There is an old joke that economists make about Cuba in the modern day. It goes something like this. A young Cuban man was trying to win the favor of a lovely young Cuban lady. To impress her, he brags about being a doorman at the Ritz-Carlton Hotel in Havana. This works well, but unfortunately, the relationship falls apart when the young lady realizes that he’s actually just a neurosurgeon.

Now, this sounds absurd, but in reality, it’s true.

The monthly salary of an engineer in Cuba is about 30 dollars. A doctor’s salary is slightly higher than this, about 45 dollars.

A taxi driver in Cuba earns around $50 a day. Yes. Driving a taxi is one of the highest-paying jobs in Cuba. A taxi driver makes more than the monthly salary of a specialist doctor in one day. What is the reason for this? Socialism.

What is Socialism?

Socialism means that the government controls everything in the country. Or the concept that the government owns everything in the country.

Socialism requires authoritarianism. If a government owns all the land, runs all the companies, produces all the goods, makes all the laws, and runs the military, it is a hardcore authoritarian state. This would be the most extreme version of socialism- a system where all things are controlled by the government.

Following are some basic principles of socialism.

1. The state is responsible for planning all economic activities.
2. The state is Responsible for the Basic Necessities of Life
3. Classless Society.
4. Public Ownership.
5. Equal Opportunity.
6. Absence of competition in the market.

A good example of this is Cuba. Before recent years, nearly everyone in Cuba worked for the government- from street food vendors selling sandwiches to doctors, all are working for the government. The government provides the same monthly salary to all citizens of Cuba. So, you get the same salary whether you sell sandwiches or are a doctor.

Say you start a cookie shop in Cuba. Usually, your income is dependent on the number of cookies you sell. But not in Cuba. 

Whether you sell one cookie or a hundred cookies, your income at the end of the month is the same. Because you don’t own the store, it is owned by the government. The government will pay you a monthly salary. So it doesn’t matter how many cookies you sell.

In Cuba, cab drivers are the one percent

Doctors in Cuba are part of the national health care system, which is entirely controlled by the government. Because of this, they get a state-sanctioned salary on top of the standard Social Welfare enjoyed by all members of the nation. The salary of a doctor is probably about 30 dollars a month.

Now in Cuba, the government can get away with paying doctors so little because the state does genuinely provide for almost all the needs of a family. Still, it means that there is very little career differentiation between a street sweeper and a neurosurgeon.

Cuba just started to allow some private sector stuff like Taxis. And a private taxi driver makes 20–30 times what a government surgeon makes.

The people that do well, though, are those that have access to tourist dollars. It wouldn’t be unusual for a tourist to tip a doorman $30. That one tip has equaled the salary of a Cuban doctor.

It means that people operating their own businesses or working in tourist-facing industries are significantly better off than most workers in the nation who still work for the government.

To learn more about the Cuban economy click here.

What is Capitalism?

If all businesses in society are controlled by the private sector, it is a capitalist society. In a capitalist society, a few private companies control everything, like education, the health sector, transportation, and land.

You could run a society totally in the private sector (like Cyberpunk 2077). You’d have corporations act as police, and governments and local communities could contract various compies to do the tasks a government usually does. This system is often called anarcho-capitalism (AnCap for short).

Capitalism creates an excellent competitive market. People are paid based on their worth. Because, in reality, a Doctor should make more than a waitress or a street vendor.

So, is Capitalism a better option?

Not really. In free markets, also called laissez-faire economies, markets will operate with little or no government regulations. This will give private companies a lot of power. Because there are no regulations, they can increase the price of their products & services as they want. Also, Social classes will begin to emerge, and the gap between the rich and the poor will widen. The rich will keep getting richer, while the poor will keep getting poorer.

Now you need some socialism in society. It is not a good idea to give every sector of a country to the private sector. 

• Unemployment benefits, welfare, food stamps, education, and health insurance for the poor
• Military forces
• Police forces
• Firefighters and emergency responders
• Urban planners

If you give total control of these things to private corporations, lots of issues can arise. The question is, how capitalist or socialist should you be?

Understanding Capitalist vs. Socialist Economies

As you now understand, it is not suitable for a society to be completely capitalist or socialist. Both these parts must exist together. Our question is, to what extent should a state be socialist and capitalist?

Let’s study some countries in the world. I will mention roughly the percentage of socialism and Capitalism in several countries. This is a rough hand- keep that in mind.

• North Korea: 5% capitalist, 95% socialist
• Cuba: 10% capitalist, 90% socialist
• Norway: 60% capitalist, 40% socialist
• China: 50% capitalist, 50% socialist
• South Korea: 70% capitalist, 30% socialist
• UK: 70% capitalist, 30% socialist
• Japan: 70% capitalist, 30% socialist
• USA: 80% capitalist, 20% socialist

You can kinda see a trend here. The more capitalist you are, the richer you are; the more socialist you are, the poorer you get.

Look at Korea. These two nations are of roughly the same size; one is a rich country, and the other is poor. This essentially is due to one being a hardcore socialist and the other being a modern capitalist state.

Currently, China has dominated the world economy. But 40 to 50 years ago, China was one of the poorest countries in the world; it was more like 20% capitalist and 80% socialist.

This massive economic change happened when China introduced capitalist concepts to their country. (adopted free-market reforms and open trade)

I believe a 70/30 or 80/20 mix is the best. It has worked the best for the longest. Because as I mentioned before, if a country becomes unnecessarily capitalist, there will be some problems.

I will take America as an example of this. The price of an inhaler in the most powerful country in the world is around 300 dollars. Yes, a generic inhaler which will cost somewhere between $30 and $75, is ten times the price in the USA.

In the UK, under the NHS, it will be either free or £10 if you have to pay.

Guess how much you have to pay for an ambulance in America? Now you might be wondering whether you even need to pay for an ambulance. Yes. If you live in America, you have to pay around $2,500 for an ambulance.

In America, hospital fees for childbirth could usually cost between 10,000 and 30,000 dollars. The funny part is that they even charge an extra $40 to hold your newborn baby for the first time.

If something like the health sector is 100% privatized, we will face many problems like this. Private companies will change the prices of goods and services as they like.

Has Capitalism won already?

Socialism was tried, and it failed- it failed worldwide

• It failed in Poland when the people of Poland voted overwhelmingly to end socialism.
• It failed in Hungary
• It failed in Russia
• It failed in Romania
• It failed in Sweden

Socialism as a guiding principle has never worked. In every single implementation, the people ended it on their own.

Think about that. We can argue all day long, but in the end, we all live in a capitalist world. The people who actually lived in a socialist nation overwhelmingly voted to end socialism which explains a lot.

The world right now is quite capitalist and has been for a while. During that time

• Life expectancy is up worldwide
• Deaths from war are way down
• Childhood mortality is way down
• Deaths from preventable diseases are way down
• Access to basic things like food and water is increasing

Capitalism strengthens the economy of a state. I will mention some reasons below.

1. Through competition, prices are reduced, and quality is increased.
2. Innovation is rewarded, and stagnation is punished- thus, capitalist states tend to innovate, and socialist states stagnate.
3. Bad companies go out of business, while good companies grow.
4. Power is spread out rather than concentrated. The economy is not run by one body like it is in a socialist state. Instead, the economy is run by millions of companies and consumer decisions.
5. The demands of consumers are met in capitalist states. In a socialist state, you will never have 20 types of bread to choose from. The government isn’t going to spend the time producing 20 options because why would they? They don’t gain anything from it, costing them more money. So in socialism, there is one bread choice.

Capitalism is working.

We are never going to have a utopia where everyone eats and is happy. Socialism claims it will provide this utopian future, yet when it was tried, we got famine, oppression, death, misery, and revolution.

Humans are flawed, and our systems will enjoy those same flaws. But Capitalism, while far from perfect, is the best answer we have so far.