Economic alternatives: Social-Capitalism, a possible compromise

I recently explored the pros and cons of socialism and capitalism and made the point that socialism is inevitable in a global society so desperately in need on standardization. We need a uniform approach to global issues, such as the environment, poverty, disease, the economy and so on. That need is growing rapidly in the present decade, because the issues are so threatening to our collective survival.

Because the issues have such a collective ring about them a collective response is almost unavoidable, which predicts a return to socialism.

Anyway, there is a third way. I am partially inclined to it too, although I will ultimate argue in favor of a theocratic model. The third way is Social-Capitalism. One of the early economic fathers, Adam Smith, argued that socialism and capitalism do not need to be antagonist.

Indeed he argued that a socialist state can benefit from the hidden hand of free market forces. Maybe an example of that is modern-day socialist China, which competes capitalistically in the global economy, a factor that is inducing all the efficiencies that are some of the best virtues of capitalism.

Classical social-capitalism foresees an economic duality, with capitalism defining the tier-1 economy and socialism the tier-2 economy. It means that wealth and other considerations are no longer class distinctions, because the two tiers are defined by the degree of dependence on the state.

I have actually seen some of this kind of model in working. Malawi is essentially a capitalist economy, although it does not work very efficiently. To offset the negatives of individualism, the government runs large collective farms that preserve national food security and employ local workforces in a reasonable symbiosis that meets a number of needs.

Then there is South Africa. It has an efficient first world economy, boasting some of the best banking practices in the world, outstanding communications infrastructure, a world-class resources sector and impressive industrial and service sectors that compete globally. It also has a sizeable third world economy that is not all poor, thanks to healthy entrepreneurship. The third world sector really comprises the informal economy and a large indigent population.

Few countries have such stark contradictions, yet the government regulates its quasi social-capitalist economy to uplift the poor and leverage them into the economy, whilst stimulating the 1st tier of the economy, resulting in collective advantages – a stronger capital market and limited social dependency.

Another example, one I will dwell on more in subsequent articles, is the Moshava or Kibbutsim model of Israel. It is internally socialist and externally capitalist. Moshava members equally share in the risks and rewards of the community and all members are equal, resulting in a rather pure form of voluntary socialism. But each Moshava competes in the economy on a capitalist basis, marketing its products and competing for markets to ensure their survival.

So maybe a duality offers the best of both worlds, if the government is able and willing to play a meaningful role in balancing the forces to ensure the survival, mutuality and progress of both forms of economy. In my next article I will dip deeper into a more theocratic economic model.

(c) Peter Eleazar @ http://www.4u2live.net/