Capitalism = Communism

I can imagine a common initial reaction to the title of this blog post being, “How preposterous!” After all, capitalism and communism are supposed to be diametrically opposed economic systems. But before I get into explaining what I mean by capitalism and communism being equal, I should first explain what I DON’T mean. First of all, I’m not suggesting that capitalism and communism are equally good; I’m not even suggesting that capitalism and communism are equally bad. What the title of this blog post means is that, if you allow for true free market capitalism, the end result of that is, inevitably… that’s right, it’s very polar opposite: communism!

Let’s start with the fact that true free market capitalism has never actually existed. I’m amazed at how many people swear by an economic system that nobody has ever experienced! Communism does have a track record, but it’s pretty terrible. The certain forms of communism that have existed have been mostly implemented under oppressive totalitarian regimes. So, on the one hand, we have a fairy tale economic system nobody’s ever seen. On the other hand, we have an economic system that’s been mostly disastrous whenever it’s happened. Still, by engaging in a careful thought experiment, we can quickly see how true free market capitalism ends up becoming communism (perhaps without the pesky totalitarian regime).

First, the basics: free market capitalism consists of the idea that all the needs of society are perfectly met through the supply and demand of the free market, without any government interference whatsoever. In other words, people need and want stuff, other people make stuff, they all come together and exchange according to what everybody is able to make and what everybody needs and wants. Sounds pretty good so far, right?

The greatest point of tension in free market capitalism, much more so than figuring out what stuff to make that people need and want, is determining how much the business owners should pay the workers. In order to maximize profit, the business owners want to pay their workers as little as possible. But in order to work, the workers want to get paid as much as possible. So, how do they resolve this impasse? Well, the business owners can all meet together and agree that none of them will pay workers more than a certain amount for their labor. That way, the workers get paid the same no matter which business they work for. But wait! The workers can organize, as well, and refuse to work unless they get paid what they feel they deserve. The business owners quickly realize that without workers, they cannot even have a business, much less make any profit. So they decide to negotiate with the workers.

The workers soon realize that they have all the leverage. They are more numerous, and the owners depend on them to conduct business. As a result, the workers demand more and more pay and benefits for their work. Eventually, the workers demand enough money to afford a significant amount of leisure time as well as the ability to help out the members of their family and community who aren’t able to work due to age, illness, disability, or having a liberal arts degree. The final equilibrium is reached when the distinction between worker and business owner becomes practically insignificant, to the point that the workers themselves are, for all intents and purposes, the virtual, if not the actual, owners of the businesses. Doesn’t this sound a whole lot like communism?