Let’s start by looking at what capitalism is.
19.1.2. Socialism
Let’s contrast that with socialism:
Socialism, in contrast is a system where:
The government owns the businesses (sometimes called “government services”)
The government decides what to make and what the price is
The government then may hire wage-laborers at predetermined rates for their work, and the excess business profits or losses are handled by the government
For example, loses are covered by taxes, and excess may pay for other government services or go directly to the people (e.g., Alaska uses its oil profits to pay people to live there).
For example, there is one Seattle City Sewer system, which is run by the government. Having many competing sewer systems could actually make a big mess of the underground pipe system.
19.1.3. Accountability in Capitalism and Socialism
In socialism, business decisions are held accountable to government leaders.
Democratic Socialism (i.e., “Socialists”)
With socialism in a representative democracy (i.e., “democratic socialism”), the government leaders are chosen by the people through voting. And so, while the governmental leaders are in charge of what gets made, how much it costs, and who gets it, those leaders are accountable to the voters. So, in a democratic socialist government, theoretically every voter has an equal say in business (or government service) decisions.
Note, that there are limitations, like the government leaders might ignore voters’ wishes, and there are people who can’t vote (e.g., the young, non-citizens, oppressed minorities) and therefore don’t get a say.
Capitalism
In capitalism, business decisions are accountable to the people who own the business, that is the shareholders. The more money someone has invested in a company, the more say they have. And generally in a capitalist system, the rich have the most say in what happens, and the poor have very little say in what happens.
When shareholders buy stocks in a company, they are owed a percentage of the profits. Therefore it is the company leaders’ fiduciary duty to maximize the profits of the company. If the leader of the company (e.g., the CEO) intentionally makes a decision that they know will reduce the company’s profits, then they are cheating the shareholders out of money the shareholders could have had (CEOs mistakenly do things that lose money all the time, but we’re talking here about intentional violations of fiduciary duty). There are many ways a CEO might intentionally lower profits, such as by having their company pay more than necessary when buying something from the CEO’s friend’s company. But even if a CEO decides to reduce profits for a good reason (e.g., it may be unethical to overwork the employees), then they may be violating their fiduciary duty.
For example, the actor Stellan Skarsgård complained that in the film industry, it didn’t matter if a company was making good movies at a profit. If there was an opportunity for more profit by making worse movies, then that is what happens:
“When raw market forces come in, [movie] studios start being run by companies that don’t care if they’re dealing in films or toothpaste so long as they get their 10% [return]. When AT&T took over Time Warner, it immediately told HBO to become lighter and more commercial. They were always making money. But not enough for an investor.”
Or as another example, if the richest man in the world offers to buy out a social media site for more than it’s worth, then it is the fiduciary duty of the leaders of the social media site to accept that offer. It doesn’t matter if it is clear that this rich man doesn’t know what he is doing and is likely to destroy the social media site, the fiduciary duty of the company leaders is to get as much money as possible to their shareholders, and they can’t beat being overpaid by the richest man in the world.
Other Accontability Models
Besides shareholder owned businesses in capitalism, and government services in socialism, there are other accountability models as well. For example:
In a privately owned business or organization, the owner has full say on what happens, and is free to make it as unprofitable or profitable as they want. Though, if the private ownership purchase is made with loans, then they have some responsibilities to the lenders.
In a publicly funded organization, non-profit organization, or crowd funded project (e.g., Wikipedia, NPR, Kickstarter projects, Patreon creators), the investors (or donors) are not investing in profits from the organization, but instead are investing in the product or work the organization produces. Therefore the responsibility to investors is not to make profits, but to do the work investors are paying for. In this model, the more money someone invests or donates, the more say they have over what the organization does (like capitalism, and unlike democratic socialism). For example, when buying groceries, you might let the grocery store take an extra $5 from you to give to a charity that gives food to the needy. Then the grocery store corporation will give $5 to the charity, but the corporation also gets $5 more say in how the charity operates (and they can pressure the charity to not do anything that hurts the corporation’s profits).
19.1.2. Socialism#
Let’s contrast that with socialism:
Socialism, in contrast is a system where:
The government owns the businesses (sometimes called “government services”)
The government decides what to make and what the price is
the price might be free, like with public schools, or public streets and highways
The government then may hire wage-laborers at predetermined rates for their work, and the excess business profits or losses are handled by the government
For example, loses are covered by taxes, and excess may pay for other government services or go directly to the people (e.g., Alaska uses its oil profits to pay people to live there).
For example, there is one Seattle City Sewer system, which is run by the government. Having many competing sewer systems could actually make a big mess of the underground pipe system.