligent discussion of its many
presumed failings. Americans equate socialism with despots and tyranny, with
fear and hunger in a brutal military dictatorship, a testimony to the power of
propaganda and ignorance. US corporations were in the vanguard of this
propaganda onslaught, but it was heavily supported by the government and media
and, certainly not least, by the educational book publishers and America’s
schools and universities.
For
a century, US corporations, government agencies, and the media, filled the
minds and hearts of Americans with fear of socialism and, having stoked that
fear, defined for them the signs of socialism to be avoided at all costs. These
signs included the government fulfilling its responsibilities in areas like
health care, social security and education and providing national needs like
electricity, transportation and communications, all presented to the people as
“giving up your life and letting the government run it for you”. Government
involvement in any segment of society or industry where big business and the
elites could make a profit was defined as either socialism or communism and
therefore treasonous to the basic religion of multi-party political
Christianity.
The propaganda
was so powerful that it became virtually impossible for an average American to
be a Christian socialist or a believer in both democracy and social security,
or to be any of these and simultaneously against big business, free-market
capitalism or privatisation. To have an American identity is to accept all
chapters of the Bible of Freedom. One cannot pick and choose which of God’s
laws one will follow. Ideological uniformity is a prerequisite for those living
in a black and white world and practicing an all-or-nothing religion.
The
brainwashing begins early in life, in elementary school, long before children
have any ability to discern the merits of government or social systems. In
fact, American children are prevented from ever obtaining that ability by a
pre-emptive educational system that puts the lie to any claims of freedom or
critical thinking. Consider this example from an American elementary school
book: The question posed is “Which of the following goes with socialism?”, with
the student offered three possible answer choices:
§ A
Political system in which a dictator rules, and there are no freedoms.
§ An
Economic system in which the government owns the big businesses.
§ An
Economic system in which businesses are privately owned.
Of course, the
correct answer is “none of the above”, but
in American schools the first two evil choices are the only correct answers,
small children learning very early on that private-enterprise capitalism is the
only way to fly, socialism not only to be avoided but to even explore that
system is equated to seeking information on Satan worship. The doors to these
little American minds are firmly slammed shut very early in life, never to be
opened again, an integral part of their political-religious indoctrination. The
false tenets of American capitalism are given vast prime-time exposure, again
closing the little minds forever to any understanding of what they are for or
why they are for it.
In terms of
political systems, ‘democracy’ is a misleading expression since Americans
bestow on it a multitude of meanings, a kind of political-religious bubble-wrap
that serves only to smoke up the room. We should all feel sorry for democracy,
this one word carrying on its back the heavy load of almost the entire Oxford
English dictionary. This poor little noun, descriptive of almost nothing in
particular, has been saddled with so many unrelated and irrelevant connotations
that it should have collapsed from exhaustion or misery centuries ago. One
female American of my acquaintance insisted that her pet’s right to dog food
was a ‘human right’ and therefore included in the definition of democracy. So
let’s dispense with this term and go with ‘capitalism’ and ‘socialism’, which
are opposite sides of the same coin, neither related to the prevailing form of
government, and which can exist happily in a democracy or a kingdom, or any
other kind of government. Neither capitalism nor socialism are naturally
antagonistic to democracies or kingdoms. Nor to dictatorships, for that matter,
but let’s not muddy the waters.
A capitalist political-economic system is what exists
in the US, an essentially unregulated free-market system where the elites and
their large corporations dictate government policies and the human environment.
Society exists to serve the capitalists whose interests take precedence over
those of the people, the government blessing these interests with supporting
legislation, taxation (or lack thereof) and import tariffs. In any conflict
between the best interests of the corporations and those of the people or
society as a whole, the corporations will win and the people will lose.
Before we go
further, let’s look at a live example, that of mobile phone service. China, a
socialist country, has the best mobile phone service in the world, while the
US, a fiercely capitalist country, has the worst, the most dysfunctional, and
certainly the most expensive. Canada is probably second. Let’s see why.
To buy a
mobile phone in China, you go to any one of thousands of shops in your city,
each selling hundreds of different brands and models of mobile phones, and
negotiate the best price you can get for the phone you want. At the same time,
you get a SIM card (about $3.00), which contains your phone number, network
connection authorisation, and some free air time. You insert the SIM card, turn
on the phone, and begin making calls while still in the shop. That’s the whole
process. Except for the SIM card, it’s the same as buying a toaster. You can
choose from various phone companies to provide service, but everything is the
same, and you can change phone companies without changing your phone or your
number. If you buy a new phone, you simply insert your old SIM card and
everything is as it was. You can purchase a second (or third) SIM card and have
different local numbers to use in different cities, if you want to do that.
For sure one
of the best features is that the entire country is wired, even in remote
locations. I was recently on holiday in Inner Mongolia and could happily send
photos on Wechat while riding my camel in the desert. And it isn’t only China
itself, but the entire Asian region that is seamlessly connected. I recently
called a friend in Shanghai to invite him for lunch, and he said, “I can’t. I’m
in Vietnam.” If anyone from anywhere in the world calls me, the system knows
where I am and my phone rings. I never have to think about service provider
compatibility, roaming, and all the other restrictions that exist in Canada or
the US. If I travel to Beijing, I receive a text message welcoming me and
telling me my calls are now local calls. In nearly 15 years in China, I could
count the number of dropped calls on the fingers of one hand. The system also
monitors abuses, presenting warning notices upon receiving a call from a number
reported to belong to telemarketers or telephone scam operators. As well, the
SMS system is used very effectively for some kinds of public notices like a
simultaneous warning to 100 million citizens of an approaching typhoon.
Phone calls in
China cost about $0.02 per minute, and SMS messages are the same for sending;
receiving is free. The typical monthly cost for a smart phone in China,
including heavy internet usage, is about $15.00, compared to around $200.00 in
the US or Canada. In China, one can buy a mobile hotspot for about $40, with a
monthly cost of about $10 for many Gb of downloads. In the US, a hotspot must
be rented (at around $50.00 per month) with a monthly cost of another $50.00
for equivalent usage. The cost disparity is not primarily from lower wages, but
that the mobile phone system in capitalist countries was not designed for the
people but for the mobile phone companies, resulting in the network and
frequency fragmentation, à la carte menus, high costs and poor service. China
recognised that rapid communications and transportation were vital to
increasing economic development, some estimates claiming China’s GDP is 15%
higher than would otherwise have been without its current mobile phone system,
and another 30% attributed to its nearly universal rapid transportation.
Capitalist
countries continually preach the benefits of competition, which is touted to
provide lower prices and better service, but it doesn’t seem to do that in the
case of the US or Canadian mobile phone market. With real competition, every
phone company would be fighting for business, offering lower prices and better
terms, but in real life the few companies instead collaborate to keep prices
high and prevent customers from escaping the trap. It is from the
American-style competition that users will pay $500,000 and spend ten years in
prison for unlocking a phone. In China, all phones are unlocked. The only
reason to lock them is to prevent competition.
Health care is
the same, designed in China as part of the necessary social infrastructure to
provide the most good for the most people. Canada’s (also socialist) is
similar, where most everything is free, financed by general tax revenue and
operated by the provincial governments as a necessary social service. No
for-profit hospitals, no insurance companies, no denied claims, no refused
treatments, no dying in the parking lot. With the capitalist US system,
Americans have unlimited competition that should give them low costs and
two-for-one surgery specials, but it seems worse than even their mobile phone
market. Let’s look at a few examples. An ECG is a commodity, done with
inexpensive equipment essentially the same all over the world. In Shanghai, an
ECG costs about $3.50, while the average cost in the US is $1,500, with some
hospitals charging as much as $3,000. A full-body MRI scan costs less than
$50.00 in Shanghai and other major cities, but between $4,000 and $6,000 in the
US. Hospital stays in the US typically cost on average forty to fifty times
more than in China. A 3-D MRI-style, 360-degree dental X-ray costs $3.75 in
Shanghai and $350 in Washington DC. Education is similar. China’s excellent
universities charge tuition fees of about $1,000 per year, graduating ten
million debt-free students each year, in contrast to $30,000 per year and many
tens of thousands each in unrepayable debt in the US.
It is due to
the US government’s corporate socialism – fascism, in other words – that
protectionism has always been a major factor in the economy, not to protect the
people but to protect the corporations. This is why the US has so often levied
high duties on imported goods, regardless of the cost to the population or
damage to the public good. Protectionism
is just corporate welfare programs, with special interest groups using the
force of government to benefit themselves at the expense of the population. American
consumers inevitably lose from these measures but are usually unaware of what
is being done to them. A typical example is a tariff on foreign garments, which
not only makes foreign goods more expensive but permits domestic companies to
substantially raise their prices. With high tariffs to protect domestic
manufacturers from lower-cost Chinese imports, 300 million Americans were
paying $20 more for a pair of blue jeans so that two or three influential
domestic companies could earn an extra billion dollars in profits. There are
many dozens of these examples, in apparel, automobile tires, solar panels, food
products, where domestic consumers were overcharged by billions of dollars only
to protect the profits of a few friends of the administration whose companies
and products were uncompetitive.
US free-market
capitalists are pushing to dismantle the last remnants of all social programs
in America, including pensions, unemployment insurance and education. When the
capitalist government no longer provides those programs, Americans will then
have to purchase them from the same 1% who provide their mobile phone system
and healthcare. This transition is now nearly complete, a virtual takeover of
the entire social and physical infrastructure of the country, leaving the
government only two responsibilities – tax collection and population
suppression. The entire world is being forcibly steered in this direction, the
formerly proposed TPP being one indication of the viciousness of globalised
capitalism.
It
surprisingly doesn’t appear widely understood that socialism is primarily just
a concern for people, for society as a whole, instead of for individual and
corporate special interests, but again socialism and capitalism are opposite
sides of the same coin. Hidden in this is the fact that the US is an extremely
socialist state, with the most fiercely socialist government of any country in
the world today. The only qualification is that a country like China is what we
might call ‘people-socialist’, caring primarily about the welfare of the people
even at the expense of the banks and powerful corporations, while the US is a
‘corporation-socialist’, caring primarily about the interests of big business at
the expense of the people. But everything else is the same. In terms of
“nanny-states”, China baby-sits the people while the US baby-sits Goldman
Sachs, J & J, and Wal-Mart. Because of the globalised, unregulated,
free-market capitalist system, the US today nurtures and cares for its big
corporations, bankers, and the top 1%, while the people live on the streets in
San Francisco and in the sewers under Las Vegas. It would be unquestionably a
better US (and a better world) if the bankers lived in the sewers and all the
people still had their homes.
And this is
the difference between capitalism and socialism. There ain’t no democracy here,
no human rights, no religion, no dog food. It’s just about who gets your money.
Three
Brief Case Studies in Socialism
1. When I was
a university student in Canada the domestic banks hatched a scheme to convert
the entire nation’s student body into a life of more or less perpetual
financial servitude, this time with credit cards. Eager to take advantage of
rising middle-class incomes and the natural naivety of young people, the banks
obtained, most likely through bribery, lists of all Canadian university
students and sent to every student in the country a free credit card – without
request or application – most students receiving several such cards in the
mail. The result was instant financial chaos. Few young people have the
experience or good judgment to sensibly manage apparently unlimited credit, and
countless tens of thousands quickly found themselves in dire straits, with
heartbreaking stories of unpayable debts and many students having to abandon
their education from the brutal pressures of the banks’ collection agencies. A
great many careers were derailed and some lives ruined, but the banks’ profits
were enormous.
Parents,
social agencies, various government departments railed against the banks with
evidence of this social disaster, but to no avail. And then, in what may be the
only surviving example of a Western government actually acting to protect its
people from the rapacity of capitalism, Canada’s Parliament passed a law that
any credit cards received without specific request and formal application could
be used to the maximum, ‘free of charge’, with no responsibility for repayment.
Unsurprisingly, existing cards were immediately cancelled, the flood of new
cards died instantly and student life in Canada slowly returned to normal, to
the great chagrin of the banks who moaned for years about the “dirty socialist
trick” played upon them by their own government.
2. Xi’an
is one of China’s loveliest historical cities (think Terracotta
Warriors), where we find a school with one of the finest campuses in the world,
hectares of green grass, an Olympic-sized swimming pool, flower gardens, lovely
condominiums and townhouse residences for the faculty and students. The school
was built with surplus profits of a local state-owned tobacco company that
wanted to give something to the community. The firm not only built the school
but pays the annual operating costs. Such an attitude from a corporation leaves
Westerners speechless. A similar example is China’s State-owned enterprises
using their excess profits to build low-cost residential housing. The Americans
raise every manner of moral and philosophical condemnation of such practices,
virtually claiming it is against the will of God for a corporation to provide
social goods at cost when an American firm, if permitted into the arena, could
reap billions in profits.
3. In early
2016 the world metals market was saturated, aluminum companies in most
countries experiencing large losses. China was suffering as well, even with
high production efficiency and costs lower than most. One of the country’s
major aluminum smelters was concerned that curtailing production would mean
thousands of layoffs in Gansu – one of the poorest provinces in China – with
corresponding pain to families and damage to the provincial economy. A
compromise was reached where the company took some of its capacity offline
while the provincial government reduced the smelter’s electricity bill (a huge
cost in aluminum production) by 30%, and the smelter and all the jobs were
saved. That solution should have earned
praise for both its practical and humanitarian elements, but Brian Spegele and
John Miller, writing for the Wall Street
Journal, blasted China for “continuing
to prop up its ailing factories” and
insulting the god of capitalism by the immorality of “keeping these zombie
companies alive”.
Worldwide
aluminum capacity needed reduction, and the US wanted China to take the fall
while American smelters remained open, but it was the American smelters that
qualified as ailing zombies, US aluminum production being grossly inefficient
and expensive. China’s aluminum production doubled from 2005 to 2015 while
being strongly profitable, while the number of smelters in the US fell from 23
to 4, a clear sign of inefficiency, high cost and lack of competitiveness.
But let’s not lose the main point which is that a
major Chinese corporation and a provincial government both accepted temporary
revenue losses for the sake of protecting the people and their jobs. It seems
to me the world could use more of this brand of immorality.
*
Mr. Romanoff’s writing has
been translated into 32 languages and his articles posted on more than 150
foreign-language news and politics websites in more than 30 countries, as well
as more than 100 English language platforms. Larry Romanoff is a retired
management consultant and businessman. He has held senior executive positions
in international consulting firms, and owned an international import-export
business. He has been a visiting professor at Shanghai’s Fudan University,
presenting case studies in international affairs to senior EMBA classes. Mr.
Romanoff lives in Shanghai and is currently writing a series of ten books
generally related to China and the West. He is one of the contributing authors
to Cynthia McKinney’s new anthology ‘When China Sneezes’.
(Chapt. 2 — Dealing with Demons).
His full
archive can be seen at https://www.moonofshanghai.com/ and http://www.bluemoonofshanghai.com/
He can be
contacted at: 2186604556@qq.com
Copyright
© Larry Romanoff, Moon of Shanghai, Blue Moon of Shanghai, 2021
