Tuesday, February 17, 2009

The five political economic systems

Since so many are confused by what are the different economic systems, here are my five political economic systems based on the three factors of production: land, labor, and capital.

Aristocratic: The economic system favoring land owners is one I call the aristocratic system. In this system, the legal system and government are created and administered by the land-owners. The laws are obviously crafted to benefit them and used to keep the vast majority of people working the land for a very small share of the production. One example, from which the name is derived, is pre-Revolution France where land owners were exceeding wealthy and granted titles while the general populous were peasants living to work the aristocrat's land. The early 19th century Southern US economy with the plantation owners and slave is another example, as it Czarist Russia with the lord-serf relationship.

Socialism: Socialism is the economic system where all factors of production are controlled by "the people," thus eliminating any specific land or capital owners and, therefore, all economic benefit goes to the labor component. Additionally, since all land and capital are now owned by everybody and everybody, in theory, works to their full ability, all production is split evenly between the people regardless of the job or effort put in.

Mercantilism: When the government creates laws benefiting owners of capital, such as factories, this is called mercantilism. Mercantilist systems have protective tariffs to discourage cheaper imports from competing with local production. They will also have export duties on raw materials to keep manufacturing costs low. Obviously helping producers, it hurts consumers through higher prices for goods.

Capitalism: Capitalism is the system whereby the government avoids any economic intervention and allows the three factors to compete freely. The term capitalism implies that this system benefits capitalists, exactly what Marx wanted when he invented the term. Now, we often call it laissez faire or free market capitalism to ensure that the listener understands that what is meant is a government that does not interfere with the economy.

Interventionism: Sometimes, the government will interfere in the economy with the goal of maintaining equilibrium between the three factors. This can come about in one of two ways. In the first way, political parties will each push their programs which counter each other. Party A passes a law benefiting land owners while Party B passes a law benefiting workers, thus offsetting each other. The second way is through sudden action. In the early 20th century, in order to combat socialism, the fascists gained control of many government. They created big government, not necessarily to benefit one party over another, but to stop the socialists from benefiting labor over all others. With intervention, we get a complicated system that generally evens out, though the result is a big cumbersome government. The government bureaucracy makes the economy less productive and the people worse off.

Look at the violence inherent in the system

Unfortunately, four of these political economic system lead to violence, as we have seen throughout history.

The aristocratic system creates an environment where land-owners fight for control over more land. More land equals more wealth and more production, so the competition to own as much land as possible is intense. Furthermore, if a land-owner gains enough land, he can become a lord or king, ruling over both the land in his possession and the people who live and work on it. Eventually, two or more kings will fight to create their own empire.

Socialism results in war wherever it appears. Right from the start, socialism requires the confiscation of land and capital from their owners. The owners of land and capital, not willing to give up their possessions, are thrown in jail, banished, or killed. Furthermore, this oppressive system must be maintained forever to prevent an intelligent and industrious worker from saving money and starting his own business. History has proven that socialism also results in international wars. Given that socialism requires internal violence, it is no stretch for that violence to applied internationally. The goal of socialism is the overthrow of the capitalists and to impose shared ownership of property by the working class. This goal knows no borders. Polish workers have just as much right to equality as the Russians and the Russian socialists will use their strength to help the Poles achieve that goal, whether they want to or not.

Most of the wars fought between the early 16th century and mid 19th century were fought over mercantilist policies, including the imperialist desire for colonies. The Spanish empire established colonies in the new world to get their precious natural resources, especially gold and silver. But more common, such as with the British and Dutch empires, was to establish colonies for which to trade. The colonies were forced to trade only with the home country, thus benefiting the home country. The famous war between England and the Spanish armada was fought over trade. Most of the wars between England and France were as well. The Spanish-American war was fought for the right to trade with the Philippines and West Indies. But mercantilist wars are not just between two competing countries. In the mid-1800s, the North outgrew the South in both population and economy. Gaining seats in Congress and the Presidency, the North imposed high protective tariffs on finished good imports and duties on raw material exports. Thus, the North made finished goods more expensive for the South and Southern crops, such as cotton and tobacco, went down in price. The result was the Civil War.

Interventionism, being a mix of the previous three systems, can cause wars in any of the above mentioned way. But interventionism also creates an ongoing internal war for control of the government. With a large government precariously balanced evenly between the three factors, a single party gaining enough power can quickly change the laws to its own benefit. In the US, the political system was designed to make it extremely difficult for any single faction to gain complete control. When the mercantilists gained control in the mid-1800s, full scale civil war broke out. Most of the time, people live peacefully in the interventionist system, but it must always result in war when one faction eventually gains too much control. Obviously, when a single faction gains majority control of government, international war also becomes more likely as they advance their policies. As mentioned above, the mercantilist wants to conquer colonies, the socialist wants to spread socialism, and aristocrats want more land. And each will pursue that through war if they gain control of the government. In fact, it is not necessarily required for one faction to gain total control. If two factions agree, even if for different reasons, that the invasion of a foreign country is beneficial and those two factions combine make up a majority, the war will occur as those two factions will outvote the third faction and any capitalists in government.

Capitalism is the only system designed to bring lasting peace. In a capitalist system, the government has just four goals: to protect our life, liberty, property, and peace. Without a government that influences everything we do, political factions have little reason to exist. Gaining control of the government will not enable one faction to benefit themselves as the government has very limited power. There will still be crime, as there is in any system, but two capitalist countries simply want to trade freely with each other and have no reason to fight each other. In fact, the capitalist country has no desire to make war on any country, even socialist, mercantilist, interventionist, or aristocratic countries. The capitalist realizes that free trade is the best method, but also that a war to open up trade with an unfree country is unproductive. Not only will the war most likely cost more than the benefits accrued, the capitalist country must in fact give up capitalism to fight this "pro-capitalist" war. In order to fight a war, the government must raise taxes to pay for it, employ soldiers to fight, and buy equipment. Thus, any war requires the government to infringe upon the people's life (dead soldiers), liberty (draft, taxes), property (taxes, military equipment), and peace (war). War is therefore impossible in a truly capitalist system.

However, countries based on the other economic systems may attempt to conquer the capitalist country to benefit themselves. As mentioned above, one of the four goals of the capitalist system is peace. Capitalist countries need some method of defending their life, liberty, and property from foreign attack in order to maintain peace. Primarily, having a method of defense acts a deterrent, causing enemies to think twice before breaking the peace. Secondly, the defense must be used to repel any attack that would make the conquered less free.