Written by Shravan Kumar
So at the end the day, which economic system would you
vouch for? Sure socialism does sound more compassionate and strives for mutual
cooperation, but when everyone’s basic needs are already provided for, the
engines of economic growth are weakened. Conversely, capitalism harnesses on
the ‘greed is good’ philosophy and provides incentives to innovate and increase
efficiency. Nonetheless, a free market capitalist economy will invariably
experience recession, unemployment and lead to the concentration of wealth at
the top income brackets. Truth is, more often than not, it is barebones
questions like ‘What are the rights, goods and services that I need, and how do
I get them?’ or ‘What is the purpose of government?’ or ‘What does equality and
justice mean to me?’ that inform our
varying perspectives and eventually gets written down as policy. When left to
themselves, most economies tend to combine elements of each: capitalism
develops its safety nets, while strongly communist ones edge towards being
full-fledged market economies.
Image Source: Pixabay
 |
Everything,
starting from your mobile to the Ola auto you took this morning to that tasty
pineapple cheese pizza you had for dinner, everything, has gone through what
economists call ‘means of production’. It is the way all goods (and services)
are manufactured (or created) and sold, starting from its raw materials to how
it arrives in your hands. Most of these things can only be created as a result
of some individual or collective effort, and they cost money; and if money is
involved, who’s paying?
When an individual
owns the entire means of production, they pay for everything and naturally keep
any and all profit made. However, should a bunch of individuals own the means
of production collectively, they share the cost and the profit as well.
Subsequently based on how this ownership is structured, we see the emergence of
multiple economic systems.
Individualism is
the belief that every human is individually unique and valuable, and hence are
encouraged to pursue their own self interests. If self-interest is a good
thing, and personal wealth is a self-interested goal, then widespread personal
wealth is a good thing. Thus individual welfare leads to overall social
welfare, and individual wealth leads to overall social wealth. This forms the
basis for capitalism. In a capitalistic society, private individuals and
businesses own the means of production. Supply and demand of goods is
determined by the free market of producers and consumers (and not by any
centralised entity like a government). Consequently, the market competition
also forces people to act in a way that benefits others, regardless of their
intentions.
On the other hand,
in direct contrast to Capitalism, we have Socialism and Communism, wherein the
means of production are collectively owned and shared. It prioritises
production for use rather than profit and achieves this through centralised
planning (usually the government). The value of a good produced is determined
by the amount of time and labour required, not the market supply and demand.
The idea that sharing resources and work according to need, rather than out of
competition, creates a more equitable and secure society, forms the backbone of
these economic systems. Furthermore, both socialism and communism, at their
core, work towards limiting worker exploitation, and eliminating the influence
of economic classes in society. The Communist Manifesto and other seminal works
co-written by Karl Marx and Friedrich Engels essentially have become the
guiding philosophy for Communism in the modern era.
During the 19th
century, as Europe transitioned from centralized monarchies to quasi-democratic
capitalist economies, workers were being exploited by those who owned the means
of production. So if you work in a factory or on a farm (as many at the time did),
whoever owns the factory or farm is getting more out of you than they are
putting in. This created an inherent inequality giving the owners (the elite
‘bourgeoisie’), power over the workers (the ‘proletariat’). To fix this
inequality, societies had to shift towards an economic model, wherein the
proletariat held this power instead by collectively controlling the means of
production. And here’s where socialism and communism come into play. Marx and
Engels argue here that, socialism is the next logical step after capitalism,
and the precursor to communism. In socialism, a democratic state controls the
means of production rather than having private companies hold ownership.
Instead of competing with each other as in a capitalist society, socialism has
workers contribute as much as they can to the greater good, and then they all
share equally in that good. However, once the state controls all the means of
production, the next step is total collective ownership. Not just of
production, but all aspects of society and economy, including private property.
And that’s communism. The intention is to abolish all private property and
create a classless, moneyless and stateless society in which everyone works
towards a common collective goal of being happy, healthy and free. Everybody
does what they can to contribute and takes only what they need in return.
In the history of
the modern world, there’s never been a truly communist country. While many have
described themselves as communist (for eg. Laos and Vietnam), by definition,
there’s never been a truly communist country. Every so-called communist country
is actually socialist, with the state controlling employment and economy to
either a significant degree or completely. Ironically, this complete control is
the major reason why socialist countries struggle to reach the communist ideal
(for eg. the former USSR, China, and North Korea). As cynical as it may sound,
human nature often is not capable of adopting an egalitarian communist vision.
People in power tend to stay in power, and abuse the power in lieu of using it
to help the society they control. The human hurdle of overcoming power, greed
and government is why we may never see a truly communist country.
Yet, in a strangely
beautiful oxymoronic way, socialist ideals when combined with capitalism
experience incredible success. A terrific example would be Canada and Nordic
countries like Sweden, Finland etc. While being capitalistic, the presence of
high taxes levied on everyone (relative to income levels) leads to the creation
of a robust social safety net. In this type of ‘social democracy’, the
government manages and regulates capitalism thereby make it more beneficial to
the average citizen. Subsequently, things like healthcare, education and fire
services, are universally available for free. (Note: Social democracy is not to
be mistaken with democratic socialism, wherein citizens democratically elect a
government that will seize and take ownership of industry; that is about
achieving socialism / public ownership via democracy.)
Image Source: Pixabay
