Can socialism and capitalism coexist peacefully in the same economy? Friedrich Hayek argued not, and in The Road To Serfdom he described why central planning and free markets are fundamentally at odds. For his insights into the interdependence of markets and political institutions, Hayek was a shared recipient of the 1974 Nobel Prize in economics.
Even though capitalism and socialism clash, individual champions of the free market can peacefully coexist with champions of central planning—in a market setting, at least. While visiting a local college campus recently, I was struck by the realization that among the shops located in a strip mall across the street, was one owned by a free market capitalist, and another owned by a couple of social/economic planners. The mall ‘conflict,’ however, was limited to how many student dollars each business could attract—a market function.
One of the shops in that mall is Ben & Jerry’s Ice Cream. This premium ice cream business was founded by Ben Cohen, long time champion and supporter of corporate social responsibility, social activism, and political candidates who favor market intervention in the interest of societal goals.
Adjacent to Ben & Jerry’s is the local Whole Foods grocery. Whole Foods’ founder John Mackey is a self-described libertarian and pro-market capitalist.
In the strip mall, central planners and laissez-faire capitalists coexist peacefully because they both benefit from the workings of the market, a situation that each understands. Conquest means wining over customers, not geography or ideology.
The cooperative process works on an international scale as well. Vernon Smith, 2002 winner of the Nobel Prize in economics, argues that globalization is not only inevitable, it is good for freedom as well as prosperity. Where culture, politics, and values often clash, “If goods don’t cross borders,” Smith notes, “soldiers will.”
There is good reason to suppose that free markets support peaceful cooperation and reduce the potential for conflict, armed or otherwise. Since everyone wants some things that they cannot produce and do not have, it can pay to participate in market exchange, no matter what your political view. The alternative, of course, is for one party to seize what it lacks by force, a winner vs. loser outcome.
In contrast, market activity relies on a competitive process. There are no guarantees of success. Markets focus on the process of coordinating plans and satisfying customers, not the final pattern of payments to workers, or level of goods that are consumed. If customers are happy, plans mesh and everyone wins.
Socialism, by contrast, is politically, ideologically, and economically antagonistic to an open-ended process. For socialist economies, it is very important to guarantee “fair” or “best” outcomes ahead of time. Socialist thinkers like to characterize unsuccessful market outcomes as ‘unfair’ or exploitative. Socialism in practice means that final incomes, the use of resources, prices and wages, and even the choice of occupations must be determined in advance by a central policy-making board, or the like. Otherwise, the pattern of prices, wages, occupations and output is likely to be different from the pattern that planners decide is “best” for society.
Interestingly, both Whole Foods and Ben & Jerry’s have been the target of criticism from labor unions. Union activists have complained about Whole Foods’ market success, employee participation in management, and all decisions that do not place ‘progressive,’ social-activist concerns above economic ones. The union position: higher company earnings should translate immediately into higher worker compensation. The union has made little headway to date.
Ben & Jerry’s hasn’t escaped union attention, either. The company that prides itself on socially responsible policies balked at attempts to unionize workers. According to owners, workers didn’t need a union because they already receive above-average compensation.
In the end, Ben & Jerry’s decided that an anti-union stance is just good business. That sounds a lot like market-induced incentives and the profit motive at work. And so it is.