Capitalism or Socialism?

 

Capitalism or Socialism?

 

Liberals and left leaning folks are often accused of being a communist, socialist or Marxist. Before responding to the accusation, let us look at the definitions first:

Marxism:  Political, economic, and social principles advocated by Karl Marx, for a class struggle, with the ultimate goal of achieving a classless, communist society.

Communism - economic and political theory that advocated the elimination of private property, and the common sharing of all resources among a group of people.

Socialism - is an economic system advocating for collective or governmental ownership and administration of the means of production and distribution of goods.

These are not perfect definitions but more or less convey the idea. They have overlapping themes, but one common thread is “No private property”. Looking at this definition, I am sure nobody in the world wants such an economic arrangement now.

What most liberals want is welfare of society, in terms of affordable housing, education and healthcare. Sometimes, it is required to subsidise these things in order to make them affordable for the poorer sections of the society, as the wages can be insufficient to meet these expenses. 

I, for one, definitely benefited from affordable school and college education and also from affordable healthcare. 

Rich people ridicule anyone talking about welfare of the people as Socialists. Often, welfare policies are misrepresented as Socialism.They paint a picture of struggle between Capitalism and Socialism. When in reality, it is actually a struggle for a fair share of the economic outputs of a society. 

There were no billionnaires prior to 1916, when Rockefeller became the first billionnaire. (Not considering Kings and princes, but only businessman billionnaires.) The rise of billionnaires only after 1916 is because, the billionaire businessmen benefit a lot from the following:

• Scientific and technological advances of the past 200 years.
• The communication and transport infrastructure built over the last century.
• The safety provided by the government for their immense wealth through the military, police and the legal system.
• Global peace secured by countless lives that fought for freedom and human rights.
• Secure access to natural resources.
• A ready supply of highly skilled manpower, often provided by subsidized education.
• Global supply chains supported by trade agreements developed over decades.
• Well-developed financial markets for funding ventures, as well as for safely maintaining wealth.

These advances of the past have been achieved through collective efforts of humanity and everyone deserves a fair share in the fruits of such development. And so the billionaires need to contribute a fair share of taxes, commensurate with their use of such infrastructure and resources developed over decades.

In the past, rich nobles and barons needed to maintain a small army to protect their property. In the modern context, money invested in stocks grows without any tax (until the stock is sold). The wealth is not only preserved free of cost, but also the wealth grows free of cost ! (It is ofcourse subject to market risks, but the market on an average has been growing faster than bank interest rates for decades)

Fair share of benefits:

The entrepreneurs are of course great innovators and risk takers, putting together various technologies and resources in clever ways to cater to market needs and even creating a new market. They create shareholder value, and they create jobs. They deserve to benefit economically for their efforts and risks taken. They should absolutely enjoy the fruits of their labour in terms of much higher personal income and wealth. And also pay a fair share in taxes for the use of infrastructure and services developed over decades.

Rising Inequaliies

In 1978, the CEO-to-worker pay ratio was about 30:1. This ratio grew to 60:1 in 1989. By 2020, the ratio had reached 350:1

So, while worker pay has stagnated, the top management pay has surged. 

Also, the extreme rich do not pay a fair share of taxes, and use their political influence to create tax loopholes and pay less and less, thereby increasing the inequalities in the society. 

So, we have ended up in a situation, where the top 60 rich people own more wealth than the bottom  50% of the world (over 3 billion people) !! This is terrible levels of inequality.

 Myth - Taxing the rich will affect job creation

There is a case made by rich people that they are required to create jobs.

Sure, but not always.

If we take an example of Zuckerberg, he became a billionaire starting from scratch, building up a tech platform and creating jobs. But after he became a billionaire, there were no more innovations. He just spent billions acquiring WhatsApp, Instagram etc, and creating a monopoly. He also acquired 80 or so companies, only to close off competition, absorb talent or absorb ideas and innovations. So much for billionaires creating jobs. It is actually some of the marvellous start-ups that bring innovative solutions and create jobs.

The billionaires also gain enormous influence over governments through financial muscle and use the influence to ensure low taxes for themselves, as well as for bypassing environmental and safety standards.

 The struggle:

 So, the struggle is not between Capitalism vs Socialism. 

It is between Welfare Capitalism vs Vulture Capitalism. 

The struggle is about:

• having fair graded taxation commensurate with the usage of infrastructure.
• having reasonable environmental protections
• having responsible worker safety regulations.
• preventing worker exploitation and ensuring fair minimum wages
• having a vibrant market economy and not monopolies
• having adequate consumer protections

It is also about having subsidized education, health care for the poorer section of the society.

When everyone progresses, the nation also is stronger. A nation cannot progress if a large section of the people is under nourished, illiterate and/or unhealthy.

 Say yes to welfare capitalism!