You didn’t build that!

“You didn’t build that.” President Obama made this (in)famous statement to justify increasing taxes on successful people to even higher levels. It is questionable, to say the least, whether even higher taxes on successful people is good policy or not. But President Obama was absolutely correct that when people in society work together, they achieve vastly more than is possible working alone. One of the distinguishing features of the modern free market economy is the extent of collaboration observable in every nook and cranny of the country.

It wasn’t that long ago that a handy person could build their own home, repair their own car, grow and hunt their own food, and live life as a “rugged individualist”. No longer. Today we depend on each other; we rely on the collaboration of strangers for our daily living. This is not a bad thing. Our lives are more comfortable and filled with amazing stuff that our grandparents could hardly imagine. This widespread collaboration is the natural outcome of free people living in free markets; an engine for advancing civilization.

My contention is that a free-market economy is fertile ground for collaboration and a socialist economy is not. The intense collaboration we observe in free economies could not happen in a socialist economy. Let me explain why I believe this is true.

Often, critics of socialism, myself included, will stress the essential efficiency of a free-market economy compared to a socialist economy. Competition, the argument goes, drives entrepreneurs to seek out the most profitable way to supply society with the goods and services that people want and are willing to pay for. Firms are motivated to produce these goods at the lowest possible cost, achieving an affordable abundance for society. Socialism, on the other hand, is notoriously inefficient. There is no self-regulating competition to guide the economy to use resources carefully to produce the right goods. The state determines what resources are to be used to produce goods and services for the people, whether they want them or not.

While critics may be correct that socialism is inefficient, an emphasis on the greater efficiency of free economies misses the more important difference between free and socialist economies. A free economy encourages individuals towards collaboration in socially constructive ways while a socialist economy motivates individuals to “game the system” and engage in socially degenerative behavior.

In a free economy, the operating moral principle is justice; each person is entitled to their just desserts. Each person earns their own way. That is the basis on which strangers in a free economy are able to successfully conduct business. Each party voluntarily serves the wants of the other party in return for a just price or fair wage; a price negotiated without compulsion other than a desire to collaborate for mutual gain.

In a socialist economy the operating moral principle is equality; not the concept of equality before the Creator and the Law that is inscribed in the Declaration of Independence, but the “Progressive/Socialist” concept of equality that each person is entitled to an equal share of the output produced by society. “From each according to their ability to each according to their need.” Since that form of equality runs counter to self-interested human nature, the power of the state is required to induce collaboration among strangers. Even with the power of the state, the socialist principle of equality does not work well in practice. Equal shares for unequal work-effort result in shirking, or worse. Black markets emerge to satisfy unmet wants, with a corresponding loss of respect for the state. Respect for one another is also diminished, as some people learn how to game the system to the disadvantage of others. Soon the “better angels” of human nature are only visible to family members and close friends. Collaboration is harder to achieve, since the rewards of collaboration are mostly diffused among strangers.

Here again is the main point. Free people in free economies encourage and reward collaborative behavior to the overall benefit of society. Socialist economies motivate shirking and selfish, anti-social behavior. Advocates of socialism mistakenly think and act as if they occupy the moral high ground in the debate with free economies. Nothing could be further from the truth. Socialism leads to self-demeaning human behavior, gaming the system and shirking one’s duties. Free economies reward those who best serve their fellow citizens with profits honestly earned. A free economy is the morally superior system by which to organize society. As history has proven over and over again.