Endangered Capitalism

In the aftermath of Brexit, but perhaps not so much so for the election of Donald Trump as president of the USA, because he is more probably the archetypical capitalist than not, there is talk of the demise of unfettered capitalism. In an article How Britain fell out of love with the free market, sentiments such as what follows prevail:

The UK Conservative manifesto attacked aggressive asset-stripping” “perverse pricing” ,“exploitative” markets in energy, property, insurance and telecommunications and “the remuneration of some corporate leaders” while the Labour Party offered policies to include – nationalisation, restored trade union rights, restrictions on the City of London – which would undo much of British neo-liberalism. While John McDonnell, a possible contender for Britain’s Chancellor of the Exchequer, lists “generally fermenting the overthrow of capitalism” as an ambition of his, so it seems the possibility that politicians will be interfering in Britain’s and other economies is becoming ever stronger.

Nigel Vinson, who has been a leading player in Britain’s free-market think tanks lists “Wage stagnation, poor GDP growth, crony capitalism in the contracting-out of public services, endless gaming of the system by corporations, a general ennui about the prevailing economic system … ” as criticisms of capitalist practices, culminating in the 2008 crash, resulting from the “deregulation and hubris of the financial markets”.

If you have any doubts about the way capitalists rip value from ordinary people, for their, the capitalist’s own benefit, this article The Real Cost of Regeneration will soon dispel those doubts

The tale from the United States is much the same. In an article How Power Profits from Disaster, Naomi Klein, an outspoken critic of the capitalist excesses, draws a grim picture of these practices in the USA, from which many of the present political leaders of the US profited hugely, which says a lot of the relationship between government and capital in the USA.

In contrast there is the argument that capitalism and the free market system have immeasurably improved the general well-being of the world’s population, particularly during the past century or so, and in particular globalisation has led to the improved life conditions of millions of previously poverty stricken “peasants” in the under-developed countries of the world who have been drawn into the global economy as sources of cheap labour. These improvements are often rooted in exploitative practices of workers abused in sweat shops, for a pittance by western standards, and such-like. Consumers do not always condone these practices in their names, just for cheaper prices, which if only by association may render them complicit in neo-liberal slave labour, and boycotts of certain brands which use these practices break out sporadically throughout the world.

Another downside to globalisation are those left behind by movement of industries from their historic places of operation, to lands with cheaper labour and more exploitative labour practices.

All of this is happening as I write this in 2017. So we have a conflict of outcomes, massively improved life styles for some ironically brought about by abusive capitalist practices and massive losses for others, brought about by the same practices, The only people who seem to benefit consistently are the ruling elite and the big players in the capitalist system.

The point to all of this is that I do not see neo-liberal globalisation as practised currently as a sustainable option. Yes, the rich can continue to get richer and the poor poorer and this can carry on until something gives. Maybe the market place collapses because there are not enough affluent consumers to support it, or maybe the poor just get sick and tired of being poor (a la France (1789-99) and Russia (1917) and Germany (1930-1945)), and history has a way of repeating itself, and the world could slip into another cycle of autocratic despotism. And do we want that to happen? Do we really want democracy and capitalism to collapse to be replaced by autocratic rule? From chaos come autocrats to impose order and that is a distinct possibility.

Is there another way? Is there a way to save capitalism and democracy and to fend off their attackers, whether they are religious fundamentalist (a la radical Islam) or statist autocrats (a la Vladimir Putin)?

I would argue there is.

The only reason either of those or any other extremist versions of society are allowed to gain a foothold is that populations perceive unfairness by existing systems as being unacceptable and will welcome almost anything in their place which promises justice and order, thus allowing extremism to occupy a moral high-ground. “Liberalism has failed”, they will argue. “We (our religion, our autocracy, our order) will restore order and justice to society”, they will argue. And folk, sick and tired of being abused and marginalised will listen, in their misery and hope for something better, forgetting that what comes with the promise of autocratic justice and order is far worse than the limited and imperfect freedoms under a neo-liberal order

What if there were generally order and justice in society? Extremist appeal would be very much diminished. They would have to work harder to destabilise societies to the point where their intervention would be supported even by a disgruntled minority.

Let me explain what I understand by capitalism. Capitalism is the private ownership of wealth and the means of production and distribution of goods and services for profit. I believe that as far as possible, government and bureaucrats should be kept at arms length from capitalism, namely from private ownership of wealth and the means of production and distribution for profit. Can we risk losing that ownership by ceding it to others?  I don’t believe so.  .I believe however that rampant capitalism as practiced by the neo-liberals as evidenced by the examples given above, should not be beyond the scrutiny and censure of society and in particular, capitalists should be accessible to society. That is, there should be in place the means for ordinary people to protect themselves from the excesses of rampant capitalism. How you achieve this last goal is not exclusively part of this discussion.

So, could there be order and justice in a democratic and capitalist society?

I believe there can indeed be such order and justice, one born out of consent of the governed.

Typically, government is run by the political and oligarchic elite, often the same body of people or at least bodies closely associated with one another. There is little or no influence from the electorate except at four or five year intervals for election purposes, and even that is highly manipulated with the same oligarchs and elites controlling media controlling opinion and trends in a manner that is far from objective. We won’t even consider for the moment, the phenomena of false news or propaganda.

If instead there were a senate peopled by ordinary people, through which all legislation and regulation needed to pass for approval, I would argue that such political representation of ordinary people would change the political landscape. It is true that not all the political and oligarchical elite would approve of such a senate, but I believe it would be preferable to any of the revolutionary outcomes cited above.

Such a senate is proposed here for South Africa.

So how does this control the excesses of unbridled capitalism? It would allow the ordinary people of a society to exert their influence on regulation and legislation which may be intended to disempower them or defraud them. I believe that would be a very significant act of empowerment.

So capitalism can otherwise continue making the rich richer and the poor poorer?

One of the primary concerns about rampant capitalism is that tendency. It leaves the poor (the left behinds) poorer and feeling disempowered and helpless and strips wealth and dignity from them. This is a dangerous outcome that needs to be addressed and a very effective way of addressing it is with a Basic Income Grant. Apart from helping to fight poverty, having a basic income will empower people who otherwise may have nothing, not even hope and dignity, and aid others who may not be so impoverished but are borderline cases, with little or no income surplus to their needs.

To those who believe that one should only receive that which is earned, let me suggest that the world is full of capable people equipped and willing to earn but who cannot be employed because the formal labour market is oversupplied. This is not going to get better. This is going to get worse with the advent of automation, computerisation and the gig economy. So how are these people going to survive? A basic income grant will not only provide for basic needs but will give recipients opportunity to invest in themselves, in savings, in education, in training, in businesses and arts and crafts and so on. Whatever you can imagine would be stimulated and advanced by such a grant.

You can think of it like this; a basic income grant paid to your population would be a very effective way of stimulating both the demand and the supply side of any economy and those most in need will spend it on their needs instead of having nothing to spend, and nothing to contribute to the economy. So I believe a basic income grant is a win win solution for many social and economic needs.

A Basic Income Grant is proposed here for South Africa

There are other things one can do to engage your population in your economy. A Sovereign Wealth Fund is one such means, provided that it was owned by each individual of your population, in equal parts, rather than by your government. In turn the sovereign wealth fund invests in your and other’s economies, wherever an investment makes sense and profits are to be made by the fund, and therefore by its owners, your population. In most countries, such a fund would become a very significant part of your economy and give your population a sense that it is engaged in your economy, rather than being divorced from it.

Such a fund is proposed here for South Africa.

Capitalism, which has been so badly managed from a societal perspective as to make it an endangered system, needs to be reinvented to be better managed from a societal perspective, so as to no longer be endangered. What these moves do in effect, is to empower ordinary citizens politically and economically using the tools of capitalism and democracy to help eradicate poverty, and to raise democracy and capitalism to a moral high-ground that radicals of whatever persuasion will find difficult to match let alone challenge.

This post originally posted in John’s Bolg 

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