Bill Gates, Charlie Munger and Warren Buffett sit down with CNBC's Becky Quick to give their opinion on the debate between capitalism and socialism.

Gentlemen, we've talked an awful lot on our air recently about socialism versus capitalism, defending capitalism, all of the different political pressures that are kind of being brought as we get into another election year.

And I thought maybe we could talk about that this morning, too.

Over the weekend, several questions came up about defending capitalism.

And, Warren, you did step out and say that you're a card-carrying member, a card-carrying capitalist in front of everyone.

What do you think about the attacks that we've seen to this point on capitalism?

Well, I think—I don't think people exactly even know what they're talking about.

But if you look at what was here in 1776 and look at what is here now, this country has an incredible job in terms of the deployment of resources and human ingenuity.

Now, does that mean that every decision should be made simply by open market determinants?

There's a need for regulation, obviously.

And there are things that have long-term costs and might not get built in.

But the idea of people unleashing their potential, using the resources they have to create what we have now from what was here 240 some years ago.

It's absolutely a miracle and what all 3 of us have seen during our lifetime And if you compare that with any centralized, planned economy, I think we win hands down.

And I think We've just started with what capitalism can produce in the United States, but I do think it obviously It it needs certain rules and regulations

Well, you did an interview in Davos with someone and I you made a pretty innocuous statement that you looked around you thought capitalism was the best system, and you got attacked online from all these people who came up with these crazy statements about how could you say things like that.

I mean, what do you think about the climate when you see things like that?

Some people think when you defend capitalism, you're defending the tax rates we have today and saying that higher absolute tax rates or more progressive tax rates, that you're disagreeing with them.

I don't think Warren and I are disagreeing that you could make the taxes more progressive.

In fact, we've been very explicit in some areas, like the estate tax, in saying we think that would be a good thing.

Socialism used to mean that the state controlled the means of production.

And a lot of people who are promoting socialism actually aren't using that classic definition.

So what we're gonna have is capitalism with some level of taxation.

Most people really aren't arguing against capitalism.

There may be a few, but most people are just saying that the taxes should change.

Although you do have someone who I think is pulling the second highest in the Democratic Party right now, who was a socialist until very recently, Bernie Sanders.

Well, whether or not he was a socialist by the full term of that.

When you start to say there shouldn't be any billionaires, that you have some cap on wealth or something like that, that goes beyond what I think.

But government needs to reallocate some resources.

I mean, extreme case would be in World War II.

I mean, that's the closest we've come to socialism.

You had an Office of Price Administration.

But during peacetime, you're always prepared for war, and you do that through government.

Government needs to reallocate some resources.

But the market system which exists under capitalism is an extraordinarily effective way and has proven it of using resources, human and other kinds, to produce incredible goods.

And Henry Ford could learn, devise a system that could turn out a couple million cars a year, but he could only use half a dozen himself, or his whole family could use 50.

I mean, he had to turn out a couple million cars that other people got to use.

And that would not have, in my view, I think if you'd set up a government bureau in 1850 and given them 100 years to develop a car, I'm not so sure that you'd have ever come up with anything like the assembly lines of Ford and all of the things that have happened.

Human ingenuity is incredible and you want something that maximizes its use and then curbs a few of the ideas that some of those people may have to sort of have it for all for themselves.

The great proof of how capitalism works is China.

When China copied Singapore and let the farmers own their own plots and let the manufacturers own their own businesses and so forth.

China's productivity increased many times, and they went from rural poverty to modern extreme wealth, and they did it by adopting a fair amount of capitalism.

Now, If a Democratic politician doesn't understand that, he's nuts.

You've made the same point, though, Charlie, that you think private sector does it much better than the government sector.

However, a lot of these people who are running also want to make government much bigger.

Well, as they say, if you love your post office, you're going to love socialized medicine.

And they don't necessarily want to make it bigger in terms of redistributing.

They may want to, the market system is brutal and it leaves behind people who are perfectly wonderful people who don't have market-related talents

yeah just plain unlucky and in a rich society believe me if we have a war or something like that we call on those people and pay them practically nothing to go fight for us.

We want goods flowing, but it's going to displace the textile worker that we used to have and

So The function of government is not necessarily to get bigger.

It may be in an important way to take care of people who, for 1 reason or another, get left behind in a market system that you also regard as essentially this huge source of wealth and goods and services.

So how do you fix the problems, or at least the perception of problems, which there's a huge perception out there in the American voting right now,

Obviously with the help of our government we're wiser.

And it would be wiser if the 2 sides didn't hate each other so much.

And there is absolute cold fury between politicians on 1 side and politicians on the other.

For that reason, I don't allow myself to get angry at politicians.

Well, I just don't let myself get that angry at politicians.

Berkshires work better because Charlie and I have never been mad at each other.

If We got mad at each other, I'd try and kill his deals, he'd try and kill my deals, it just doesn't work that way.

We don't need a couple of alpha males blustering at 1 another over this stuff.

They ought to just cool it and take a little reputational hit and get the feathers.

But we ought to worry about the people that don't fit into the system.

We want the system and a lot of people are getting left further and further behind because as capitalism gets more advanced, it gets more specialized, and there actually is greater difference between the haves and the have-nots.

And the haves can take care of the have-nots.

And the interesting thing is both parties basically agree on that.

I think your income tax credit can make a huge jump in that direction.

We've improved the public school systems, we've improved things that do give people more of an equal chance and take care of people who fall by the wayside.


Speaker 0: Gentlemen, we've talked an awful lot on our air recently about socialism versus capitalism, defending capitalism, all of the different political pressures that are kind of being brought as we get into another election year. And I thought maybe we could talk about that this morning, too. Over the weekend, several questions came up about defending capitalism. And, Warren, you did step out and say that you're a card-carrying member, a card-carrying capitalist in front of everyone. What do you think about the attacks that we've seen to this point on capitalism?

Speaker 1: Well, I think—I don't think people exactly even know what they're talking about. It isn't capitalism. It's perfect. But if you look at what was here in 1776 and look at what is here now, this country has an incredible job in terms of the deployment of resources and human ingenuity. And that is a product of the system.

Now, does that mean that every decision should be made simply by open market determinants? There's a need for regulation, obviously. And there are things that have long-term costs and might not get built in. But the idea of people unleashing their potential, using the resources they have to create what we have now from what was here 240 some years ago. It's absolutely a miracle and what all 3 of us have seen during our lifetime And if you compare that with any centralized, planned economy, I think we win hands down.

And I think We've just started with what capitalism can produce in the United States, but I do think it obviously It it needs certain rules and regulations

Speaker 0: Well, you did an interview in Davos with someone and I you made a pretty innocuous statement that you looked around you thought capitalism was the best system, and you got attacked online from all these people who came up with these crazy statements about how could you say things like that. I mean, what do you think about the climate when you see things like that? Well,

Speaker 2: Some people think when you defend capitalism, you're defending the tax rates we have today and saying that higher absolute tax rates or more progressive tax rates, that you're disagreeing with them. I don't think Warren and I are disagreeing that you could make the taxes more progressive. In fact, we've been very explicit in some areas, like the estate tax, in saying we think that would be a good thing. Socialism— You

Speaker 3: got your wish and it

Speaker 2: came back. Socialism used to mean that the state controlled the means of production. And a lot of people who are promoting socialism actually aren't using that classic definition. So what we're gonna have is capitalism with some level of taxation. Most people really aren't arguing against capitalism.

There may be a few, but most people are just saying that the taxes should change.

Speaker 0: Although you do have someone who I think is pulling the second highest in the Democratic Party right now, who was a socialist until very recently, Bernie Sanders.

Speaker 2: Well, whether or not he was a socialist by the full term of that. Now, there is some muddy areas. When you start to say there shouldn't be any billionaires, that you have some cap on wealth or something like that, that goes beyond what I think. And you could say I'm self-interested.

Speaker 3: Really?

Speaker 1: We will exempt the present ones. But government needs to reallocate some resources. I mean, extreme case would be in World War II. I mean, that's the closest we've come to socialism. You had an Office of Price Administration.

You had a war production board. But during peacetime, you're always prepared for war, and you do that through government. Government needs to reallocate some resources. But the market system which exists under capitalism is an extraordinarily effective way and has proven it of using resources, human and other kinds, to produce incredible goods. And Henry Ford could learn, devise a system that could turn out a couple million cars a year, but he could only use half a dozen himself, or his whole family could use 50.

I mean, he had to turn out a couple million cars that other people got to use. And that would not have, in my view, I think if you'd set up a government bureau in 1850 and given them 100 years to develop a car, I'm not so sure that you'd have ever come up with anything like the assembly lines of Ford and all of the things that have happened. Human ingenuity is incredible and you want something that maximizes its use and then curbs a few of the ideas that some of those people may have to sort of have it for all for themselves.

Speaker 0: Charlie, you've made the

Speaker 3: same point. The great proof of how capitalism works is China. When China copied Singapore and let the farmers own their own plots and let the manufacturers own their own businesses and so forth. China's productivity increased many times, and they went from rural poverty to modern extreme wealth, and they did it by adopting a fair amount of capitalism. Now, If a Democratic politician doesn't understand that, he's nuts.

Speaker 0: You've made the same point, though, Charlie, that you think private sector does it much better than the government sector. However, a lot of these people who are running also want to make government much bigger. Do you have a quarrel with that or no?

Speaker 3: Well, as they say, if you love your post office, you're going to love socialized medicine.

Speaker 1: And they don't necessarily want to make it bigger in terms of redistributing. They may want to, the market system is brutal and it leaves behind people who are perfectly wonderful people who don't have market-related talents

Speaker 3: or just unlucky

Speaker 1: yeah just plain unlucky and in a rich society believe me if we have a war or something like that we call on those people and pay them practically nothing to go fight for us. We want goods flowing, but it's going to displace the textile worker that we used to have and

Speaker 3: so on.

Speaker 1: So The function of government is not necessarily to get bigger. It may be in an important way to take care of people who, for 1 reason or another, get left behind in a market system that you also regard as essentially this huge source of wealth and goods and services.

Speaker 0: So how do you fix the problems, or at least the perception of problems, which there's a huge perception out there in the American voting right now,

Speaker 3: voting public. Obviously with the help of our government we're wiser. And it would be wiser if the 2 sides didn't hate each other so much. Anger drives out reason. And there is absolute cold fury between politicians on 1 side and politicians on the other.

It's quite counterproductive. For that reason, I don't allow myself to get angry at politicians.

Speaker 0: How would you fix it?

Speaker 3: Well, I just don't let myself get that angry at politicians. I don't expect them to be virtuous.

Speaker 1: Berkshires work better because Charlie and I have never been mad at each other. It just does. I mean, way better. If We got mad at each other, I'd try and kill his deals, he'd try and kill my deals, it just doesn't work that way.

Speaker 3: We don't need a couple of alpha males blustering at 1 another over this stuff. They ought to just cool it and take a little reputational hit and get the feathers.

Speaker 1: But we ought to worry about the people that don't fit into the system. We want the system and a lot of people are getting left further and further behind because as capitalism gets more advanced, it gets more specialized, and there actually is greater difference between the haves and the have-nots. And the haves can take care of the have-nots. And the interesting thing is both parties basically agree on that. They just...

Speaker 0: Yes, how you get there,

Speaker 1: that gets complicated. I think your income tax credit can make a huge jump in that direction. I mean, you know, Social Security... We've done various things. Over the years, we have improved.

We've improved the public school systems, we've improved things that do give people more of an equal chance and take care of people who fall by the wayside. We just got to keep doing it. You

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Bill Gates, Charlie Munger, Warren Buffett on the socialism versus capitalism debate