Saturday 9 November 2013

Capitalism vs Socialism

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, “OK, we will have an experiment in this class on Obama’s plan”.. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. Could not be any simpler than that.

Here are possibly the 5 key points about such an experiment:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Post borrowed with pride from Armstrong Economics



  1. Hi SMOL,

    I have read this somewhere before and I feel this whole story is pretty biased against Obama's reforms.

    We just can't assume that everyone in society has access to the same opportunities (the students have the option to work hard).

    Although I stop short of supporting socialism, I do think capitalism has been taken to the extreme in recent years and it's time for some form of a rollback.

    1. Hello 15 HWW,

      I was in my secondary school days when Reagan and Thatcher were in power. Let's say they left a very strong imprint on me on - that''s what I call leadership ;)

      Extremes at both ends of the pendulum are never ideal.

      Using the same classroom metaphor, If SOME of the bright students would volunteer to help and tutor the weaker students who ASKED for help, the world would be more equitable.

      Some students are perfectly OK with bad grades - they have other interests in life besides grades - who are we to judge?.

      Some students just want to be left alone - good grades bad grades it's none of our business.. Having good grades is not a crime.

      Denmark is a good country for those who like socialism,

      After taxes, a garbage collector makes almost the same as a lawyer.

      Beautiful country and even more beautiful blondes!

      But man! The prices are so pretty too!

      Can be pretty hard for Asian parents to use the study hard so can get high paying job mantra though... :(


  2. Hi SMOL,

    I agree with you that the extremes are hardly ideal. In fact, the extremes are actually quite insane.

    If the students are left alone, I doubt that a healthy outcome would be observed. 4 years in a boy school would help to attest to that.

    Therefore the teacher plays an important role and wouldnt it be better if the smarter students are incentivized/forced to help the weaker ones?

    1. 15 HWW,

      Ha ha! I also spent 4 years in a boy school.

      I'm more a small government kind of guy. I like the HK model before 97 ;)

  3. So Capitalism always pays very well for people who use a lot of brain power and very little for people who use their muscle power. This reminds me of NICK VUJICIC.
    Can anyone beat him in this world, relatively speaking? Imagine he has to use muscle power to earn a living.
    So is he better in a Capitalist or Socialist system?
    i say you just have to do your best in whatever system or be contented.

    1. temperament,

      Wise words indeed.

      If I am found in a system that does not support my well being and happiness, I will do what my forebears have done - and what many are still doing today.

      Not like the brazen giant of Greek fame,
      With conquering limbs astride from land to land;
      Here at our sea-washed, sunset gates shall stand
      A mighty woman with a torch, whose flame
      Is the imprisoned lightning, and her name
      Mother of Exiles. From her beacon-hand
      Glows world-wide welcome; her mild eyes command
      The air-bridged harbor that twin cities frame.
      "Keep ancient lands, your storied pomp!" cries she
      With silent lips. "Give me your tired, your poor,
      Your huddled masses yearning to breathe free,
      The wretched refuse of your teeming shore.
      Send these, the homeless, tempest-tost to me,
      I lift my lamp beside the golden door!"

  4. Wah!
    SMOL, so poetic. i like.

  5. isn't that obvious?

    we advance through brains and not muscle power.

  6. Ha! Ha!
    Coconut, you are right.
    Whether Capitalist or Communist, it's always better to be a pig than any other animals. Brain usually exploit muscle. Even the principle of mechanical leverage say so. So those who take risks in the markets must be some kinds of pig? Me? No lah i sweat a lot to earn my living. Take a lot of risks ma.

  7. wah temperament, i didn't know your english so powerful, haha, i need sometime to understand what you were saying.

  8. Ha! Ha!
    coconut, how can it be? you are a trader i am just prodding along in the market as a thick skin "PAK SEE BEH CHOW". i think SMOL will agree.

  9. 1) temperament,

    I have full confidence you can fight your own battles ;)

    Don''t drag me along as "we". LOL!

    2) coconut,

    See lah! Read science textbooks never read literature... Go read Animal Farm - a very good satire on Communism ;)

    1. i go for facts, not friction. i went to reality, not fantasy.

      how? my literature good or not?

    2. you cannot immagin how quiet this market is this morning, i think i better plan my year end get away.

    3. the entire market is like bees nest, need someone to stir things up.

  10. Ha! Ha!
    coconut, do you agree sometimes "The truth is stranger than Fiction"? i do. i rather believe in the fiction rather than the truth. That's also why i get slaughtered in the market sometimes.
    Anyway how is life going to go on if we don't have to sort out daily what is fact and what is fiction? Boring, isn't it? But we all have to tell a story sometimes, don't we? This is the time, we may want to mix a little fiction with facts to make our listeners laugh. Ha! Ha!

    1. yes i do, but we feel strange becos we are stuck in fiction or presumption and we did not realised it.

      on the other hand, if we keep our foot on reality, than many things that many people do will invertably becomes very strange (and foolish).

      i do agree with you that life is pretty boring if we keep our mind in reality. and human as a whole will not advance if is not becos of these fiction and fantasy that we have.

  11. Ha! Ha!
    Now i see, you see! You see, i see! Hopefully, all who can see, see.

    1. coconut and temperament,

      Life is indeed boring and harsh in reality - we born; we die. That's about it!

      Must add a bit of fantasies and illusions here and there to spice things up a bit ;)

    2. "cha lat"! thats a real sign of getting older and older.

  12. Ha! Ha!
    I remember an old Cantonese movie where this man is given the gift of eternal life on Earth but nothing else. So he lives through Life of plenty, famine and war and everything else life can throw at a person. He grows so tired of living that he begs the gift of eternal life be revoked. He wants to live like an ordinary mortal again.
    So do you want Eternal Life on Earth if you can have it but nothing else?

    1. temperament,

      Living can be a curse; dying can be release.

      The trees have eternal life; but what good if they do not bloom?

      Who will remember the flowers that wither away last season?

  13. Hi SMOL,


    Let's take this example to it's logical socialist conclusion.

    "From each according to his ability, to each according to his needs" - this phrase is the key idea behind socialism, and in no way did I see it being exercised in this example.

    In a socialist model, students who are not interested in studying (which is a form of labor), do not have to study because that's not where they best talents are to be found. People who are naturally talented in studying will instinctively want to do well in it regardless of how the grades are eventually distributed because there's a certain pride in doing so. In such a society, "after the enslaving subordination of the individual to the division of labor. and therewith also the antithesis between mental and physical labor, has vanished; after labor has become not only a means of life but life's prime want", there's no other place for people to labor except where he is doing the kind of labor best suited for his talents and skill, hence the phrase "from each according to his ability".

    Idealistic of course, but we're talking about models and hypotheticals, aren't we?

    "To each according to his need" will imply that the marks are awarded to those who needs it the most. Socialism doesn't mean that everyone will get the same marks. Perhaps this person needs a higher mark to pass a certain module, he'll get the most marks. Someone who scores very well in previous exams don't need such a high marks, hence he'll have a lower mark. The best in this test will still contribute to the best of his ability because he is doing so out of the good of the society, and his labor is given free to others because firstly, he can do so easily with little effort and second, he don't need it as well as others. Why do you need anything more than a 50%? Getting more and more marks is a classic accumulation of capital, antithesis to the idea of socialism. You should be given only as many marks as you need.

    Pass it forward. Eventually, when your'e in need, you know that someone else with that particular talent will help you in return. And that makes you want to return back to society as well in the future.

    Isn't such a society beautiful?

    1. LP,

      Humans have been searching for their "Camelot" since the beginning of time. That's the fantasy and illusion of an equitable life...

      The Tang dynasty was built on trade and tributaries from vassal states. To the Chinese its our golden era. Anyone asked how the people from the vassal states felt?

      Same goes for Rome at its zenith. Were it not due to the exploits of slaves and spoils of conquests?

      Somebody gives; somebody takes.

      You know what?

      "To each according to his need" will imply that the marks are awarded to those who needs it the most.

      I not even sure it works in practice at the family level for most families ;)


  14. Hi SMOL,

    I understand that it's idealistic. Of course it is. Somebody gives, somebody will take. I know that too. But I think you're still stuck in the old capitalistic model where we're rewarded according to our mode of production. That's the world we grew up and that's reality.

    I'm saying that that we should give another system a shot since this system didn't really work out. I really look forward to how Switzerland is like in the next few years. Quite a few ground breaking changes there. Hopefully that will be the new social-economic model of how other nations should be.


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