The Ideology of Capitalism

Currently, a lot of political capital is being spent on branding people socialist and extolling the virtues of capitalism.  That being said most of the people spitting the venom probably cannot define capitalism.  What makes them so loyal to something they cannot define?  Is capitalism really a sound idea?

Capitalism when boiled down to its roots is the suggestion that private parties, motivated by their own interests will make better decisions for the allocation of scarce resources than government or cooperatives.  The suggestion is that in the long run, more "good" is done by those acting in their own interests than those acting in the interests of others.  This may sound counter-intuitive, but there's a significant amount of history to back it up.

While having the State own the means of production and act in the best interests of their people, sounds much more effective in theory, the countries which have tried it have not met with great success.  Sadly, the people allocating assets, even with the best of intentions, tend to make worse decisions than those acting in their own interests.  In fact the countries that have maintained nominal "communism," such as China, have largely achieved this through allowing private ownership of property.

Interestingly, depending on your view, capitalism doesn't necessarily address the redistribution of wealth.  Presumably, you could have a capitalist society in which individuals own the means of production; however some amount of this money is taxed and then redistributed to the less wealthy.  In fact, this type of behavior happens, albeit through bureaucratic means, in even very "capitalist" countries like the United States. 

At the same time, countries like Great Britain, which exhibit similar behaviors, are labeled as Socialist.  Although Great Britain does have a more centralized control on production, the primary difference seems to be the tax rate.  Countries with higher tax rates and more social safety nets tend to be labeled Socialist, while those with less tend to be Capitalist.  This seems to be a fuzzy line however.  Few would content that the UK truly owns all the means of production and distribution, but it is still viewed as Socialist.

This all seems to suggest that there really is a continuum of what is now referred to as Socialism and Capitalism, which doesn't have much to do with their technical definitions.  True Socialism, like that on the rise in Venezuela seems a very different thing than the Socialism of Europe.  Thus the definitions of Capitalism and its ideology tend to be contextual.