Allan Jones

Oct 28, 2019

4 min read

Capitalism, Socialism, Communism, and More

Poverty — Part 4

No discussion of poverty can take place without some agreement on the fundamental vocabulary of economics. According to Merriam Webster:[1]

· “Definition of capitalism: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

· Definition of socialism:

o 1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods

o 2a : a system of society or group living in which there is no private property

o 2b : a system or condition of society in which the means of production are owned and controlled by the state

o 3 : a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done

· Definition of communism:

o 1a : a system in which goods are owned in common and are available to all as needed

o 1b : a theory advocating elimination of private property

· Definition of social democracy

o 1 : a political movement advocating a gradual and peaceful transition from capitalism to socialism by democratic means

o 2 : a democratic welfare state that incorporates both capitalist and socialist practices”

These are definitions, and as such, they provide specific and limiting meaning to the terms. However, the terms can be problematic when leaders or others seeking to find new and innovative solutions to some of today’s economic conditions create new economic models that do not fit nicely into one of the traditional boxes. The baggage associated with Communism and Socialism are frequently used to demean or disparage new ideas. In this book, you will need to understand the meaning of the terms, but you also need to allow for variations on the traditional models represented by those labels and be willing to examine creative alternatives that may be better suited to today’s global economies. Illinois, Indiana, and Michigan are no longer competing against each other for manufacturing jobs, they are collectively competing with cheap labor countries around the world. It makes sense then to explore economic models that are better suited to this new global economy.

Capitalism That Works

There was an article in the Washington Post on July 17, 2017 titled, “Capitalism that works”.[2] The article examines the wide range of models of capitalism being practiced around the world, and the resulting differences in their trade balances. The following selections from the article, provide a glimpse into its message. I highly recommend you read it. Capitalism can work, but there is more than one form of capitalism.

“The composition of the top and bottom 20 nations on the list (measured by trade balance) provides an even more illuminating picture. Three kinds of nations dominate the top 20: oil exporters (Saudi Arabia ranks third), East Asian manufacturers-for-export (China ranks second) and Northern European industrial and social democracies (not just Germany but also Denmark, Sweden, the Netherlands and Norway — the last, swimming in North Sea oil, an energy exporter as well).

The most striking aspect of the bottom 20, by contrast, is the prevalence of English-speaking nations. Not only does the United States finish 193rd, but Britain comes in at 192, Canada at 189, Australia at 186 and New Zealand at 173.

Does using English condemn a nation to producing less at home and buying more abroad? Probably not — especially since Britain and the United States once boasted huge export surpluses. But something has driven a wedge between the Anglo and the Saxon economies — and that something is the divergent evolutions of their respective forms of capitalism.

Anglophone economies are characterized by lower levels of regulation and worker rights than their Northern European counterparts, and most crucially, particularly in the United States and Britain, they have become dominated by finance. As Wall Street and “the City” (Britain’s financial sector) have waxed, their nations’ manufacturing sectors have waned. Crucial to this evolution (or devolution) has been an embrace of shareholder capitalism: the doctrine, first propounded by Milton Friedman, that corporations’ sole mission is to reward their shareholders.

In the United States, boosting a company’s share value has become the be-all and end-all of corporate purpose — and as the average length of time that a shareholder holds a stock has dropped precipitously in recent decades, raising short-term profits has come at the expense of other corporate activities.

The nations of Northern Europe, by contrast, have created economies that have enhanced their power and distributed wealth more equitably. In the Nordic countries, the world’s highest levels of unionization have not led to a decline in competitiveness but rather to highly trained work forces and major trade surpluses. In Germany, corporations are required to give workers a role in key decisions, and shareholders play a minor role in businesses’ funding and calculations. In consequence, the nation’s manufacturing sector is continually upgraded and the nation’s apprenticeship programs set the standard for developing skilled workers. Median compensation in manufacturing is a third again higher than it is in the United States — yet, counter to the wage-cutting conventional wisdom in American boardrooms and economics classrooms, Germany is №1 in trade and the United States is №193.”

So, yes, Capitalism can work, but the current American version only works for the wealthy executives and investors, not for the workers. Their form of capitalism results in less income and wealth inequity. America’s Poverty is a political choice made by the people in power.