The standard leftist refrain about “advanced capitalism” is that it amounts to “socialism for the rich and capitalism for the poor.” Like most leftist notions, this idea represents almost the exact opposite of the truth. The system they refer to is anything but socialism for the rich and capitalism for the poor. Capitalists do not want socialism for themselves and capitalism for the rest. Capitalists seek profit, which can only come under a capitalist system.
Of course, the phrase “socialism for the rich and capitalism for the poor” is premised on the leftist belief that socialism is obviously beneficial for those living under it, a veritable land of milk and honey, while capitalism is a nefarious, dog-eat-dog, every-man-for-himself “anarchy,” where the dogs fight each other for the scraps and many necessarily starve. Socialism is to be sought and capitalism to be avoided, at all costs. But the truth of the matter is that capitalism is the productive system that creates wealth and rightfully distributes it, while socialism is the consumptive system that restricts the creation of wealth and wrongfully devours it.
Why is this the case? In socializing the means of production, socialism disincentivizes personal, private investment in capital formation, including capital in oneself. Under socialism, private investment in capital resources, including in oneself, is discouraged (or disallowed). Socialism thus favors the noninvestor, the nonproducer, and the nonuser of the means of production and disfavors (or disallows) the private investor, the producer, and the user of the means of production. Therefore, fewer people will undertake these roles, and capital formation will decline; less appropriation of natural resources, less development of new factors of production, and less upkeep of old factors of production will occur.1
Additionally, since investment in productive factors is discouraged (or disallowed), socialism disincentivizes saving and encourages consumption. Since one cannot become a capitalist, there is less reason to save and more reason to spend. The result will be less production of consumer goods, and likewise, a lower standard of living for everyone. Socialism also results in a wasteful use of the means of production because it does not respond to changes in demand. Without entrepreneurs to reallocate capital resources to changing demand and improved means, socialist planning cannot adjust to changes in demand and production. This means that at least the production of less wanted goods and services and possibly even the nonproduction of needed goods and services will result.