This article was originally published by Michael Rectenwald at Mises.org. 

The standard leftist refrain about “advanced capitalism” is that it amounts to “socialism for the rich and capitalism for the poor.” Like most leftist notions, this idea represents almost the exact opposite of the truth. The system they refer to is anything but socialism for the rich and capitalism for the poor. Capitalists do not want socialism for themselves and capitalism for the rest. Capitalists seek profit, which can only come under a capitalist system.

Of course, the phrase “socialism for the rich and capitalism for the poor” is premised on the leftist belief that socialism is obviously beneficial for those living under it, a veritable land of milk and honey, while capitalism is a nefarious, dog-eat-dog, every-man-for-himself “anarchy,” where the dogs fight each other for the scraps and many necessarily starve. Socialism is to be sought and capitalism to be avoided, at all costs. But the truth of the matter is that capitalism is the productive system that creates wealth and rightfully distributes it, while socialism is the consumptive system that restricts the creation of wealth and wrongfully devours it.

Why is this the case? In socializing the means of production, socialism disincentivizes personal, private investment in capital formation, including capital in oneself. Under socialism, private investment in capital resources, including in oneself, is discouraged (or disallowed). Socialism thus favors the noninvestor, the nonproducer, and the nonuser of the means of production and disfavors (or disallows) the private investor, the producer, and the user of the means of production. Therefore, fewer people will undertake these roles, and capital formation will decline; less appropriation of natural resources, less development of new factors of production, and less upkeep of old factors of production will occur.1

Additionally, since investment in productive factors is discouraged (or disallowed), socialism disincentivizes saving and encourages consumption. Since one cannot become a capitalist, there is less reason to save and more reason to spend. The result will be less production of consumer goods, and likewise, a lower standard of living for everyone. Socialism also results in a wasteful use of the means of production because it does not respond to changes in demand. Without entrepreneurs to reallocate capital resources to changing demand and improved means, socialist planning cannot adjust to changes in demand and production. This means that at least the production of less wanted goods and services and possibly even the nonproduction of needed goods and services will result.

It should almost be unnecessary to point out how socialism changes the character of society and even the personalities of those living under it. People under socialism become less adept at producing, innovating, and responding to the changing demands of their fellows. They become less able to adapt. As time under socialism accumulates, they become more and more present-oriented and less prudential.

Contrary to the claims of its advocates, it is socialist—not capitalist production—that is irrational. Its irrationality is due to the elimination of the essential indices for determining rational pro­duction and distribution—namely, prices. Ludwig von Mises showed that prices represent the incredibly thick and vital data sets required for allocating resources to production and calibrating these to demand. Socialism is irrational because by beginning without prices for the factors of production, no rational criteria can ever emerge for allocating resources to specific production processes. Eliminating prices, the socialist economy cannot provide the feedback loops required for determining what to produce, how much of it to produce, or how to produce it. Cancerous, oversized productive capacities in one sector of the economy are par­alleled by relatively anemic productive capacities in another, and so on.

This means that socialism fails not only at resource allocation but also at the economic representation of the people it claims to champion. Absent price mechanisms, economic “voters,” or consumers, have no way to voice their needs and wants. Production and distribution must be based on the non-democratic decision-making of centralized authorities. Furthermore, without any way of having their needs reflected in production, socialism represents anything but “economic democracy.” Those who really care about the working masses must reject socialism for its incapacity to establish economic democracy, its most fundamental reason for being.

Capitalism is the ethical system that respects property rights, beginning with the property in people’s bodies, while socialism is the unethical aggression against property rights, including aggression against ownership in people’s bodies. Without property in one’s body, one is a slave.

Based on “the private ownership of the means of production,” capitalism simply entails the following: 1) persons own their own bodies and can do whatever they want with their bodies, as long as they do not trespass against another’s bodily or other property; 2) whatever persons create with otherwise unclaimed resources or resources for which they have contracted, whenever such action does not entail aggression against another person’s property, becomes their property; 3) the protection of property rights and unfettered exchange, an increasing division of labor, increasing wealth production, and overall improved social welfare.

In short, everything that is taught about capitalism and socialism, like most everything else that is taught in general, is the inverse of the truth.

What is true of political capitalists, however—that is, those who curry favor with the state—is that they seek profit while reducing or eliminating risk, and they pursue state favoritism to gain it. But make no mistake, capitalists of whatever stripe undertake their activities in search of profits. Why then would political capitalists want socialism for themselves and capitalism for others? The short answer is that they don’t. They want capitalism for themselves and socialism for others. That is, they want to monopolize for-profit production by eliminating the property of others while reducing or eliminating their own risk.

In fact, the whole objective of what has been called the Great Reset is the exact inverse of the formula “socialism for the rich and capitalism for the poor.” The Great Reset represents an attempt on the part of a protected class of elite capitalists to form cartels and seek state favoritism to establish capitalism for themselves while effectively consigning the vast majority to socialism. This explains why capitalist corporations, in conjunction with propagandists at the World Economic Forum, are spouting social democratic socialist rhetoric and ideology and pushing a social-democratic socialist agenda.