Wanted: Equitable capitalism, profitable socialism

October 23, 2012

Socialism – real, no-private-ownership, state-controlled, egalitarian socialism – has been off the political agenda in most states, including Communist China, for decades. The mixture of gross inefficiency and varying degrees of repressive savagery that most such systems showed seems to have inoculated the world against socialism and confined support for it to the arts and sociology faculties of Western universities. But what was booted triumphantly out the front door of history may be knocking quietly on the back door of the present. The reason is inequality.

Pointing out inequality is a political attraction these days, and as good a dramatization of that as any is in the comparison between what Tony Blair, Britain’s Labour Prime Minister, said about it in 2001, on the eve of his second election, and what Conservative leader David Cameron said about it in a speech in 2009, soon before the 2010 election that made him Prime Minister. Blair, questioned about rising inequality, responded that while he was concerned with poverty and its alleviation, he didn’t lose sleep about the rich being rich. “It’s not”, he said, invoking Britain’s most popular sports figure, “a burning ambition for me to make sure that David Beckham earns less money.”

Cameron, referring to the recently published The Spirit Level by Richard Wilkinson and Kate Pickett – a detailed argument that inequality is bad for everyone, even the rich – said the book showed that “among the richest countries, it’s the more unequal ones that do worse according to almost every quality-of-life indicator.” That left and right should so switch places marks the shift that has taken place in the past decade, from living in societies where the tide of growth lifted all boats to one where most fear they’ll soon be sinking (assuming they already aren’t).

The political discourse in the United States has long held that getting rich is glorious, on the assumption that everybody has an equal chance of doing it. But that hasn’t been the case for some time, a fact that would seem to make Mitt Romney vulnerable. He is very rich, though he has skillfully in distanced himself from the Romney who remarked at a (leaked) private meeting that 47 percent of his fellow Americans wouldn’t vote for him because they paid no taxes. He even managed a joke about it at the Alfred E. Smith memorial dinner last week, saying it was relaxing to wear the most formal dress, the kind of thing that “Ann and I wear around the house.” Obama, also jocular but rather sharper, said, “Earlier today I went shopping at some stores in Midtown. I understand Governor Romney went shopping for some stores in Midtown.”

Beneath the wit, there’s an anxiety in the Romney camp that his wealth is a disadvantage. Likewise, there’s an evident calculation in the Obama camp that while the political culture in the United States still precludes an all-out attack on the rich, a constant reminder of presidential modesty does no harm. (“Modesty” is relative: The Obama family holds assets in in the $2.6 million to $8.3 million range, versus Romney’s $190 million to $250 million.)

Socialism is routinely accused of being the product of envy, and there’s something to that. Russian, Chinese, Cuban and other revolutionaries mobilized workers, peasants and intellectuals by pointing to the luxury in which the wealthy few lived. After the revolutions, “rich peasants” were slaughtered and repressed even as many of the really rich managed to escape – hence the large number of Russian counts and countesses in early 20th century Paris.

But then, capitalism is routinely accused by its enemies of being based on greed, and there’s something to that, too. Few would choose to put in the long, stress-filled hours that working in the financial sector, or founding a company, demand unless they believed it would make them rich – and envied for being so.

The excesses of the 1920s and earlier were deemed by most to be immoral and passé. But recently, as Paul Krugman observed a decade ago, we entered a “new gilded age,” from which the middle disappeared. The trends have only deepened since then. In South Africa, where inequality is among the highest, white plutocrats have now been joined by “a fabulously rich black elite.” In Russia, 96 billionaires control 18.6 percent of the wealth, while 48 of their Indian comrades control 10.9 percent – though the latter country is on the lower slopes of inequality, about the same as the United Kingdom and Germany. Sweden – of course – registers among the lowest, though there, as almost everywhere, inequality grows.

The situation is grossly unfair, but it’s not necessarily simple to solve. The protesters at the various Occupy movements, spreading out from Wall Street last year, proclaimed that “we are the 99 percent.” But as the political scientist David Runciman points out, “the implication of the slogan … is that we have all been duped … (and) now that we know about it we can stop it. But how?”

How is the question. Socialism’s central justification is in its name: It is concerned with the social. Its moral force is that it implicitly asks the question: What are you doing for society that entitles you to more of its resources? From that question flows a myriad of considerations, such as: Why should the soldier whose country puts him in harm’s way earn one-hundredth that of a financier, whose job is to increase wealth? How do we weigh the relative rewards due to the entrepreneur, who takes risks and creates jobs, against the worker who goes through the sewers every day among the rats to ensure the effluent flows out and we don’t go back to pre-19th century levels of disease? “The market” has decided such things. The growth of inequality – and in many societies the corruption bolted to it – now questions its wisdom.

Socialism’s central flaw has been its inefficiency – and in the hands of the revolutionaries and their descendants, its murderous application. Social democracy, by contrast, has been pacific and mildly redistributionist. But it hasn’t had the strength to withstand the gale of globalized inequality blowing through our societies. We’re lacking an alternative.

Yet out of the continuing and maybe deepening crises of the Western economies there may come some political force that seeks to address the social at least as much as the individual. It is already straining to emerge and gain traction. Making it compatible with the freedom we have enjoyed will be the trick.

PHOTO: A protestor marches through the streets as others hold a banner during a demonstration ahead of the NATO meeting in Chicago May 18, 2012. REUTERS/Jim Young


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The “how” to fix inequality is not difficult at all.

Simply “follow the money” and begin fixing the rules that have been “broken” by the wealthy class, particularly in the last 30 years.

Where to begin is with the changes in trade, banking and tax legislation that has been slowly, but with increasing speed, trending towards the benefit of only the wealthy class.

The problem is getting the vast majority of people to even understand there is a problem, and that something must be done about it before we ALL go “down the tubes”.

As the US economy continues to decline, I have a feeling that particular task may become much easier quite soon.

Posted by Gordon2352 | Report as abusive

Although Germany’s society has developed more inequality in recent years, the fundamental concept for their society, anchored in the Basic Law, is that capitalism is successful at producing material prosperity, but must be balanced by the awareness of all citizens that they have a mutual responsibility for the benefit of all other members of the society. After WWII they were entirely equal and when the currency system was established in 1948, each received the same amount of “starter money”. That equality informed the development of the country in the’50’s and is still remembered today.

Posted by Stiefelknabe | Report as abusive

There is an idea called ‘hard headed socialism’ where it is understood that we have an obligation to share but it is done in the context of social programs that are actually costed out and paid for on an ongoing basis.
The real question posed by the inequality movement is did the rich really earn their wealth or did they just game the system via congress or some other BS line of justification.

Posted by u_no_who | Report as abusive

Any system where the force of the individual is removed gravitates towards failure. This is as true in small businesses as it is in great nations. To put it in American terms, Steve Jobs is assigned a job in the shoe factory glueing on soles while Bill Gates must work on the farm. As a white South African, I can tell you we have one of the highest Gini Coefficients in the world and it causes social friction, but I can also tell you that Black South Africans excluding the new elite class are far better off than those of neighbouring countries in absolute terms. I think a lot the hatte towards inequality is misguided. I agree that the system should not seek to gerrymander the rich’s interests and these things should be fixed but inequality itself is a both here to stay and a neccessary evil.

Posted by BidnisMan | Report as abusive

Whatever happened to the idea of universal or democratic capitalism, as espoused by Louis O. Kelso and Mortimer Adler? This was the founding idea behind ESOPs, which appear to have been largely corrupted to merely a means for businesses to just get rid of pensions. But Adler and Kelso themselves were quite sincere in believing that the productivity of capital was ultimately going to prove much more economically valuable, in market terms, than low-to-medium skilled labor could ever be. So in their view the only way to allow long-term universal participation in the economy was to “encapitalize” everyone to a useful degree, using tax-advantaged, self-financing loans that paid off in few years (i.e., before retirement). Kelso’s preferred term was “Binary Econcomics”, because he thought most people should have combined income streamd from their own, privately-owned capital (tax-free), plus their labor. The idea was just to provide enough of a “sufficiency” to ordinary people give them a real means of full economic participation, without having to resort to artificial transfers through taxes, welfare and externally-imposed wage constraints.

This probably sounded unrealistic at the time, but honestly considering what globalization will do to American workers – sans price deflation – and considering where technology is heading – honestly facing up to what it will soon be capable of – it seems that universal capitalism may be inevitable, if we want to keep the aspirational and productivity benefits of capitalism alive while maintaining a just and healthy society for everyone.

Posted by mlrrogers | Report as abusive

You once again bring to the front the two sides of the social coin.

At all of the various possibilities of “purity”, Capitalism harnesses individual self-interest to pull the economic cart. Let’s think of economic activity as a pizza. If you keep the number “at the table” the same, more ingredients make a bigger pizza and everyone at the table gets a bigger piece when it is cut. If you can convince everyone it is in their best interest to contribute to that pizza in good faith, everyone WILL benefit. Some “closer” to the hand that slices get bigger pieces leaving less for others at the table, but it has forever been so.

At all of the various possibilities of “purity”, Socialism and all other alternatives merely change the hand on the knife that slices a pie substantially fixed in size. Once again, those closer to that particular hand are the ones that get bigger pieces leaving less and less for those not so favored. No one getting a smaller piece is motivated to make a bigger pizza, but all squabble without end to secure a bigger and bigger piece for “them and theirs”.

Anyone can see that the “bigger pie” is the best choice, but in any economic system reality and equity are fundamentally and forever “at odds”. All men are NOT created equal.

In general it can be said that the overall life of the “average person” even in America up to WW II was, compared to today, relatively nasty, brutal and short. Half of everyone’s life was spent in substantial pain since their teeth were literally rotting in their mouths from age 25 or 30. Few places in business or at home were very comfortable in the cold of winter or the heat of summer. Summer was a time of sickness when there was no “running water” and life was largely lived outside when the sun was up. Cooking and preserving food, cleaning, washing, ironing and mending clothes and keeping the “fire in the hearth” consumed every waking monent of even the few women that did not have children.

Entertainment and socializing was occasional, such as going to Church on Sunday, periodic shopping (for those with the money to do so) and celebrating holidays. Since then, America has led the way to a longer and more comfortable “way of life” by substituting energy from mostly oil and coal for human sweat.

Today a majority of America’s “poor” drive and are somewhat literate. They have (with their remote controlled widescreen TVs) more and better entertainment than royal courts did before “public” radio. Unfortunately, developed nations have consumed more and more of the world’s finite natural resources. If humans are not to turn our big blue marble into a big brown marble devoid of all “higher” lifein their quest of a sustainable “better life” we are going to have to reexamine much of what we do today.

We must ask “should we do this” and 
what is the most efficient way of doing this, in the short term and in the long term. We must ask the question honestly whether it is humanity’s destiny to cover every unoccupied space on Earth with humanity, or to spreat into our solar system and beyond into the universe.

Capitalism has clearly proven best in raising the “best and brightest” to leadership. It offers those who work harder, or longer, or smarter than others the opportunity to keep some of the “extra” thus produced for themselves and those around them. The uncommon ability of some to mix together some workable combination of “available” citizens into an orchestra that can play “economic music” is of undeniably great economic value.

Socialism, on the other hand, gives disproportionate and controlling “voice” to those whose whose very presence is poison to the common good, the forever dissatisfied, the forever envious, and those best described as just plain malicious. It achieves it’s strength in numbers from the lazy, who offer nothing (or only that which they must) whose “economic worth” is always less than it should be (as should be their “just rewards”). These are most visible today in the form of government employees and other union dominated economic monopolies. These make not “economic music” but “economic noise…activity without meaningful purpose or merit.

Undeer any “system”, those “in charge” have to categorize accurately within their “economic resources” the productive, the economically useless, and all in between. Some produce things “hands on”, some by the application of their intelligence and/or their experience and others quit learning or refuse to improve themselves at some invisible point. Within each tier there are the clever, the devious, the simple, the not so simple.
But, in the end, should we judge Capitalism a failure because it is not perfect? By that same measure, every other economic system thus far tried by man is also; and without a “system” there is no society and economic chaos must ultimately prevail.

If we are to “do what we can, where we are, with what we have” and thus live as well as possible while continuing to improve the “average quality of life” of our society, some form of Capitalism is the only possible economic path forward. There are many, many possible paths backward. Why is the obvious choice so constantly questioned? Because “We, the people” allow the envious on the “outside” to make us feel guilt in our success.

If they can somehow bring America down to their level, they think their own continuing failure will be somehow more acceptable. They are wrong. But they won’t know it until they need America to once more “pull their fat out of the fire” and America isn’t there.

Posted by OneOfTheSheep | Report as abusive