Rob Hersov: Why capitalism works and socialism does not

Capitalism, marked by private ownership and free-market competition, has proven to drive innovation, prosperity, and personal freedom. In contrast, socialism—with its state ownership and centralized planning—often results in economic inefficiency, scarcity, and oppression. Evidence from the Heritage Index and Legatum Prosperity Index shows that the freest, most capitalist nations are also the wealthiest and most prosperous. History reveals capitalism as a path to growth and choice, while socialism limits freedom and frequently leads to hardship.

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By Rob Hersov, capitalist activist.

While socialists deride capitalism as a heartless system that enables poverty, it is socialism that has led to the deaths of over 100 million people through starvation and violence, and the poverty of countless millions more.

Capitalism is a system in which property is owned by private individuals or companies, and where private enterprise compete in a free market with little government interference.

Socialism is where all property is owned by the state, and the economy is centrally planned by bureaucrats. Almost all enterprise is owned and run by the government.

Many countries combine a bit of both. South Africa has capitalist aspects, as people still own their property, and there exists a semblance of a market where companies compete. But the government also owns many large companies, such as Eskom, and actively interferes in the economy with pervasive regulations.

Despite what many politicians and pseudo-intellectuals may have us believe, the more capitalist a country, the richer and freer it becomes. Conversely, socialism erodes people’s freedoms and has historically led to mass poverty and death. The facts prove this. 

The freer the market, the richer the country

Of the top ten most capitalist countries, according to the Heritage Index, which measures economic freedom, six are also in the top ten richest countries by GDP per capita. Five of the freest economies are also in the top ten most prosperous countries according to the Legatum Prosperity Index 2024, which measures quality of life, healthcare, education, personal freedom, safety and security. All the richest and most prosperous countries score well on the Heritage Index.

Singapore and Taiwan lead the way in economic growth and innovation (Switzerland leads in innovation), while other capitalist countries like Switzerland, New Zealand, Estonia and others are famously prosperous and enjoy a high quality of life.

Contrary to popular misconception, Nordic countries like Sweden, Finland, Denmark and Norway are not socialist, and rank as some of the most capitalist countries in the world, leveraging their free-market policies to make life better for their people.

On the other hand, socialist countries consistently rank as the worst places to live. North Korea is a totalitarian police-state, Venezuela and Zimbabwe have seen their economies become the worst in the world after the adoption of socialist policies, and Cuba is stuck in time, unable to grow or prosper (with loadshedding their newest socialist service non-delivery). This has little to do with sanctions and everything to do with their refusal to allow economic freedom to their people.

Capitalism is informed by reality

Economies are based on countless signals that inform choices. If the supply of a good is down, the price goes up to control its consumption. If more people want something, the price also goes up. This is the best rationing mechanism possible for ensuring that scarce resources are not overconsumed, while incentivising their production. All of this is done almost automatically, as it is all informed by the choices that humans make in the market.

Socialism lacks this price mechanism, relying on central planners to thumb-suck quotas, values and supply and demand figures. There are no independent economic actors to generate signals under socialism, so central planners are left in the dark.

This can lead to shortages of certain resources. In Communist China, central planners redirected mass amounts of food from rural areas to urban centres, as the production numbers were falsified by corrupt officials seeking promotion. This led to starvation across China, eventually killing a conservative estimate of 30 million people between 1960 and 1962.

Capitalism enhances choice and freedom

In socialism, there is one provider. Consumers don’t have a choice between different brands or products. They get what they are mandated to receive by the government.

In capitalism, choice is abundant. As consumers, we can choose between hundreds of different brands all with various flavours, advantages, disadvantages, perks and appeal. If one product disappoints us, we can always try another.

This freedom of choice is not just represented in purchasing a different brand of cereal over another, but in enabling individuals to choose what school they want to educate their children, which healthcare provider they want to care for them, and ultimately how they want to live their life.

Capitalism is the most democratic of systems because it allows people to choose how they want to live their life, and constantly vote with their money.

It is no wonder that socialism always results in tyranny, as the complete control over the economy enables dictators to rule over everyone, stripping them of choice and freedom. While capitalism may lead to income inequality on paper, socialism guarantees the inequality of elites and those they oppress.

Competition leads to excellence

One of the fundamental virtues of capitalism is that it requires companies to constantly compete for success. This drives companies to innovate, drop prices, perform better and do all that they can to deliver the best product or service to their customers.

In socialism, there is one entity. As we can see with monopolies like Eskom, without competition, there is no incentive to perform a job well. Socialism inevitably leads to mediocrity and failure as there is no driving force to keep it performing well.

Capitalism works. Socialism doesn’t.

Capitalism breeds success, innovation and enables freedom. Socialism is lost without price signals, and inevitably leads to shortages, tyranny and death. The freer a countries economy, the richer it becomes. The more we embrace capitalism, the better our society becomes.

Capitalism works. Socialism kills.

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