A Tale of Two Cities (Apologies to Charles Dickens)

Socialism

The driving force behind socialism is the thought that everyone is equal. How this plays out in reality is another matter. Enforced equality is generated by redistribution of wealth and income, one of the basic tenants of Socialism (and Australian Labor and the USA Democrats).

So under Socialism, a businessman is allowed to set up a business making widgets and to do this he employs people. He makes his widgets and sells them on the market to consumers. He ends up making a profit after paying for materials to make the widgets, paying wages to those he employs to construct the widgets, paying taxes on his profit after deductions. The businessman ends up with a tidy sum, and thanks to his entrepreneurial skills, can afford to buy a bigger house, a better car, take more holidays and generally have a better standard of living than those he employs. He is also paying a much larger amount in taxes than those he employs.

Those taxes, along with the taxes of the employed, are used to construct roads, build hospitals, pay teachers, employ police, fireman and bureaucrats, including politicians.

The businessman’s income is such that his lifestyle upsets some other members of society who feel that they are being exploited to fund his lifestyle. They want part of his largess. They convince certain politicians to increase taxes of widgets, which delivers more money to bureaucrats to spend on hospitals etc.

This is where it gets tricky, because the widgets are wanted by all, but they have become more expensive because the tax increase has forced the price of widgets up, the businessman has increased his prices to keep his income the same. The politicians are not happy with this so they introduce new taxes so that the workers can have more pay, more bureaucrats are employed to distribute the new taxes. This has a

crippling effect on the business as less employees are available to work as the bureaucrats are being paid more and with better conditions than those who actually do constructive work making the widgets. So more workers choose to be bureaucrats than constructive widget workers.

The businessman sees that things are tough so he turns down production and because of supply and demand action he actually sees that the price of widgets increases, but he is employing less, but paying more taxes. As his company grew, so did the bureaucracies that end up competing with his enterprise in terms of workers and resources.

The workers unite to form unions to demand more wealth and cut off the means of production from the widget maker. He is distraught, the government despises him because he is a fat cat hoarding money away from the exploited workers who are defended by the bureaucrats that sponge upon such workers.

The businessman throws the towel in and closes up shop and sets up production in Africa.

Now the quality of life is abject in Widgetland as the workers have no jobs but demand income from bureaucrats that are also receiving no funds as the taxpayer have disappeared. The government borrows to pay the teeming hordes, but soon finds that the banks will only go so far and the Land of Widget becomes a failed state. Everyone loses everything and it is all owned by a foreign entity.

Capitalism

The driving force behind capitalism is the thought that everyone is not equal. How this plays out in reality is much like nature intended. Everyone have the right to make themselves what they can out of what resources they can utilise, one of the basic tenants of capitalism (and Australian Liberal and USA Republicans).

Under Capitalism, a businessman is allowed to set up a business making widgets and to do this he employs people. He makes his widgets and sells them on the market to consumers. He ends up making a profit after paying for materials to make the widgets, paying wages to those he employs to construct the widgets, paying taxes on his profit after deductions. The businessman ends up with a tidy sum, and thanks to his entrepreneurial skills, can afford to buy a bigger house, a better car, take more holidays and generally have a better standard of living than those he employs. He is also paying a much larger amount in taxes than those he employs.

Those taxes, along with the taxes of the employed, are used to construct roads, build hospitals, pay teachers, employ police, fireman and bureaucrats, including politicians.

The businessman’s income is such that his lifestyle upsets some other members of society who feel that they are being exploited to fund his lifestyle. They want part of his largess. This is where the story differs, because those employees who want a larger share go and see the businessman and convince him that if they can up their individual production then they should receive a larger share of the profits. The businessman thinks this through and agrees to individual contracts to reward those that deliver more.

As the Widgets are being turned out in greater numbers, the cost goes down and more are being bought, taxes are increased with more sales, income and profit, all without the interference of any bureaucracy.

More people are employed being constructive, incomes are rising and taxes are increasing. More is available for better roads, hospitals and teachers. Police numbers are not required to jump as mostly everyone is busy being productive and consuming and using the widgets being made.

The businessman throws a party and opens another factory in Widgetland.

The workers are happy and compete against each other in a desire to be above one another, competition is played out in work, sports, daily life, things get better as society improves.

Quality of life is great in Widgetland, so much so that the bankers seek out the government to see if they can invest the spare cash in other enterprises. The land of Widget thrives.