What really is capitalism?

By Oscar E V Fernando
Is it opium for the masses like some would want us to believe? There are a lot of terms defining an economy that befuddle the average reader; there are three broad categories:

Capitalism or Free Enterprise;

Communist or Socialist State Enterprises;

Enterprises managed by Statutory Boards.

In capitalism as an economic system, the means of production are privately owned; it is operated for profit; investment of capital is determined privately; decisions regarding production, marketing, and prices for goods, services and labour are determined by forces of supply and demand.

There are those other economies called - free enterprise systems, economic liberalism that has varying degrees of governmental control.

Speaking of statutory boards, if we consider capitalism with profit motive as fish and communist economies with military coercion as fowl, then our own brand of statutory boards are neither fish nor fowl. Hence is the dilemma of the Sri Lankan economy now vastly indebted to the outside world!

The word capitalism is a hackneyed phrase used for:

Private ownership of capital with emphasis in a free market;

Class analysis such as relationship between labour and the capitalist class - a phrase hackneyed to the extent of detesting the capitalist economic system;

Growth of a global market system;

Individuals pursuing self interest without altruistically working for the common good.

Over the years controversies have been built up as to—capitalism being an actual system or an ideal—whether specific to an era, or region whether it is a universally valid system—for some it is an economic system and for others a political, social and cultural system.

In addition to the Babel of confusion, the word capitalism has become, there are other economic systems such as:

Feudalism, where the monarch holds land and uses serfs to work the land;

Socialism where means of production are owned and run by collectives such as the state for the people.

Communism where the means of production are owned collectively by the workers themselves and the produce of labour is collectivised, resulting in the ‘abolition of bourgeoisie or private property and where the products of labour are directly distributed ‘to each according to its need’ and where ‘buying and selling’ is abolished.

Whatever be the above theoretical definitions, feudalism, socialism and communism are waning in spite of the rhetoric uttered by their proponents.

It is correct that the communist world collapsed; it is also correct that several nations and political parties thereafter adopted free-market policies or market capitalism.

But we also see around us frustration in the capitalist system especially in the developing world—with all the goodwill of the World Bank.

Has not selfishness crept into the capitalist system; take the case of a company-to what extent is it run for the sole benefit of the proprietor and the managers at the expense of the human capital, the workers who toil to make it a success?

Take also the case of the stock market prices; isn’t greed, selfishness and a gambling spirit that evaluate the value of a company, rather than the intrinsic value of it? In this melee how far do managers think of the human aspect of the company?

It is increasingly seen that in modern day capitalism, the directors, and policy makers are neglecting to see how companies are run, thus leading to alarming scandals, states a recent financial report.

Is the present day capitalism, sincere in its structure and values? Does it work with equity and a sense of morality, for as long as these ingredients are available, only capitalism will be a success!

What about the soaring level of salaries the managers’ vote for themselves? How much of the share market boom is due to shares held by the corporate executives?

Other aspects of uncontrolled capitalism are-bribery, money laundering, tax evasion, and income inequality. These contribute to a gap between rich and poor undermining future prospects of continuing prosperity.

It is observed today that the trend is for small private sector family unit investments: shouldn’t these be ethical in outlook? Without moderate state control will the market settle on moral grounds?

Unequal distribution of wealth persists in the capitalist system—although inequality is a part of the system it can bring with it benefits for all members of society, if the state can ensure that no one is left in poverty.

This is where state regulatory mechanisms—that will not kill the goose that lays the golden egg come in - as in the fast developing private economy in communist China!

Taken in correct perspective, free market can develop economic potential. There must be justice and solidarity, thus avoiding accumulation of material goods the only activity—the dignity of the person must be considered; this should overcome deficiencies of the free market.

From the angle of liaising with the capitalist world to introduce state mechanisms, nothing much seems to come out of the old brigade of the communist world of our country: couldn’t the new brigade, perhaps not so die-hard as the old, be more amenable to a controlled capitalist economy-as in Red China?

The country is bound to benefit from such amenability!