The basic folly of communism is why should people go all out to work hard if they are going to get paid the same as all of the other workers anyway? Forced equality destroys incentive, at least on a large scale.
But on the other hand, implementing capitalism risks allowing a few people to set up the system to suit themselves so that the rich get richer and the poor get poorer. If this capitalist wealth disparity goes too far, the general population will not have enough money to buy all of the consumer goods being produced, inviting the production cutbacks which result in recession and possibly economic collapse.
Pay workers too much relative to the work that they do and it will just even out in the form of inflation. But pay workers too little relative to the cost of the goods and services that they are producing and it will leave goods and services unsold. Since it does not make sense to produce goods and services that are not going to sell, producers will cut back and lay off workers, who will then do less consumer spending, feeding a recession spiral.
A household budget can be considered as a simple realm, while a national budget is a complex realm. In a household budget, money tends to be either absolutely saved or absolutely wasted. But in a national budget, such is not the case. If a government tries to save money by laying off workers, it only means that their consumer spending will be curtailed and the government's tax revenue will be decreased. It will also likely lead to other layoffs, adding to the recessionary spiral so that the money "saved" by laying off workers is not as absolutely saved as it would be in a household budget.
Likewise, money that the government "wastes" by paying workers that it may be able to do without is not absolutely wasted, as it would be in a household budget. Those workers will spend the money, thus stimulating the economy in general and increasing the government's tax revenues. The real risk in paying out too much money relative to the work being done is inflation.
Workers must work enough hours for the economy to reach desired levels of production. But once again, balance is required because there is more involved than economics alone. If they work too many hours, they do not have time to read and exercise and this is destructive in the long-term. More children will be home without their parents around, possibly inviting trouble. Workers will also be at less than their best per hour worked. Put simply, having workers work 30% more hours does not usually result in 30% more productivity.
People require a certain level of stress to be at their most productive. But too much stress produces more criminals, which are a tremendous drain on society. In a way, the best economic system is not the one which produces the most overall wealth, but the one which produces the lowest crime rate and the fewest number of people in prison.
The free market utilizes the thinking of a vast number of people to make economic decisions, instead of a few central planners. But lacking central oversight means that the free market produces a lot of what I term "fluff", people working but not producing anything of tangible value and artificial wealth, things such as automobiles that did not have to become practical necessities. Too many people making their living by moving paper and electrons around, instead of actually producing something.
There is also two sides to outsourcing overseas. It costs jobs at home but there is no doubt that it produces a more peaceful world by giving countries a stake in the global economy.
Remember that every ideology is a reaction to what came before. People tend to put their emotions into things like how an economy is run and thus distort the picture. Thus, we zig-zag through history instead of taking a more efficient straight line. I define a mature ideology as one that has already been through a reaction in both directions.
A political ideology can also serve another purpose. When a country is really religious for a long period of time but then drifts away from such piousness, the patterns of the religion tend to remain and something else is adapted in place of the religion.
Some of the popularity of Republican capitalism in America is certainly the result of this. Free-wheeling capitalism has a historic all-American feel to it, even though the Constitution does not endorse any particular stripe of politics. Many Republicans act as if they are defending a religion from infidels and if you question any aspect of republicanism, they act as if their religion is being questioned. Republicans who leave the party are treated as apostates, just as if the party were a church.
I would prefer to have the real religion and to keep religion and politics separate because they do not belong together. The God that I know is far above the affairs of mere men and trying to put them on the same level is nothing less than blasphemy to God.
How many times have you heard a conservative politician tell you something like "Elect me and I will run the government like a corporation?"
The trouble with this is that the government is not a corporation. A corporation is a simple realm of absolutes, the goal is always to minimize overhead in order to maximize profits. The government, meanwhile, is a complex realm of balance.
As a simple example, a corporation can lay off workers and that is the end of it. But if the government lays off workers, it must not only pay their unemployment benefits but will also lose the income tax revenue from their earnings. A corporation thinks in the short-term, while the government thinks in the long-term.
Capitalism allowed free reign will surge ahead until it melts down, like a nuclear reactor with the control rods pulled all the way out. The economic crashes in the U.S. of 1929, 1987 and, 2008 all came after two consecutive Republican presidential terms. Eisenhower, Nixon and, Ford were more moderate Republicans whose terms did not bring about full-scale crashes.
With free-wheeling capitalism, the different sectors of a complex modern economy eventually get out of balance. Bubbles form in real estate or in other areas. The wealthy divert more money to themselves so that workers get paid too little relative to the goods and services that they are producing to be able to buy all of those goods and services. Since it does not make any sense to produce goods and services that are not going to sell, producers begin cutting back on production and thus getting a recessionary spiral underway.
In 1929, for example, industrial production was absolutely booming following the perfection of assembly-line manufacturing techniques. All manner of goods from radios to cars were rapidly rolling off assembly lines. But workers were being paid too little to be able to afford many of the goods that they were producing. Finished goods were just piling up in warehouses. Factories began cutting back on production, meaning that workers had even less money, and it spiraled into a devastating crash.
In geometric terms, we could say that a corporation resembles a line in the same way that a government resembles a circle. A corporation can cut off part of it's line while leaving the rest intact. But if the government circle is cut at any point, if affects the entire circle.
Economic conservatism is useful when we go too far left, such as in the late 1970s. But the U.S. is far more often too far right. I see inflation as an indicator of having gone too far left, but recessions in which inflation is not a significant factor are caused by having gone too far right.
America's Republicans are sales people. But they are generally better at campaigning than they are at actually governing. Capitalism is a simplistic Nineteenth-Century ideology from a time when the frontier was wide open and there was still plenty of land available for the taking.
Government has to deal with things that are far beyond the simple realm of a corporation. Effective government often means choosing the lesser of two evils. Government debt is not good, but a moderate amount of debt is preferable to more unemployment. More unemployment, meanwhile, is better than higher inflation.
The ideal time for the government to lay off workers that it can probably do without is when the economy is booming and those workers have a better chance to find work in the private sector. Unfortunately, the time that government usually lays off workers is when the economy is not booming and the government's tax revenues are down, meaning that it will have to pay those workers unemployment benefits anyway while losing the income tax revenue from them.
It may sound inviting, but the last thing we need is for an extremely complex national economy to be run by the simple philosophy of a corporation. It may produce short-term gains, but at the expense of long-term disaster.
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