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 it now.

 

What most liberals / lefties 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 college education.

Rich people ridicule anyone talking about welfare of the people as socialists. They paint a picture of struggle between capitalism and socialism. Often, welfare policies are misunderstood as Socialism No sir, it is actually a struggle between vulture capitalism vs welfare capitalism.

 

Case for progressive taxation:

The billionaire businessmen benefit a lot from the:

·       Scientific and technological advances of the past

·       Communication and transport infrastructure built over centuries

·       Safety provided by the government for their immense wealth

·       Access to natural resources

·       A ready supply of highly skilled manpower often provided by subsidized education.

·       Global supply chains supported by trade agreements

·       Well-developed Financial markets for funding

And so, the billionaires and the ultra-rich need to contribute taxes commensurate with their use of the enabling economic infrastructure and the security that is provided for their immense wealth.

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.

However, they do not pay a fair share of taxes and use their political influence and pay less and less, thereby increasing the inequalities in the society.

 

Rising Inequality

The inequality between the ultra-rich and the rest of society has been increasing significantly for quite some time

·       Over one-third of the world's wealth is owned by the richest 1%

·       The richest 1% has captured nearly two-thirds of all new wealth since 2020

·       Top 10 rich people own more than the bottom 50% of the world population i.e. 3.5 billion people!

Hence there is a need to tax the ultra-rich more and invest in social programs like education, health, and public infrastructure, for a fairer society.

 

Increasing exploitation of workers

While median housing price has gone up by 11 times in 50 years, median wage has risen only 6 times, making housing more unattainable

This at a time when worker productivity has doubled during the same time period !

There is also a trend of office workers expected to be available through out the day on call, increasing the working hours.

Such exploitation leads to disenchantment with the status quo, and pushes young people towards the ideals of communism, while they remain oblivious to its horrors.

 

The temptation of Communism despite its abject failure

Only a dictatorial government can implement “abolishing private property” by confiscating property. There is no rule of law and it is the will of the authoritarian ruler that matters.

“Distribution of all products according to common agreement” means allocation of economic output by a group of people to the rest of the population, leading to enormous corruption, unfair allocations etc., all made worse by a dictatorial government.

“Central planning” means, without a free price system based on supply and demand, central planners lack the information vital to make rational economic decisions.

“Each according to his ability” assumes everyone works and contributes according to their abilities and totally ignores the desire for self-advancement that drives many people to work hard, innovate and take risk.

We have seen communist societies fail miserably in the past, like USSR. Some people blame it on western sanctions, but the truth is USSR had massive petroleum and mineral resources. Also, Ukraine, the food basket of Europe was part of USSR. But there was rationing of bread and queues for bread in many regions of the Soviet Union.

They could trade with large countries like India and China, and several African countries, so blaming their economic struggles on western sanctions doesn’t pass muster.

When the Berlin wall was broken, it was broken by the communist section of Germany in the East, who rushed to join with the prosperous Capitalist West Germany. And not the other way around.

So, clearly the communist ideals have failed miserably in real life.

However, the rising inequality, increased exploitation of workers, having lower economic status than parents etc., lead the youth to be tempted by the ideals and false promises of Communism. So, it is essential to address these issues objectively.

 

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 I 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. It is about

·       having fair graded taxation for the benefit of everybody.

·       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!