[12] Although socialism is often defined by socialists as "real democracy," it is in fact mobocracy, or the tyranny of the many over the few. To see why, let us consider an example.
[13] Imagine that you are factory owner manufacturing cars. Under communism, your factory would be confiscated by the dictatorship of the proletariat and its production managed by a centralized bureaucracy. The difference between a communist and a socialist, however, is that the socialist does everything in half-measures. Under socialism, you may well be allowed to keep your factory on the conditions that you do not earn an "excessive" profit and that you provide well-paying, spiritually-fulfilling jobs to your employees, allowing each of them a vote in all of your decisions.
[14] Recall that "fairness" is crucial to the definition of socialism and note that this term is defined through a societal lens. From a socialist perspective, it is unfair that you own the factory in the first place and your authority over your employees is seen as "exploitation," regardless of how well you pay them or how kindly you treat them. Socialists are only willing to allow you to maintain ownership because they balk at the prospects of workers mortgaging their homes for working capital or a dictatorship of the proletariat assuming direct control of the factory.
[15] Imagine that you decide to manufacture a new type of car. To do so, you will have to get the approval of your employees, who have little incentive to give you their permission without receiving anything in return. Additionally, you will have to get the approval of "societal stakeholders," such as the people who live in the same city as your factory who feel that more car production may increase air pollution and decrease their quality of life. Finally, you will have to incorporate into your designs the "helpful suggestions" of government bureaucrats, who exist to promote the social good.
[16] Of course, if the car is manufactured and no one buys it, you will personally absorb all losses. Nor will you reap any substantial reward from its success. You are essentially expected to produce wealth for everyone's benefit except your own, and far from receiving any thanks, to endure abuse and scorn in return. Would you manufacture cars under these conditions?
[17] Not many people would, and therein lies the problem with the definition of socialism; it provides no incentive for production, and it sacrifices individual economic freedoms for a vaguely defined "social good." Economic freedom is little loved by most people when corporate interests are concerned, but the same restrictions imposed on wealthy factory owners affect the single mother running a small catering business out of her kitchen.
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[7] Why is capitalism an informal system? A crucial part of the definition of capitalism is the idea of laissez-faire, a French term which roughly translates into "allow to do" or "leave alone." Capitalism is an informal system in the sense that it does not seek to impose answers upon society to the three fundamental questions facing all economies: What should we produce? How should we produce? And, for whom should we produce?5
[8] Capitalism suggests that rather than these questions being answered by kings, governments, or even well-intentioned central planners on society's behalf, these questions should be answered by you and I and every other individual in a free market. In other words, capitalism is simply what occurs when we are all left to our own economic devices; as a system, capitalism is characterized by the absence of formal systems. As Adam Smith explained, "All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord."6
[10] A more encyclopedic definition of capitalism would be of an informal economic system in which property is largely privately owned, and in which profit provides incentive for capital investment and the employment of labor. Capitalism is also the philosophy that the government's role in the economy should be strictly limited and that the forces of supply and demand in a free market, while imperfect, are the most efficient means of providing for the general well-being of humankind.
12] While profit is a word routinely pronounced with the negative emotion of a swear word in the modern political discourse, it is profit alone that provides incentive to undertake financial risk, such as the risk involved in starting a business.
[13] Incentive is the key word. Incentives matter so much that economists James Gwartney, Richard L. Stroup, and Dwight R. Lee begin a marvelous little book with the declaration, "All of economics rests on one simple principle: that incentives matter. Altering incentives, the costs and benefits of making specific decisions, alters people's behaviour."10 Where profits are denied, entrepreneurship and innovation are stifled and all our lives are the worse for it. Beneath the definition of capitalism is the realization that we are never so efficient and effective as when we pursue our own reward.
[36] While conservatives differ with one another on many individual economic issues, most modern conservatives agree that a free market is the sole path to prosperity for humankind. The idea of action without action appeals to the average conservative who deeply believes that government should not meddle in the fiscal affairs of the individual beyond its function as regulator and referee. But conservatives are not utopians, and they hold little hope for a world in which everyone is perfectly happy and everyone's wants are perfectly met; rather, conservatives view our economic options as a set of imperfect choices and regard capitalism as the least evil among them.
(This is from the website as well. While I didn't come up with this diagram, I definitely think it is right on the money)
Elaboration of the Political Spectrum
[10] Everyone disagrees about what the political spectrum should look like. In my own view, if we were to contrast the right wing vs left wing division on a diagram, it would look roughly like this:
conservative-resources.com
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