Capitalism, Socialism and Interventionism - Open and Closed Systems
Although there have many "isms" to designate the various social systems that have existed throughout history there are basically only three. They are Capitalism, Socialism and Interventionism. All the "isms" can be placed in one of these three categories.
- Capitalism is an economic concept of civilization that is based on the private ownership and control of the means of production.
- Socialism is a system of social organization that calls for public (state) ownership of the means of production. The totalitarian state owns everything and everyone's life.
- Interventionism is the practice of government interference in the marketplace. The market economy is legally hampered.
I owe the above definitions to Percy L. Greaves' book "Mises Made Easier."
We must determine which system is an open system and the most effective for individuals to achieve their dreams and desires.
The Law of Entropy
Since I am not a physicist I am keeping this simple with a short explanation of how the law of entropy works. Let's say we're converting coal into energy to power a steam-driven piston. Most, but not all of it is turned into motion. Some of the energy will be lost.
Another effect is that eventually the machine wears out from the movement of the piston. So you have the effect of lost energy and the machine eventually breaking down.
The law of entropy also tells us that the universe is expanding into a state of increasing disorder or increasing entropy.
The question is: Why does it seem that some things in the universe are tending towards increased order? Doesn't this violate the laws of entropy (second law of thermodynamics)?
Open Systems
Ilya Prigogine solved and answered the above questions. He discovered order emerges because of the disorder (chaos). Evolution and growth are the inevitable consequences of open systems falling into temporary chaos and then reorganizing at higher levels of functioning.
Open systems take in energy and matter from their environment. They then dissipate the resulting entropy into the system and into the environment. What this means is that the system handles both growth and adversity to reorganize at a higher level.
When any system reaches it limits (threshold), it either becomes chaotic and breaks down—or reorganizes at a higher level. Which route it takes is determined by how efficient and adaptable the system is. An inefficient system collapses in chaos. An efficient system reorganizes at a higher level.
I would like to thank Bill Harris for the above information which was adapted from his book "Thresholds Of The Mind."
Before we proceed I would like to remind you that physics is an inductive system—Praxeology (Economics) is a deductive system. You can't apply mechanical laws to economics—although many anti-libertarian "economists" have tried. Fortunately the concept of an open system can be applied both to deductive and inductive reasoning.
Now let's discover which social system is an open system that best meets the needs of its men and women.
Socialism
*Socialism is a system where the state owns the means of production. Individuals can only follow the orders of those in charge. They are restricted in the actions they can take to improve their well-being. Instead of the decisions of millions determining the organization of society, only a few make the decisions.
Can you imagine how stifled a system is when only a few people are able to freely use the information that is necessary for successful action? Plus when economic calculation is eliminated a vital source of information for the growth of a society is gone. The compass of successful action is no longer available. There is no gauge of success and failure. The system has closed down. It does not reorganize at a higher level.
It is obvious that socialism is a closed system. It tends toward chaos and disintegration. People become impoverished and deprived. A few benefit at the expense of everyone else. I could supply you with thousands of pages of economic theory explaining why socialism is doomed to failure. However I think the facts speak for themselves. It actually did collapse because of its inability to adapt to change.
Socialism can't and never will work because it is a closed system that quickly stifles and chokes off individual initiative. The impossibility of economic calculation in a purely socialist system is enough to permanently cripple it. The fact that socialism prevents the free flow of information dooms it to chaos and eventual collapse.
*The terms socialism and communism are interchangeable.
Interventionism
In a system of interventionism the government interferes with the market place in order to benefit some at the expense of others. Government officials and do-gooders tell you that they are only trying to improve the efficacy of the marketplace by eliminating injustice. However I think the negative results of their interference show this is absurd.
Economic theory demonstrates that all government intervention in the economy violates economic law and has undesirable consequences. It worsens the situation—even from the point of view of its advocates.
As will be demonstrated, capitalism is an open system. All interference with it cuts off its "vital force" and moves it closer to the closed system of socialism.
Interventionism is futile and self defeating because it gradually sabotages the smooth functioning of the system. And it destroys people's hopes, dreams and ambitions.
All government intervention delays progress, limits the systems adaptability and lowers its threshold. The laws of praxeology (human action) demonstrate this. The results—a violation of individual rights, limiting of individual choice, destruction of currency, corruption, wars, etc. Of course as the systems adaptability is hampered so is the individual's adaptability hampered. As the system threshold is lowered so is the threshold of its individuals.
Once a system of extreme government intervention breaks down, which it must inevitably do, it is usually replaced by something worse. This doesn't bode well for the Western World. The only reason the fall of communism led to a semi free market renaissance was because of the existence of semi free markets in the Western World. Otherwise is would have crumbled into hopelessness and despair.
Government intervention leads to a breakdown of the system. Since it is a restricted system that finally becomes closed, there is no reorganizing at a higher level. What replaces it is a totalitarian system. This is why countries end up be run by the Stalins, Hitlers, Mussolinis etc..
Of course it is always possible in a democracy that the citizens will rebel against government intervention and demand that their liberty and freedom be restored. The ensuing chaos could then lead to pure Libertarianism--with a social system of unhampered capitalism.
Capitalism
In a system of unhampered capitalism everyone is free to choose. All voluntary exchanges are legal. It is a completely open system. *The government's only function is to protect life, liberty and property. Involuntary exchanges are illegal because these types of anti-social activities interfere with an individual's freedom of choice. Obviously if someone's freedom of choice is violated, his opportunities for success in life are limited. As more people's freedom of choice is restricted the system moves towards being closed. It becomes unable to adapt to change and adversity.
Economic theory conclusively proves that unhampered capitalism is the only system that can result in the happiness and prosperity that individuals desire. Realizing that the social system of unhampered capitalism is the only arrangement of society's activities that constitute an open system, we can come to the conclusion that all other systems will result in the misery, poverty and degradation of the masses.
Only unhampered capitalism is an open system that can grow and thrive. If it ever does reach a breaking point it will evolve to a much higher state of organization.
Although Karl Marx is considered capitalism's greatest enemy—Marxism being one of the deadliest curses in the history of mankind—he was correct on one point. A system of pure unhampered capitalism will lead to a new "utopia". What must be understood is that the new system would also have to be unhampered for it to evolve into another higher state of organization.
When an open system such as capitalism finally reaches its threshold what replaces it is vastly superior. Basically it is still unhampered capitalism, but at a much higher state of existence. The productivity of labor and the standard of living is so high that what follows is a society based on the spiritual. Production is mental and spiritual.
Imagine this: Instead of having to work 40 to 60 hours a week you only have to work one hour to accomplish the same standard of living. It is almost hard to envision what would follow. What does an incredibly advanced society produce? One thing for certain is that superior spiritual and mental powers are unleashed which results in a standard of living unheard of in our present state of development.
Unhampered capitalism is an open system that corresponds to the needs of individuals. It allows them to expand their powers—and one day reach a state of higher awareness that will propel them into a glorious future.
*A case can be made for abolishing the institute of Government.
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