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I understand what you say that when the actions we are discussing were taken, they were taken with the best intentions, and some even worked. The begging of the french evolution, for example, a complete bloodbath, that in retrospect was necessary (after that they kinda got out of hand, but that's another topic). I understand that, in the time of the inquisition, they weren't killing people because it was fun, but because they though it was the right thing to do. Same thing with the Holodomor and the holocaust and countless other acts.
The thing is, we are judging these actions by today's standards, because our discussion about capitalism is grounded on today's world, because this line of argument arose when the opinion that capitalism, even though its imperfect and sucks for a lot of people, is still better than the examples we were given of other ways to handle society.
When I talk about Religion dealing in absolutes and for that reason Theocracy not working, I have to be talking about the religions that do actively seek the power of being the focal point of a government. Hinduism do influence the behavior of people in India, and surely people from different castes normally decide not to mingle, but I do not think that currently that are any written laws about it. As a matter of fact, there have been affirmative action measures taken by the Indian Government to include the members of the lower castes, even the untouchables, on the government itself. The laws of Hinduism then are not the laws of the country, but the law of those who follow the religion, so it cannot be called a Theocracy. If it was, the mingling between castes would be forbidden by the laws of state. It still deal in absolutes because the only way people will change castes is by dieing and being reborn. What happens if someone chooses not to believe in that?
Any known system that is given full power will suck, capitalism included, as we seen on the industrial revolution. Thank god for the socialist people from that time that fought against the absolute control the owner's of factories had. As a result capitalism evolved to what is now modern capitalism, that even though profits are still the objective, there are
checks and balances in the way of the rights of workers and the environmental protection laws to stop it from acting like tin the 1800. Those checks and balances are that much harder to be applied on a Theocracy, since how will you argue with the word of god or the prophets? Especially if, like religion is famous for doing, those that speak against it are branded as infidels, enemies of god and all that is holy and alive, being at the best scenario shunned completely, in the worse killed. As a social construct, Religion is exceedingly hard to be checked and balanced, since it entire premise is not based on logic but faith. How does one argue against faith in a convincing way?
As I said before I don't think capitalism is perfect, or that the situation should stay like it is forever. But by comparing today's capitalism to every single other form of society that was actually implemented( communism, for example, is beautiful on paper, but has never been truly implemented and I don't think it could), the vast majority of us would prefer to live in it. If I lived in the past where i live now I would living in a Indian tribe, would love it and would never want to move out of it. I don't but in the system in place i can choose to do it. There are no laws making me have to stay on my capitalist country, if i wanted I could choose to abandon it and live in another system. That kind of liberty is what makes it work for me.
And I never said anything about Benevolent dictatorship, that was another guy. Dictatorship is another one of those system that cant work in a long stretch of time, specially a benevolent one, since what benevolence is changes form person to person.