Socialism redistributes what capitalism creates
July 27, 2008
 By Vuyo Jack
I recently listened to a debate among friends over capitalism and socialism. The capitalist friends related capitalism's history as emerging from Europe's feudal system in the 1700s, which had repressed the creativity of common folk.
In those days, the nobility had privileges and benefits by virtue of their family histories. The Industrial Revolution changed that and ushered in capitalism.
Capitalism is a system that creates capital, which in turn creates wealth. No other system before had produced capital.
Capitalism's key driver was that it enabled individuals to express their creativity, which in most cases was a catalyst for creating wealth. Some argue capitalism has been responsible for growth and the improvements we see in the world today.
Socialism, in a labour-movement or Marxist definition, is a stage between capitalism and communism. The premise behind socialism is the equality of all people and an equitable distribution of benefits.
According to Wikipedia, the term socialism was first used by European social critics, who spoke out against capitalism and private property. Karl Marx wrote that socialism would be achieved through class struggle and proletarian revolution. Communism is the extreme side of socialism.
My friends' debate went on for a while until it was realised all points were valid. Self-interest drives capitalism, whereas socialism is characterised by community and the collective. The sweet spot in this debate was seeing how capitalism was one side of the coin and socialism the other.
Osho, an Indian mystic, once said socialism was a coming of age of capitalism. This is the trend we see taking shape in the US through philanthropy, which is a fancy word for equitable wealth redistribution.
Capitalism is great for wealth creation, while socialism is a great distribution mechanism. Both depend on each other. If there is no wealth created, what are you going to distribute besides poverty?
Furthermore, if there is no equitable distribution of accumulated wealth, economic activity would be constrained. So production comes first, followed by equitable distribution.
Production requires entrepreneurs who use infrastructural and human capital to bring their ideas into reality. Not everybody can create capital. Entrepreneurs are driven by their own interests, whether it is enlightened self-interest or greed.
Distribution comes afterwards, based on the level of effort and contribution made. If there is no equitable distribution then there would be no incentive to produce at all. So the key to reaching a balance is the fairness and equity in the system.
What does this have to do with South Africa, in general, and broad-based black economic empowerment (BEE), in particular? Broad-based BEE contains elements that are redistributive in nature and those that are capital- and wealth-creative.
BEE ownership in most cases is a purely redistributive mechanism that plays a game of musical chairs, shifting ownership from white people to black people. There is nothing really creative about it.
Socioeconomic development is partly redistributive, but can be used in a creative manner to pull people out of poverty through survivalist projects.
Skills development and enterprise development are the most potent catalysts in building capital. Once knowledge has been acquired and people's skills have been developed, nobody can take them away and they can be used to create long-lasting wealth. Enterprise development assists in building a solid foundation for enterprises that can employ people and create wealth.
Preferential procurement is a great anchor for wealth creation because it keeps market access open and the economic interaction flowing. The human capital elements of empowerment provide a solid foundation for the creation of wealth as well as equitable distribution.
All the elements of broad-based BEE are not accidentally there. They depend on each other as much as both capitalism and socialism require each other to succeed.
Furthermore, labour requires business to exist because without business there is no labour.
|
|
