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Capitalism vs Socialism vs Communism

For thousands of year, humankind has fought over how the economy of a country should be organized. Blood has been spilled, lives have been lost, and empires have fallen because no satisfactory answer has been given. Today, YOU'RE going to decide once and for all. Over the next few days you will be engaged in a battle royal to determine which economic system should reign supreme: capitalism, socialism, or communism. Your group will compose three different presentations to make the case that your economic system is the best. You will be required to do a great deal of research into your economic system, and will be reading some of the leading economic philosophers in history. Remember, your presentation will determine once and for all which economic system is the best: no pressure or anything... This project will last three days, and will be broken down step by step. Ultimately, your group will put together a presentation with three components: 1. A PowerPoint/Prezi/multimedia presentation that presents your economic system Think of this as the basics of your economic system; you're presenting to the class what your economic system is all about 2. A skit showing your economic system in action This gives the class to see your economic system in the real world. It is important for us to see how your economic system allocates resources, handles disputes, etc. 3. An interview with a leading philosopher to advocate your position This is where your group is going to sell your economic philosophy. How did it come about? Why is it better than the others? Why are the alternate economic philosophies worse? Your group should be subdivided into three different groups, each one responsible for one component listed above. However, keep in mind that you're all on the same team, and so your information should match; make sure that what you say in your PowerPoint is the same as what you act out in your skit! You have a limited amount of time in which to make your presentations, so it is important to get to work early and diligently. Here is a recommended breakdown of how you spend your time: Day 1 Read your documents and find out the details of your particular economic system. Make sure that EVERYONE in the group is on the same page, because you want consistent information from one presentation to the next. Divide up into groups (decide who's doing the PowerPoint, skit, and interview) Note: the interview is only two people, the interviewer and the interviewee Day 2 Work on your presentations Your group will have somewhere between 15-20 to complete all three parts of your presentation. Use your time wisely. Day 3 Present!

The following are the things you should be focusing on for each piece: Presentation Provide the basic details of your economic system What are basic terms within your economic system that students need to know? How does it answer the three basic questions? Give examples Give some examples of places which use this economic system. Skit Show your economic system in action How are goods/services allocated? How does your economic system influence the government structure? Be sure to use the terms from the presentation in your skit! Feel free to make your presentations creative/humorous. However, in the pursuit of a joke, don't forget that content is key. Interview Explain the philosophy behind your economic system What are the origins of your system? How does your system fit in with human nature? Why is it the BEST? The interview segment is the perhaps the best and clearest way to articulate the positions of your economic system; use it as such Here are each of the interview subjects. You may feel free to research them further to gain a greater understanding of their beliefs Capitalism: Milton Friedman Communism: Karl Marx Socialism: Allan Maass

Capitalism Worksheet
Definitions: Capital: Capitalist: Entrepreneur: Means of production: Profit motive:

Basic Economic Questions: What to produce? How to produce? For whom to produce?

Ownership Who owns the natural resources? Who owns the right to labor and the means of production? Who gets the profit?

What is the role of government in a capitalist society? How is the government intertwined with the economic system?

What are the advantages of this system?

What are some possible disadvantages of this system?

Communism Worksheet
Definitions: Capital: Classless society: Bourgeoisie: Proletariat: Means of production:

Basic Economic Questions: What to produce? How to produce? For whom to produce?

Ownership Who owns the natural resources? Who owns the right to labor and the means of production? Who gets the profit?

What is the role of government in a communist society? How is the government intertwined with the economic system?

What are the advantages of this system?

What are some possible disadvantages of this system?

Socialism Worksheet
Definitions: Central Planning: Bourgeoisie: Proletariat: Nationalization: Welfare state:

Basic Economic Questions: What to produce? How to produce? For whom to produce?

Ownership Who owns the natural resources? Who owns the right to labor and the means of production? Who gets the profit?

What is the role of government in a socialist society? How is the government intertwined with the economic system?

What are the advantages of this system?

What are some possible disadvantages of this system?

Comparing Economic Theories Capitalism 1. Who decides what goods will be produced, how the goods should be produced, and for whom they should be produced? 2. Who owns the countrys natural resources? 3. Who owns the right to a persons labor? 4. Are profits generated? If so, where do they go? 5. What rights are most important in this economic system? 6. What is the role of government? 7. Advantages Socialism Communism

8. Disadvantages

Excerpts from The Communist Manifesto by Karl Marx and Friedrich Engels
The history of all hitherto existing society is the history of class struggles. Freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open fight, a fight that each time ended, either in a revolutionary reconstitution of society at large, or in the common ruin of the contending classes. In the earlier epochs of history, we find almost everywhere a complicated arrangement of society into various orders, a manifold gradation of social rank. In ancient Rome we have patricians, knights, plebeians, slaves; in the Middle Ages, feudal lords, vassals, guild-masters, journeymen, apprentices, serfs; in almost all of these classes, again, subordinate gradations. The modern bourgeois society that has sprouted from the ruins of feudal society has not done away with class antagonisms. It has but established new classes, new conditions of oppression, new forms of struggle in place of the old ones. Our epoch, the epoch of the bourgeoisie, possesses, however, this distinct feature: it has simplified class antagonisms. Society as a whole is more and more splitting up into two great hostile camps, into two great classes directly facing each other Bourgeoisie and Proletariat.
Historically, how was society organized? According to communists, who had more power? In modern society, what are the two classes? Which group is the more powerful?

From the serfs of the Middle Ages sprang the chartered burghers of the earliest towns. From these burgesses the first elements of the bourgeoisie were developed. The discovery of America, the rounding of the Cape, opened up fresh ground for the rising bourgeoisie. The East-Indian and Chinese markets, the colonisation of America, trade with the colonies, the increase in the means of exchange and in commodities generally, gave to commerce, to navigation, to industry, an impulse never before known, and thereby, to the revolutionary element in the tottering feudal society, a rapid development. The feudal system of industry, in which industrial production was monopolised by closed guilds, now no longer sufficed for the growing wants of the new markets. The manufacturing system took its place. The guild-masters were pushed on one side by the manufacturing middle class; division of labour between the different corporate guilds vanished in the face of division of labour in each single workshop. Meantime the markets kept ever growing, the demand ever rising. Even manufacturer no longer sufficed. Thereupon, steam and machinery revolutionised industrial

production. The place of manufacture was taken by the giant, Modern Industry; the place of the industrial middle class by industrial millionaires, the leaders of the whole industrial armies, the modern bourgeois. Modern industry has established the world market, for which the discovery of America paved the way. This market has given an immense development to commerce, to navigation, to communication by land. This development has, in its turn, reacted on the extension of industry; and in proportion as industry, commerce, navigation, railways extended, in the same proportion the bourgeoisie developed, increased its capital, and pushed into the background every class handed down from the Middle Ages.
How has colonization widened the gap between the bourgeosie and the proletariat? How was industrialization made the rich richer and the poor poorer?

Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells...[we have a crisis of] over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them. And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.
Why is capitalism and the work of the bourgeoisie inherently unstable?

The weapons with which the bourgeoisie felled feudalism to the ground are now turned against the bourgeoisie itself. But not only has the bourgeoisie forged the weapons that bring death to itself; it has also called into existence the men who are to wield those weapons the modern working class the proletarians. Owing to the extensive use of machinery, and to the division of labour, the work of the proletarians has lost all individual character, and, consequently, all charm for the

workman. He becomes an appendage of the machine, and it is only the most simple, most monotonous, and most easily acquired knack, that is required of him. Hence, the cost of production of a workman is restricted, almost entirely, to the means of subsistence that he requires for maintenance, and for the propagation of his race. But the price of a commodity, and therefore also of labour, is equal to its cost of production. In proportion, therefore, as the repulsiveness of the work increases, the wage decreases. Nay more, in proportion as the use of machinery and division of labour increases, in the same proportion the burden of toil also increases, whether by prolongation of the working hours, by the increase of the work exacted in a given time or by increased speed of machinery, etc. But with the development of industry, the proletariat not only increases in number; it becomes concentrated in greater masses, its strength grows, and it feels that strength more. The various interests and conditions of life within the ranks of the proletariat are more and more equalised, in proportion as machinery obliterates all distinctions of labour, and nearly everywhere reduces wages to the same low level. The growing competition among the bourgeois, and the resulting commercial crises, make the wages of the workers ever more fluctuating. The increasing improvement of machinery, ever more rapidly developing, makes their livelihood more and more precarious; the collisions between individual workmen and individual bourgeois take more and more the character of collisions between two classes. Thereupon, the workers begin to form combinations (Trades Unions) against the bourgeois; they club together in order to keep up the rate of wages; they found permanent associations in order to make provision beforehand for these occasional revolts. Here and there, the contest breaks out into riots.
How does industrialization affect the attitude and mindset of the proletariat? How does the proletariat respond?

The distinguishing feature of Communism is not the abolition of property generally, but the abolition of bourgeois property. But modern bourgeois private property is the final and most complete expression of the system of producing and appropriating products, that is based on class antagonisms, on the exploitation of the many by the few. In this sense, the theory of the Communists may be summed up in the single sentence: Abolition of private property. In short, the Communists everywhere support every revolutionary movement against the existing social and political order of things. In all these movements, they bring to the front, as the leading question in each, the property question, no matter what its degree of development at the time. Finally, they labour everywhere for the union and agreement of the democratic parties

of all countries. The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win.

Working Men of All Countries, Unite!


What do communists want to do with private property? Will they accomplish this goal secretly or openly?

Why I am a communist by Katherine Susannah Prichard


When I was a young journalist, I saw the poverty and injustices people were living under in the slums of Melbourne [in Australia]. I listened to reports of the Anti-Sweating League, and heard the evidence of girls who were nervous wrecks as a result of working long hours on high pressure machines for low wages. Women told me how they were often expected to submit to the lust of unscrupulous employers before they could get white-work to take home, and earn little over a shilling for making a dozen nightgowns. Fear of being unable to pay the rent of the miserable rooms in which they lived, of having no money to buy food and clothes for a young family and a husband, out-of-work or ill, forced desperate women sometimes to accept these terms. I was shocked and horrified. The city, with its stately buildings, banks, churches, Town Hall and National Art Gallery, stood in the midst of this tragedy, as if aloof from, or indifferent to it. To look at the shops filled with food and clothing, all manner of luxurious wares, you would never have thought there were any poor nearby. Far from the filthy lanes and dreary warrens poverty-stricken men and women lived in, spread the beautiful homes and gardens of wealthy citizens. What was the meaning of it? Why did such conditions exist? How was it that some people should have to live in fear and poverty all their days, while others, whether they worked or not, could live easily and pleasantly, squandering riches, and concerned only about their own pleasure and power?
What questions drove the author to examine communism? Explain how the author viewed the contrast between wealth and poverty. What did it inspire her to do?

The first World War increased my understanding of the crimes against humanity for which a system based on the profit for a few individuals and suffering for the many, was responsible. Both my brothers were caught up in this war. Alan, my elder brother, was killed in France. Grief for him made me resolve to work for peace, and to oppose political and economic intrigues which foster the barbarous insanity of war.
Why would a communist view wars as a capitalist conspiracy?

Under a system of ownership and administration by a majority of the people, the working class in any nation, I realised that one set of human beings could no longer exploit and cruelly abuse others for personal profit. Poverty and prostitution would cease and all the vices, crimes and disease generated by Capitalism a vicious system of every man for himself and devil take the innocent, helpless and too-finely constituted for the desperate struggle of existence. There would be no shameful seizure of the land and wealth of primitive peoples under Socialism.
Explain what she means by shameful seizure of the land and wealth of primitive peoples? Give an example of one such seizure.

Communism cannot be exported...It grows from the conditions of existence in Capitalist and semi-feudal countries. It grows from the injustices and suffering of masses of the people through poverty, war and repression of the right of the people to strive for a better way of life. It is growing in many countries because of the contradictions of Capitalism itself, which cannot expand and increase its profits without imposing heavier burdens on the working people, dragging them into wars, economic crises, and depriving them of the right to organise in their own defence.

Marx said: Capitalism brought into being by the laws of historical evolution will be destroyed by the inexorable working of these same laws.
Explain how capitalism has the seeds of its own destruction.

Communism is a reorganization of society on the basis of ownership by the working people of the land, mines, factories, means of transport, as well as the health, educational and cultural services required to fulfill their needs. There is a transition stage, in which various measures are adapted to the conditions in different countries, before the whole plan can be completed. Communists insist that the basis of exploitation the use of men and women for personal profits and power lie in the Capitalist system. Reforms do not remove the villain of the piece from the scene of action. While he holds economic power the people will bear the weight of any measures of partial nationalisation. Communists believe that the fundamental basis of a true Socialist society must be change from a Capitalist system of ownership, exploitation and control to one of ownership, administration and control of the affairs of a nation by the men and women who produce its wealth. Communists do not want bloody revolution. Revolution means change. There have been revolutions in art, industry and social relations which have not caused bloodshed. Communists declare that the many have the right to organise and educate the people so that they will be able to bring about the change in the basis of the State and of our social system. By so doing Communists believe they reduce the dangers of bloody revolution, which do not come from us in any case. They believe that the new system of social ownership and administration can be introduced by parliamentary measures which express the will of the people.
Give two examples of industries/programs that communists will alter once they take power. What is meant by a communist revolution? How will it occur?

You know that the multi-millionaires warmongers and profiteers, all who profit by ignorance and the fear of unemployment abuse and slander communists and Communism. There are, also, a number of well-meaning men and women who have never heard the case for Communism, and are blinded by religious prejudices. Why do these people abuse and slander Communists and Communism? The answer is clear. Communists stand for the rights of the people: in the interests of the people. The millionaires, warmongers and profiteers describe Communists as loathsome and evil because Communists threaten their profits, their right to exploit and subjugate labour and genius to their greed for wealth and power.
Why do newspapers/media slander communism?

The Case for Socialism by Alan Maass


Socialism is based on the idea that we should use the vast resources of society to meet peoples needs. It seems so obvious--if people are hungry, they should be fed; if people are homeless, we should build homes for them; if people are sick, the best medical care should be available to them. A socialist society would take the immense wealth of the rich and use it to meet the basic needs of all society. The money wasted on weapons could be used to end poverty, homelessness, and all other forms of scarcity. Theres no blueprint for what a socialist society will look like. That will be determined by the generations to come who are living in one. But it seems obvious that such a society would guarantee every person enough to eat and a sturdy roof over their heads. The education system would be made free--and reorganized so that every childs ability is encouraged. Health care would be made free and accessible to all, as would all utilities like gas and electricity. Public transportation would also be made free--and more practical and efficient. All of these basic needs would become top priorities. A socialist society would not only take away the existing wealth of the ruling class, but also its economic control over the world. The means of production--the factories, offices, mines, and so on-would be owned by all of society. Under the current system, important economic decisions are left to the chaos of the free market and to the blind competition of capitalists scrambling for profits. Under socialism, the majority of people would plan democratically what to do and how do it. How would a socialist society be organized? Give two examples of items provided by a socialist government. Not surprisingly, socialist ideas bring loud complaints from defenders of the capitalist system. Most come down to the same thing: Public ownership and planning would involve a bunch of bureaucrats ordering people around and telling them what they should want. Its a ridiculous accusation when you consider that the majority of people under capitalism have no meaningful choices about the things that matter the most in their lives--what they do at work and how they do it, what they can buy, how they spend the bulk of their time. These decisions are made in the corporate boardrooms, in the Oval Office, in the judges chambers--without anyones input. Socialist planning would involve the exact opposite of this: the widest possible debate and discussion about whats needed in society and how to achieve it. Instead of leaving decisions about what gets produced and how to a handful of executives, all workers would have a voice in what they do at their workplace. And larger bodies of democratically elected representatives would be able to fully discuss overall social priorities. If a socialist society mistakenly produced too much of one product, the extra could be given away and resources shifted into making something else. When capitalists make this kind of mistake, factories are shut down, workers are thrown onto the street, food is destroyed to push up prices, and so on. Socialism would put an end to this absurd waste. Explain socialism's rejection of the idea that government control limits choice. Why is socialism MORE democratic than capitalism?

For hundreds if not thousands of years, most societies around the world have been divided between exploiters and exploited--between a ruling class of people that runs society in its own interest and much larger exploited classes whose labor is the source of their rulers wealth and power. Under each system, the biggest conflicts have been between these classes--over who rules, who gets ruled over, and how. In all of these societies, the oppressed have dreamed of a future world of equality and justice where their oppression would end. And they have fought for it--from the slave rebellion against the Roman Empire led by Spartacus to the peasant uprisings in Europe, among others. So the ideals of socialism arent new. But the possibility of achieving them is the product of only the last few centuries--in most parts of the world, of just the last 100 years. Why? Because socialism cant be organized on the basis of scarcity. Unless theres enough to go around, theres certain to be a scramble over who gets what. That scramble is bound to produce a class society--a society in which one group of people organizes the system to make sure they get enough, even if others go without. Only under capitalism has human knowledge and technology been raised to the point where we can feed every person on the planet, clothe them, put roofs over their heads, and so on. So, under capitalism, theres no longer any natural reason for poverty to exist. But abolishing poverty means getting rid of the system that causes it--and that requires a social force capable of overthrowing it. Why is socialism only a recent phenomenon?

You can see this power in situations that fall well short of revolution. In March 1996, General Motors provoked a strike of 3,200 autoworkers at two Dayton, Ohio, factories that made brake parts for most GM vehicles. It was a huge blunder. Within a week, the walkout had crippled GMs production across North America. All but two of the companys assembly plants had to close. GM lost about $1 billion in profits in 15 days. Management gave in. By the same token, a general strike by workers throughout the economy can paralyze a whole country-and bring a government to its knees. Thats what happened in Poland in 1980 with the revolt of the Solidarnosc trade union. The upheaval began with a strike by shipyard workers in Gdansk, but it soon spread to involve 10 million workers across the country. Within weeks, democratically organized workers committees sprang up to organize the strike and to make decisions about how to provide essential services. The so-called socialist government--a dictatorial regime with a long record of vicious repression--was powerless to restore order for more than a year. Before the strike, Polish workers would never have guessed that they could rock a seemingly all-powerful police state. But they cut off the lifeblood of the system: the wealth they created by their labor. Of course, other groups in capitalist society can, and do, fight back. For example, during the 1960s, the biggest upheavals in the U.S. involved African Americans fighting for civil rights and against racism. These were magnificent struggles that won real and lasting changes. And they inspired other parts of society to fight. But, by themselves, Blacks didnt have the power to transform the whole system. First, they were a minority of the population. And, organized as a community, African Americans had the moral power to embarrass and persuade--but not the kind of economic power to hit the bosses where it hurts. How does socialism view the rights of people to organize? How does socialism improve government?

If we were to judge only from what we see around us, it might be hard to have confidence that the majority of people can organize to win fundamental change. After all, most working people arent revolutionaries. Most of the time, they accept a number of ideas that justify the status quo--from the old clich that you cant fight city hall to the belief that people at the top of society are somehow specially qualified to run it. This is partly because were continually exposed to different institutions that are in the business of reinforcing these prejudices. The mass media are one example. Watch the local television news, and youll see sensationalized stories about crime and violence--while discussions about the real issues that affect peoples lives get shortchanged. The poor are stereotyped and scapegoated, while the wealth and power of the rich are celebrated. Even shows meant as entertainment tend to reinforce the conventional wisdom. Likewise, its easy to see how the education system encourages conformity. Except for the minority of students being trained to rule society, the experience of school is usually alienating. Students are taught to compete against each other--and ultimately to accept the conditions they see around them. With all the selfish and mean-spirited ideas actively promoted by these voices of authority, its a wonder that any sense of solidarity survives under capitalism. But it plainly does. This is most obvious in the outpourings of charity in cases of social crisis, like a famine or an earthquake--even when they take place halfway around the world. The kindness and generosity of ordinary people is boundless. But even on a day-to-day basis, society simply couldnt function without a basic sense of cooperation and sacrifice among ordinary people--within families, among coworkers, and so on. Capitalist society obscures this basic decency--because the system is organized around greed. Obviously, those in charge get ahead by being as greedy as possible. But working people are forced-whether they like it or not--to participate in a rat race that they have no control over. Theyre pitted against one another and required to compete just to keep their job or maintain their standard of living-much less get ahead. What evidence do we have that socialism is inherently human?

As a result, the idea of people uniting for social change can seem distant and unrealistic. For most people, the experience of their lives teaches them that they dont have any power over what happens in the world--and that they dont know enough to have an opinion about it anyway. Powerlessness produces what appears to be apathy among people, about their own future and the future of society. This is why it isnt enough for socialists to talk about why socialism will make an excellent alternative to capitalism. Its also necessary to talk about the struggle to get there-because struggle transforms people and gives them confidence in their own power. As Marx put it: Revolution is necessary not only because the ruling class cannot be overthrown in any other way but also because the class overthrowing it can only in a revolution succeed in ridding itself of all the muck of ages and become fit to found society anew. The act of fighting back is the first step in challenging the prejudices learned from living in the dog-eatdog world of capitalism. This can be seen in even the smallest strike. Strikes almost always start over a specific workplace issue--for instance, the demand for higher wages or better conditions. But whatever the original grievance, striking workers who may have thought of themselves as law-abiding citizens are acting in a way that goes against what society teaches them. Fighting back also requires unity. Striking workers are often forced to question the divisions built up in

their ranks--between Black and white, men and women, native born and immigrant. As a strike goes on, feelings of solidarity and a sense of the wider issues at stake start to become as important as the original issues. Though the media love to dismiss them today, the struggles of the 1960s are proof that ideas can change with enormous speed. In periods of social upheaval, millions upon millions of people who focused their energy on all sorts of things suddenly turn their attention to the question of transforming society. The biggest struggles of all--revolutions that overturn the existing social order--produce the most extraordinary changes in people. Whats most striking about the history of revolutions is the way that ordinary people, who are trained all their lives to be docile and obedient, suddenly find their voices. Ultimately, how will a socialist revolution come?

Why Socialism? By Albert Einstein


Man is, at one and the same time, a solitary being and a social being. As a solitary being, he attempts to protect his own existence and that of those who are closest to him, to satisfy his personal desires, and to develop his innate abilities. As a social being, he seeks to gain the recognition and affection of his fellow human beings, to share in their pleasures, to comfort them in their sorrows, and to improve their conditions of life. Only the existence of these varied, frequently conflicting, strivings accounts for the special character of a man, and their specific combination determines the extent to which an individual can achieve an inner equilibrium and can contribute to the well-being of society. It is quite possible that the relative strength of these two drives is, in the main, fixed by inheritance. But the personality that finally emerges is largely formed by the environment in which a man happens to find himself during his development, by the structure of the society in which he grows up, by the tradition of that society, and by its appraisal of particular types of behavior. The abstract concept society means to the individual human being the sum total of his direct and indirect relations to his contemporaries and to all the people of earlier generations. The individual is able to think, feel, strive, and work by himself; but he depends so much upon societyin his physical, intellectual, and emotional existencethat it is impossible to think of him, or to understand him, outside the framework of society. It is society which provides man with food, clothing, a home, the tools of work, language, the forms of thought, and most of the content of thought; his life is made possible through the labor and the accomplishments of the many millions past and present who are all hidden behind the small word society. The root of socialism is social. Explain why Einstein finds that significant, and why it makes socialism a good ideology.

It is evident, therefore, that the dependence of the individual upon society is a fact of nature which cannot be abolishedjust as in the case of ants and bees. However, while the whole life process of ants and bees is fixed down to the smallest detail by rigid, hereditary instincts, the social pattern and interrelationships of human beings are very variable and susceptible to change. Memory, the capacity to make new combinations, the gift of oral communication have made possible developments among human being which are not dictated by biological necessities. Such developments manifest themselves in traditions, institutions, and organizations; in literature; in scientific and engineering accomplishments; in works of art. This explains how it happens that, in a certain sense, man can influence his life through his own conduct, and that in this process conscious thinking and wanting can play a part. Man acquires at birth, through heredity, a biological constitution which we must consider fixed and unalterable, including the natural urges which are characteristic of the human species. In addition, during his lifetime, he acquires a cultural constitution which he adopts from society through communication and through many other types of influences. It is this cultural constitution which, with the passage of time, is subject to change and which determines to a very large extent the relationship between the individual and society. Modern anthropology has taught us, through comparative investigation of so-called primitive cultures, that the social behavior of human beings may differ greatly, depending upon prevailing cultural patterns and the types of organization which predominate in society. It is on this that those who are striving to improve the lot of man may ground their hopes: human beings are not condemned, because of their biological constitution, to annihilate each other or to be at the mercy of a cruel, self-inflicted fate. What does Einstein say about human nature? Does this suggest that socialism is Lockean or Hobbesian?

If we ask ourselves how the structure of society and the cultural attitude of man should be changed in order to make human life as satisfying as possible, we should constantly be conscious of the fact that there are certain conditions which we are unable to modify. As mentioned before, the biological nature of man is, for all practical purposes, not subject to change. Furthermore, technological and demographic developments of the last few centuries have created conditions which are here to stay. In relatively densely settled populations with the goods which are indispensable to their continued existence, an extreme division of labor and a highly-centralized productive apparatus are absolutely necessary. The timewhich, looking back, seems so idyllicis gone forever when individuals or relatively small groups could be completely self-sufficient. It is only a slight exaggeration to say that mankind constitutes even now a planetary community of production and consumption. I have now reached the point where I may indicate briefly what to me constitutes the essence of the crisis of our time. It concerns the relationship of the individual to society. The individual has become more conscious than ever of his dependence upon society. But he does not experience this dependence as a positive asset, as an organic tie, as a protective force, but rather as a threat to his natural rights, or even to his economic existence. Moreover, his position in society is such that the egotistical drives of his make-up are constantly being accentuated, while his social drives, which are by nature weaker, progressively deteriorate. All human beings, whatever their position in society, are suffering from this process of deterioration. Unknowingly prisoners of their own egotism, they feel insecure, lonely, and deprived of the naive, simple, and unsophisticated enjoyment of life. Man can find meaning in life, short and perilous as it is, only through devoting himself to society. How has modern industrial society made mankind feel? What consequences might this have on our behavior? The economic anarchy of capitalist society as it exists today is, in my opinion, the real source of the evil. We see before us a huge community of producers the members of which are unceasingly striving to deprive each other of the fruits of their collective labornot by force, but on the whole in faithful compliance with legally established rules. In this respect, it is important to realize that the means of productionthat is to say, the entire productive capacity that is needed for producing consumer goods as well as additional capital goodsmay legally be, and for the most part are, the private property of individuals. For the sake of simplicity, in the discussion that follows I shall call workers all those who do not share in the ownership of the means of productionalthough this does not quite correspond to the customary use of the term. The owner of the means of production is in a position to purchase the labor power of the worker. By using the means of production, the worker produces new goods which become the property of the capitalist. The essential point about this process is the relation between what the worker produces and what he is paid, both measured in terms of real value. Insofar as the labor contract is free, what the worker receives is determined not by the real value of the goods he produces, but by his minimum needs and by the capitalists requirements for labor power in relation to the number of workers competing for jobs. It is important to understand that even in theory the payment of the worker is not determined by the value of his product. Explain Einstein's position that workers are not paid the value of the goods they produce.

Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor encourage the formation of larger units of production at the expense of smaller ones. The result of these developments is an oligarchy of private capital the enormous power of which cannot be effectively checked even by a democratically organized political society. This is true since the members of legislative bodies are selected by political parties, largely financed or otherwise influenced by private

capitalists who, for all practical purposes, separate the electorate from the legislature. The consequence is that the representatives of the people do not in fact sufficiently protect the interests of the underprivileged sections of the population. Moreover, under existing conditions, private capitalists inevitably control, directly or indirectly, the main sources of information (press, radio, education). It is thus extremely difficult, and indeed in most cases quite impossible, for the individual citizen to come to objective conclusions and to make intelligent use of his political rights. How does capitalism, and the creation of wealthy industrialists, subvert democracy?

Production is carried on for profit, not for use. There is no provision that all those able and willing to work will always be in a position to find employment; an army of unemployed almost always exists. The worker is constantly in fear of losing his job. Since unemployed and poorly paid workers do not provide a profitable market, the production of consumers goods is restricted, and great hardship is the consequence. Technological progress frequently results in more unemployment rather than in an easing of the burden of work for all. The profit motive, in conjunction with competition among capitalists, is responsible for an instability in the accumulation and utilization of capital which leads to increasingly severe depressions. Unlimited competition leads to a huge waste of labor, and to that crippling of the social consciousness of individuals which I mentioned before. This crippling of individuals I consider the worst evil of capitalism. Our whole educational system suffers from this evil. An exaggerated competitive attitude is inculcated into the student, who is trained to worship acquisitive success as a preparation for his future career. I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals. In such an economy, the means of production are owned by society itself and are utilized in a planned fashion. A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow men in place of the glorification of power and success in our present society. Through what methods does capitalism keep workers in fear? How does capitalism pervert education? Why is socialism the solution to social ills?

Capitalism and Freedom by Milton Friedman


Economic arrangements play a dual role in the promotion of a free society. On the one hand, freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself. In the second place, economic freedom is also an indispensable means toward the achievement of political freedom. Viewed as a means to the end of political freedom, economic arrangements are important becuase of their effect on the concentration or dispersion of power. The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other. Historical evidence speaks with a single voice on the relation between political freedom and a free market. I know of no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free market to organize the bulk of economic activity. How does capitalism ensure that power is not concentrated in a tyrannical government?

The relation between political and economic freedom is complex and by no means unilateral. In the early nineteenth century [many] were inclined to regard political freedom as a means to economic freedom. They believed that the masses were being hampered by the restrictions that were being imposed upon them, and that if political reform gave the bulk of the people the vote, they would do what was good for them, which was to vote for laissez faire. In retrospect, one cannot say that they were wrong. There was a large measure of political reform that was accompanied by economic reform in the direction of a great deal of laissez faire. An enormous increase in the well-being of the masses followed this change in economic arrangements. The triumph of... capitalism in nineteenth-century England was followed by a reaction toward increasing intervention by government in economic affairs. This tendency to collectivism was greatly accelerated, both in England and elsewhere, by the two World Wars. Welfare rather than freedom became the dominant note in democratic countries. Historical evidence by itself can never be convincing. Perhaps it was sheer coincidence that the expansion of freedom occurred at the same time as the development of capitalist and market institutions. Why should there be a connection? What are the logical links between economic and political freedom? In discussing these questions we shall consider first the market as a direct component of freedom, and then the indirect relation between market arrangements and political freedom. A by-product will be an outline of the ideal economic arrangements for a free society. Has the recent historical trend been toward capitalism or government interference? Explain.

Fundamentally, there are only two ways of co-ordinating the economic activities of millions. One is central direction involving the use of coercion--the technique of the army and of the modern totalitarian state. The other is voluntary co-operation of individuals--the technique of the market place.

The possibility of co-ordination through voluntary co-operation rests on the elementary -- yet frequently denied -- proposition that both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed. Exchange can therefore bring about co-ordination without coercion. A working model of a society organized through voluntary exchange is a free private enterprise exchange economy -- what we have been calling competitive capitalism. In its simplest form, such a society consists of a number of independent households -- a collection of Robinson Crusoes, as it were. Each household uses the resources it controls to produce goods and services that it exchanges for goods and services produced by other households, on terms mutually acceptable to the two parties to the bargain. It is thereby enabled to satisfy its wants indirectly by producing goods and services for others, rather than directly by producing goods for its own immediate use. The incentive for adopting this indirect route is, of course, the increased product made possible by division of labor and specialization of function. Since the household always has the alternative of producing directly for itself, it need not enter into any exchange unless it benefits from it. Hence, no exchange will take place unless both parties do benefit from it. Co-operation is thereby achieved without coercion. Specialization of function and division of labor would not go far if the ultimate productive unit were the household. In a modern society, we have gone much farther. We have introduced enterprises which are intermediaries between individuals in their capacities as suppliers of service and as purchasers of goods. And similarly, specialization of function and division of labor could not go very far if we had to continue to rely on the barter of product for product. In consequence, money has been introduced as a means of facilitating exchange, and of enabling the acts of purchase and of sale to be separated into two parts. What is at the root of capitalism? Why must participation and trade be voluntary? Why do individuals/businesses practice specialization? Despite the important role of enterprises and of money in our actual economy, and despite the numerous and complex problems they raise, the central characteristic of the market technique of achieving co-ordination is fully displayed in the simple exchange economy that contains neither enterprises nor money. As in that simple model, so in the complex enterprise and money-exchange economy, co-operation is strictly individual and voluntary provided: (a) that enterprises are private, so that the ultimate contracting parties are individuals and (b) that individuals are effectively free to enter or not to enter into any particular exchange, so that every transaction is strictly voluntary. The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the "rules of the game" and as an umpire to interpret and enforce the rules decided on. What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby to minimize the extent to which government need participate directly in the game. The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity. It is, in political terms, a system of proportional representation. Each man can vote, as it were, for the color of tie he wants and get it; he does not have to see what color-the majority wants and then, if he is in the minority, submit. What is the role of government in capitalism?

In order for men to advocate anything, they must in the first place be able to earn a living. This already raises a problem in a socialist society, since all jobs are under the direct control of political authorities. In a capitalist society, it is only necessary to convince a few wealthy people to get funds to launch any idea, however strange, and there are many such persons, many independent foci of support. And, indeed, it is not even necessary to persuade people or financial institutions with available funds of the soundness of the ideas to be propagated. It is only necessary to persuade them that the propagation can be financially successful; that the newspaper or magazine or book or other venture will be profitable. The competitive publisher, for example, cannot afford to publish only writing with which he personally agrees; his touchstone must be the likelihood that the market will be large enough to yield a satisfactory return on his investment. Why would there be more employment in a capitalist society than in one centrally planned?

I, Pencil by Leonard Read


I am a lead pencilthe ordinary wooden pencil familiar to all boys and girls and adults who can read and write. Writing is both my vocation and my avocation; thats all I do. You may wonder why I should write a genealogy. Well, to begin with, my story is interesting. And, next, I am a mystery more so than a tree or a sunset or even a flash of lightning. But, sadly, I am taken for granted by those who use me, as if I were a mere incident and without background. This supercilious attitude relegates me to the level of the commonplace. This is a species of the grievous error in which mankind cannot too long persist without peril. For, the wise G. K. Chesterton observed, We are perishing for want of wonder, not for want of wonders. I, Pencil, simple though I appear to be, merit your wonder and awe, a claim I shall attempt to prove. In fact, if you can understand meno, thats too much to ask of anyoneif you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing. I have a profound lesson to teach. And I can teach this lesson better than can an automobile or an airplane or a mechanical dishwasher becausewell, because I am seemingly so simple. Simple? Yet, not a single person on the face of this earth knows how to make me. This sounds fantastic, doesnt it? Especially when it is realized that there are about one and one-half billion of my kind produced in the U.S.A. each year. Pick me up and look me over. What do you see? Not much meets the eyetheres some wood, lacquer, the printed labeling, graphite lead, a bit of metal, and an eraser. Just as you cannot trace your family tree back very far, so is it impossible for me to name and explain all my antecedents. But I would like to suggest enough of them to impress upon you the richness and complexity of my background. My family tree begins with what in fact is a tree, a cedar of straight grain that grows in Northern California and Oregon. Now contemplate all the saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding. Think of all the persons and the numberless skills that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes, motors; the growing of hemp and bringing it through all the stages to heavy and strong rope; the logging camps with their beds and mess halls, the cookery and the raising of all the foods. Why, untold thousands of persons had a hand in every cup of coffee the loggers drink! Name all the steps that were involved just in getting the wood for the pencil.

The logs are shipped to a mill in San Leandro, California. Can you imagine the individuals who make flat cars and rails and railroad engines and who construct and install the communication systems incidental thereto? These legions are among my antecedents. Consider the millwork in San Leandro. The cedar logs are cut into small, pencil-length slats less than one-fourth of an inch in thickness. These are kiln dried and then tinted for the same reason women put rouge on their faces. People prefer that I look pretty, not a pallid white. The slats are waxed and kiln dried again. How many skills went into the making of the tint and the kilns, into supplying the heat, the light and power, the belts, motors, and all the other things a mill requires? Sweepers in the mill among

my ancestors? Yes, and included are the men who poured the concrete for the dam of a Pacific Gas & Electric Company hydroplant which supplies the mills power! Dont overlook the ancestors present and distant who have a hand in transporting sixty carloads of slats across the nation. Once in the pencil factory$4,000,000 in machinery and building, all capital accumulated by thrifty and saving parents of mineeach slat is given eight grooves by a complex machine, after which another machine lays leads in every other slat, applies glue, and places another slat atopa lead sandwich, so to speak. Seven brothers and I are mechanically carved from this wood-clinched sandwich. My lead itselfit contains no lead at allis complex. The graphite is mined in Ceylon [Sri Lanka]. Consider these miners and those who make their many tools and the makers of the paper sacks in which the graphite is shipped and those who make the string that ties the sacks and those who put them aboard ships and those who make the ships. Even the lighthouse keepers along the way assisted in my birth and the harbor pilots. Notice the wide range of people involved in the production of the pencil. What might the author be trying to say? The graphite is mixed with clay from Mississippi in which ammonium hydroxide is used in the refining process. Then wetting agents are added such as sulfonated tallowanimal fats chemically reacted with sulfuric acid. After passing through numerous machines, the mixture finally appears as endless extrusionsas from a sausage grindercut to size, dried, and baked for several hours at 1,850 degrees Fahrenheit. To increase their strength and smoothness the leads are then treated with a hot mixture which includes candelilla wax from Mexico, paraffin wax, and hydrogenated natural fats. My cedar receives six coats of lacquer. Do you know all the ingredients of lacquer? Who would think that the growers of castor beans and the refiners of castor oil are a part of it? They are. Why, even the processes by which the lacquer is made a beautiful yellow involve the skills of more persons than one can enumerate! Observe the labeling. Thats a film formed by applying heat to carbon black mixed with resins. How do you make resins and what, pray, is carbon black? My bit of metalthe ferruleis brass. Think of all the persons who mine zinc and copper and those who have the skills to make shiny sheet brass from these products of nature. Those black rings on my ferrule are black nickel. What is black nickel and how is it applied? The complete story of why the center of my ferrule has no black nickel on it would take pages to explain. Then theres my crowning glory, inelegantly referred to in the trade as the plug, the part man uses to erase the errors he makes with me. An ingredient called factice is what does the erasing. It is a rubber-like product made by reacting rapeseed oil from the Dutch East Indies [Indonesia] with sulfur chloride. Rubber, contrary to the common notion, is only for binding purposes. Then, too, there are numerous vulcanizing and accelerating agents. The pumice comes from Italy; and the pigment which gives the plug its color is cadmium sulfide.

No One Knows Does anyone wish to challenge my earlier assertion that no single person on the face of this earth knows how to make me? Actually, millions of human beings have had a hand in my creation, no one of whom even knows more than a very few of the others. Now, you may say that I go too far in relating the picker of a coffee berry in far-off Brazil and food growers elsewhere to my creation; that this is an extreme position. I shall stand by my claim. There isnt a single person in all these millions, including the president of the pencil company, who contributes more than a tiny, infinitesimal bit of know-how. From the standpoint of know-how the only difference between the miner of graphite in Ceylon and the logger in Oregon is in the type of know-how. Neither the miner nor the logger can be dispensed with, any more than can the chemist at the factory or the worker in the oil fieldparaffin being a by-product of petroleum. Why doesn't the owner of the pencil factory know all of the people involved in its production? Is it necessary? Here is an astounding fact: Neither the worker in the oil field nor the chemist nor the digger of graphite or clay nor any who mans or makes the ships or trains or trucks nor the one who runs the machine that does the knurling on my bit of metal nor the president of the company performs his singular task because he wants me. Each one wants me less, perhaps, than does a child in the first grade. Indeed, there are some among this vast multitude who never saw a pencil nor would they know how to use one. Their motivation is other than me. Perhaps it is something like this: Each of these millions sees that he can thus exchange his tiny know-how for the goods and services he needs or wants. I may or may not be among these items. There is a fact still more astounding: The absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found. Instead, we find the Invisible Hand at work. This is the mystery to which I earlier referred. Why did all of the people the pencil cited in the paragraphs above participate in the production process? What was their motivation? It has been said that only God can make a tree. Why do we agree with this? Isnt it because we realize that we ourselves could not make one? Indeed, can we even describe a tree? We cannot, except in superficial terms. We can say, for instance, that a certain molecular configuration manifests itself as a tree. But what mind is there among men that could even record, let alone direct, the constant changes in molecules that transpire in the life span of a tree? Such a feat is utterly unthinkable! I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energiesmillions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human masterminding! Since only God can make a tree, I insist that only God could make me. Man can no more direct these millions of know-hows to bring me into being than he can put molecules together to create a tree. The above is what I meant when writing, If you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing. For, if one is aware that these know-hows will naturally, yes, automatically, arrange themselves into creative and productive patterns in response to human necessity and demand that is, in the absence of governmental or any other coercive master-mindingthen one will possess an absolutely essential ingredient for freedom: a faith in free people. Freedom is impossible without this faith.

Once government has had a monopoly of a creative activity such, for instance, as the delivery of the mails, most individuals will believe that the mails could not be efficiently delivered by men acting freely. And here is the reason: Each one acknowledges that he himself doesnt know how to do all the things incident to mail delivery. He also recognizes that no other individual could do it. These assumptions are correct. No individual possesses enough know-how to perform a nations mail delivery any more than any individual possesses enough know-how to make a pencil. Now, in the absence of faith in free peoplein the unawareness that millions of tiny know-hows would naturally and miraculously form and cooperate to satisfy this necessitythe individual cannot help but reach the erroneous conclusion that mail can be delivered only by governmental masterminding. Why can't a central government make a pencil?

If I, Pencil, were the only item that could offer testimony on what men and women can accomplish when free to try, then those with little faith would have a fair case. However, there is testimony galore; its all about us and on every hand. Mail delivery is exceedingly simple when compared, for instance, to the making of an automobile or a calculating machine or a grain combine or a milling machine or to tens of thousands of other things. Delivery? Why, in this area where men have been left free to try, they deliver the human voice around the world in less than one second; they deliver an event visually and in motion to any persons home when it is happening; they deliver 150 passengers from Seattle to Baltimore in less than four hours; they deliver gas from Texas to ones range or furnace in New York at unbelievably low rates and without subsidy; they deliver each four pounds of oil from the Persian Gulf to our Eastern Seaboardhalfway around the worldfor less money than the government charges for delivering a one-ounce letter across the street! The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson. Let societys legal apparatus remove all obstacles the best it can. Permit these creative know-hows freely to flow. Have faith that free men and women will respond to the Invisible Hand. This faith will be confirmed. I, Pencil, seemingly simple though I am, offer the miracle of my creation as testimony that this is a practical faith, as practical as the sun, the rain, a cedar tree, the good earth. How does the pencil's statement confirm the beliefs of capitalism?