October 2025, Economic Theory Part I

If you have been following my writing you will know that from time to time I have talked about Economic Theory, and, that I would speak to it at a later time. Now that I have just about completed my series, I thought it was a good time to begin. However, this is not a subject that can be fully discussed in just one paper but may take a few for all of you to develop a good understanding of it.

I want you to understand these theories, where they came from and why they developed into what they are today. I am not, attempting to change anyone’s mind. However, I do want to give you a different lens to look at the world through. I first learned these theories from U-Mass. Boston’s, School of College of Public and Community Service. I used to kiddingly call it “the bastion of socialism”. However, it is basically the same curriculum you will hear from either the most conservative or the most liberal colleges. Because it is the same story. This is how it happened and why. The difference is: How it is applied, and that will be, your decision, going forward.

How many times, especially in this political environment, have you heard a guy like Bernie Sanders or Alexandria Ocasio-Cortez, called a Communist, a Socialist, and a Fascist all in the same sentence? Well, which is it? You see they are all different, even though they are all economic and political terms, that is basically all they have in common, that also includes capitalism. However, those that oppose the first three economic models lump them together and use them as one term, in a nefarious connotation, to make the audience biased against them.

That’s like calling a person an attorney, a doctor, or an airplane pilot, it makes no sense. For the most part they are all different things; even though they share the fact that they are all human. If someone actually said that to you, I am sure you would certainly look at them with skepticism.

So, let’s explore these different economic theories:

Socialism- is an economic term. It is the theory that workers (the people) own the means of production, and the people are paid depending on how much they contribute to society. Communism- is both an economic and political term. Marx believed it would be the vehicle to bring about true Socialism. Under Communism the State owns the means of production and no one person is any greater than another; thus, everyone receives an equal share of the combined output, no matter if they contributed to society or not.

Fascism- in the words of Benito Mussolini, “fascism should more properly be called corporatism, because it is a merger of State and Corporate power.” Under Fascism the State controls the means of production. There is no vision beyond the State, everything is national in their eyes. The focus is on growing the nation and thinking only on a national level. No human value exists beyond the State, it demands a strong sense of militarism, dictatorship and social intervention.

Capitalism- According to Dictionary.com: “An economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned wealth.” In other words: The means of production, distribution and the exchange of wealth are maintained (run) by private individuals and or corporations. Not by the State like Communism or the people (or the workers) under Socialism.

What is libertarianism? The name liberalism suggests participants favor liberal social issues and policies. Libertarian philosophy is far right on economic issues and for the most part far to the left on social issues. Based on the early beliefs of our founding fathers of the sanctity of life, liberty, and the pursuit of happiness, without restriction.

So, what does all that mean: On social issues such as the unborn, they would favor no regulation. Allowing the person it affects, to make their own decision. On issues such as protection of the country, and improvements to advance commerce, they would favor government intervention and regulation to support it. On economic issues they support “lasses-faire” or hands off approach. Believing the market will find its own balance or equilibrium. No regulation in that arena is necessary.

What is Anarchy? Anarchism- according to Merriam-Webster; “a situation of confusion and wild behavior in which the people in a country, group, organization, etc., are not controlled by rules or laws.” It also means the denial of any established authority or established order. Or it could mean a utopian society of individuals who enjoy complete freedom without government.

What is Syndicalism? Syndicalism- comes from the French word “syndicat”, meaning union. Under syndicalism the workers own the means of production. Thereby, the profits earned in a business go back into the business and the profits shared among the workers. Syndicalism in the late 1890’s and into the 1900’s was closely linked to anarchists because workers saw it to be the only vehicle to wrestle away power from the rich. Which was simply, to revolt. Syndicalism was used by Germany after WW II which needed to go back into a market economy and in order to do that, they needed to control rents, wages and prices. They used a form of syndicalism which they called co-determination and entered an agreement with the unions where half of the board of directors would be appointed by the unions. It proved to be successful because it produced fewer strikes and their labor force, one of the highest paid in the world.

All of these models are derivatives of the two basic economic models Conservative (Neo-conservative) we use in America today and the Liberal model (Socialism with variable factors) used in Europe and Scandinavia.

The Theories. How did the idea of Liberal and Conservative originate and what are their differences? The idea of how to organize a society and how to create a system of rules so that the flow of commerce would thrive in a new economic era; came largely from the theories of John Calvin, the founder of Calvinism, Thomas Hobbes and Adam Smith on the conservative side. At the liberal end of the spectrum, it was the teachings of Fredrik Engels and Karl Marx. Both theories are rooted in their insights of how they viewed the human nature of man.

John Calvin (1509-1564), one of the most recognized religious reformers, wrote and believed that, because human beings are flesh, we are wicked to the very core of our souls. Because we have “free will”, we do what we like which corrupts our body, mind and soul. So wicked is man; he has not even the human consciousness to comprehend anything other than evil.

His teachings developed into the “Doctrine of Salvation” in 1618; believing that it is only through the Grace of God, that one can be saved. However, in order to be saved, it can only be done by the free election of God and not by one’s good works or behavioral change. God does not look at one’s life, past or present but rather chooses his saved patrons by free election rather than merit. Once chosen by God, it is the “Spirit” and the “Perseverance of Saints”, that keeps a man’s faith in direct obedience for life. From that point on he is not capable of falling out of faith. So how does one get chosen by God? Interestingly, those “chosen” by the “Spirit of God”, also happened to be wealthy. It seemed more like a fraternity than a religion. For God appointed them to be the stewards of wealth. Thus, if one was born, or to marry, inherit or otherwise become wealthy, it was not because of luck or circumstance; it was because you were chosen by God. Do you think the analysis was embraced by the rich?

Thomas Hobbes 1588-1679, Thomas Hobbes believed that people are basically “mean, nasty and brutish”. They are inherently wicked and are incapable of governing themselves. Hobbes believed the only way to stop people from destroying their own self-interest was to create a large, powerful monarch to maintain order and promote personal self-interest of the populace. He likened the power and size of such a monarch to a “Leviathan” or sea monster of which these words were defined in a book of the same name in 1651.

It was the idea of Adam Smith (1723-1790) who is still considered the guru of the conservative economic model and his writings in “Wealth of a Nation” (1776) that promotes the notion of individualism. Smith believed that through a “market system”, individuals who are motivated (greedy) are doing the best they can for themselves and society. The theory being: If a man works hard and creates wealth, then buys goods and services, he is doing the best possible thing for himself and society as it creates an “invisible hand” that keeps the economy humming as money and commerce pass through society.

He argued that the use of machinery further helped the market economy by being more efficient. Entrepreneurs could produce goods cheaper to the market and organize their manufacturing into lines of production, rather than the use of the craft artisan. You could say that he was one of the founding fathers of the “production line concept”. His example of the Pin Factory became famous:

In a pin factory one man would draw out his wire, straighten it, cut it, point it, grind it and then place it on paper for shipping. By streamlining the operation into several different tasks, instead of one person (according to Smith’s example) make one pin; mass production could make many more. In this example Smith fortifies his case. For in a free market, other pin makers will have to adapt and compete to be more efficient and cost effective and sell for the lowest price or be left bankrupt or to be sold. At the same time, customers buying the pins have been able to purchase them at the lowest price and in doing so, “the invisible hand” of buying, selling, and reinvesting, keeps the economy thriving.

These writings eventually lead to the idea that man is going to do the best that he can for himself individually; to accumulate as much property and wealth as he can to promote his wellbeing. And in doing so, commerce moves so that others may participate for the benefit of all.

Well, that is where the ideas and view of the conservative economic model began. It is important to look at their life spans and what happened during their lifetimes to form those ideas. During Calvins years, people were just beginning to be paid wages which was the wooden stake in the heart of feudalism and regular sea trade in 1407. Thomas Hobbes- The first Chartered Corporation began in 1600 and saw East India Company consume a country as well as it had tremendous influence over the sovereign. Adam Smith- saw the development of the water wheel in the 1790’s and the potential for mass production.

Next time I will talk about how the Liberal economic model came about. You have enough to think about for now.