Capitalism, Socialism, and Greed

Recently, I was talking with a friend of mine about politics and economics, and he said to me, "A system based on greed will inevitably be corrupted. Capitalism is an iterated prisoner's dilemma in which the most likely win is in betrayal", where betrayal in this case means using the influence acquired through accumulated wealth to tip the system in your favor. In response to him, and all others who feel that capitalism is an untenable system because people's greed will inevitably ruin the system, I wrote the following letter.

Although it saddens me greatly that greed is a more common trait in man today than rational self-interest, the truth of this statement can little be denied. Indeed, in those who do not act in accordance with greed, it has been my experience that they do so due to fear or apather mare often than to moral principle. However, though this factmay weaken any free market, private property system, it weakens any socialist system even more. This is because greed weakens socialist systems in the same way it weakens capitalist systems--the greedy attempt to influence the system to their advantage, and it also weakens socialist systems in a way which does not affect capitalist systems--the greedy have little motivation to engage in productive economic activity under socialism. Regarding the latter point, in a system in which reward is not proportional to productivity, the greedy will have little motivation to wkr hard as this will not satisfy their greed. That is to say, under socialism, most of the product of their work will be taken away and given to those who did not work as hard, so there is less compelling a reason to work than in a capitalist system, which allows people to keep the entire product of their labor. Regarding the former point of influencing the system, the distribution of goods must be decided in some way, as it is impossible that either goods or needs will ever be evenly divided among the people. Under socialism, regardless of the specific mechanism used to determine the distribution, there will be some person or group of people who have the power to decide how goods will be distributed, and eventually someone will assume that role who is willing to use that power to advance his own ends. And so, the situation you feared under capitalism, in which some person or group of people would acquire the power to affect the distribution of wealth, is a necessity of the alternative! Needless to say, the mixed economy is no different from the socialist state except in the extent to which the greedy man can manipulate the system from within rather than participate in the system directly.