by Michael Greaney

Created on: April 29, 2009

The question whether you prefer capitalism or socialism is a little like the old joke about the hobo who comes to the back door and asks the tired and harried housewife if she could help a poor man out of his misery. "Certainly," she responds. "Would you rather be shot, or hit with an ax?"

Frankly, for the poor and, increasingly, many of the working class, the only difference between capitalism and socialism is which word you use to describe the situation. Capitalism, classically defined (the term was invented by the socialists as a pejorative), means a system in which the vast bulk of productive and financial capital is owned by a small private elite, and the great mass of people (the rest of us) work for that elite, selling our labor for wages.

Socialism, using the definition developed by the quintessential socialist, Karl Marx, in "The Communist Manifesto," can (as Marx declares) be summed up in a single sentence: the abolition of private property. Under socialism, the means of production as well as the means of acquiring and possessing property is owned directly or controlled ("ownership" and "control" are synonymous in law) by the State. That is, both productive capital and financial capital are under the control of the State, which determines who can own, or if anybody can own at all. A relatively small elite of State bureaucrats effectively owns the vast bulk of productive and financial capital, and the great mass of people (the rest of us) work for that elite, selling our labor for wages.

Still, if forced to choose, capitalism is to be preferred over socialism. Capitalism, while it effectively shuts the vast majority of people off from the means of acquiring and possessing property, at least recognizes and acknowledges that private property, however distorted the understanding, is a "natural right," that is, a necessary and inherent part of what it means to be a human person.

Capitalists do not, as a rule, admit that there are effective barriers that exist that prevent most people from becoming owners. Due in large measure to erroneous beliefs about money, banking, credit, and (especially) the science of finance, the concentration of ownership in the hands of a small elite in capitalism is usually believed to be necessary, even beneficial. This is in spite of the fact that concentrated ownership of the means of production and relying on existing savings to finance capital formation actually inhibits growth and causes wide swings in the business cycle, as

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