Capitalism works in concert with human nature while socialism works against it. “From each according to his ability, to each according to his needs.” That famous quotation from Karl Marx is at the heart of communism and socialism. It runs completely contrary to human nature. As a general rule, people will work hard for themselves and their families, but it’s considered an imposition so large that only God can ask them to pay other people’s bills without resentment. Put another way, the vast majority of human beings care far more about what they’re going to eat for lunch today than they do about whether someone they’ve never met can pay his rent. (PS: And most of the people who claim to be part of that exceptional few are lying).
Capitalism, on the other hand, relies on a philosophy best described by Adam Smith. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.
Because capitalism works hand in hand with human nature and asks people to serve themselves as they serve others, it creates a much more productive society that gets the maximum out of its citizenry.
Capitalism rewards merit. Socialism rewards mediocrity. Who gets rewarded in a capitalist society? People who can produce. If you come up with a hot new product, give people a service they want, or entertain them better than they can find elsewhere, they will pay you handsomely to do it. Some people complain about the people who get rewarded in a free market. Why should Peyton Manning make so much more than a school teacher? Why should a bank CEO make so much more than a teller at the same bank? Capitalism offers a simple solution to that problem: If the market rewards NFL quarterbacks and CEOs more than teachers and tellers, you can become a quarterback or a CEO — if you’re capable. If you can’t and you don’t like what you get paid as a teacher or a teller, the good news is that you’re free to move on to somewhere that better rewards your talents. In this fashion, capitalism encourages people to make the best use of their talents.
Conversely, socialism rewards people for failure. Can’t find a job? Great, here’s your welfare and your food stamps. You haven’t worked in a year and a half? Fantastic, we’ll keep incentivizing you not to work by extending your unemployment insurance. Are you a mediocrity who is so unskilled and unambitious that you’ll stay at the lowest paying job you can find long-term instead of learning from it and moving on? No problem! We’ll raise the minimum wage for you.
If you incentivize success like capitalism does, you get more growth, prosperity, and success. If you incentivize failure like socialism does, you get more sloth, poverty, and failure.