Capitalism and Socialism


What is Capitalism?

Well, we’re all familiar with Capitalism, as it is what stacks the shelves in the supermarket; whereas you’d queue all day for half-a-loaf of bread in the old Soviet Union.

Of course, your local supermarket has at least two brands of everything- that’s the virtue of competition –unless the supermarket is striving for a monopoly in the product, by introducing its “own brand”.

And regulation is needed, to ensure the product meets a certain standard of quality, with ingredients displayed on the packet. Also, at not too low a price, lest the supplier goes broke.
So, it is clear that unfettered Market Forces is not ideal.

With Fall of the Berlin Wall, and collapse of the Soviet Union, it was assumed that Utopia had arrived – or that was implied. All that is needed now is fine tuning. (How’s the All Ords today?)
However, now, with the political advent of Bernie Sanders in USA, Jeremy Corbyn in UK, and Donald J Trump as US President, a critique of capitalism is evident – all is not well. We have popularism and protectionism. Likewise, Brexit and problems with the European Union and its PIIGS (Portugal, Italy, Ireland, Greece, Spain).

After all, communism tried to rectify the inherent defects of capitalism, and the demise of communism leaves capitalism with the same defects it always had – and which are resurfacing.

But, enough of this, let us get back to basics.

The human species has evolved from a nomadic foraging ape to a settled existence in towns and cities, where agriculture and animal husbandry was, and is, the basic source of food, clothing, etc.

This has been supplemented by timber from forests, for housing and other construction, plus mining from quarries. Many crafts and skills resulted, until feudalism was eliminated by land enclosures and factory production; with foreign merchants, retail and wholesale trade, and industrialisation.

Much of our historical record tells of the exploits of Kings and Queens, whereby the life of the humble peasant and artisan tends to be neglected. Below the warfare of the Nobility, the daily life of feudal conscripts survived as best it could, while tribes merged into nations, until we have the global society of today where finance dominates.

Throughout history, the Haves exploited the Have-nots, from slaves in Ancient Greece and Rome (and Egypt, etc. before that) to feudalism, to the large farms and factories in recent centuries.
Indeed, “wealth” ensured “well-being” from good food, whereas “poor” mean a person was “poorly” due to limited sustenance.

Gold and silver and other such valuable possessions, plus entitlement to arable land, by grant of the king and nobility, was evidence of power. The Gold Standard and coinage was supplemented by bank notes (legal tender), and then by book-entry, so we have almost a digital economy today.
However, as King Midas discovered, gold is no real substitute for food and human relations.

Capitalism, as a word, originated in the 19th century, with the Industrial Revolution in the UK – Socialism, again as a word, came later.

The capitalist owned the factory, due to prior accumulation of wealth, or, as entrepreneur, due to borrowing from a bank. His workers might often have been dispossessed peasants due to Land Enclosures and abolition of the Feudal System. They now lived by sale of their labour.
Such workers had no say in the running of the factory, and, indeed, were lucky if they had a “job” at all. The same situation virtually applies today.

Trade unions were formed to protect workers from the worst exploitation of the bosses, and were initially banned by the Combination Acts of 1799-1800 – where any two or more workers were deemed illegal if “combining” to raise wages. These Acts were eventually abolished in 1824, after much repression, injustice, and strife.

The Trade Unions found that industrial action (strikes, sabotage, boycott) were insufficient to gain their Aims, so they formed the British Labour Party, to advance them by political means.
As a Labour MP did not have the financial resources of a Tory MP, parliamentary salaries were introduced – for ALL MPs.

And as Capitalism as the economic basis of society seemed too brutal, the idea of Socialism, and the Welfare State, were mooted, and reforms instituted.

In various other industrialised nations similar changes occurred, and ideas ranged from utopias to the “scientific” socialism of Karl Marx, with Anarcho-syndicalism in between.

What is Socialism?

If Capitalism is the private ownership of the means of production, distribution, and exchange, then Socialism is the public ownership of the same – usually, via the State.

What might have started out as capitalist enterprise, e.g., the various railway companies in Britain, was found to be chaotic and ad hoc, whence the standardisation of rail gauge, and, eventually, the nationalisation of all to form British Rail.

The “modern” tendency is to reverse this to a large extent, by privatisation: if a little bit of capitalism is good, then a lot must be better. Hence, the privateers move in to plunder the Public Purse.

Govts, hard pressed for cash don’t mind, as the largesse from a one-off sale means they don’t have to increase taxes. A super-profits tax is now being mooted as acceptable, at least to the public.

President Macron of France wants to free up business and clamp down on welfare; he is likely to have street protests as a result. The French are adept at this. Sanders, Corbyn, and Trump tend in the opposite direction, even if Trump also wants to cut company tax, as does the Govt in Australia.

Dr. Jim Cairns once defined Socialism as “the extension of democracy into economic affairs”.

But what is Democracy, and what is its history?

Back in the Middle Ages, and prior to that, it was the Strongest and most Cunning member of the tribe who ruled by Might is Right, he became King, Monarch, or Caliph – until toppled by a superior Challenger from within or outside the tribe. All other members of the tribe were subservient, and obeyed orders. Democracy was non-existent.

This prevailed, with merging of tribes into larger groupings, until Kingdoms were formed, with the Barons owing allegiance to the Monarch. It was only when the arbitrary nature and incompetence of a monarch, e.g., King John of Britain, became too much that the Barons (Nobles) dared to band against him and present a list of demands in the form of Magna Carta.

Once Divine Right was thus challenged, it became somewhat easier, particularly as monarchy became hereditary, to lessen the grip of arbitrary rule, and give lesser mortals more say.
Hence, the first Parliament was established under Henry III, leading to the Houses of both Lords/Peers and Commons under Edward III.

Not that universal franchise occurred, as Membership of Parliament was confined to males of property. It was only in the 1800s that further progress was implemented.

Since then many nations have adopted such Geographic Democracy, and have experimented with Compulsory or Voluntary voting; First past the post; preferential; proportional representation, etc.

A Free Press is deemed essential, so that voters can decide between Party Platforms.

However, who controls the Economy also tends to control the Politics, and the More Things Change the More They Remain the Same. The USA differs from China in having a one-party system with two heads (Tweedledumbo and Tweedledonkee; Plutocracy instead of Oligarchy.)

Yes, Geographic Democracy has about reached its limit.

The advent of the Welfare State, and before that the Elizabethan Poor Laws, brought in a touch of Economic Democracy - mostly pushed by the Labour Party.

The democratic nation State has the responsibility for such things as public utilities, schools, hospitals, pensions, social welfare generally – all of which tends to be anathema to private wealth, which resents the taxation needed to finance them.

As Capitalism claims greater “efficiency” than public organisation, there has been a tendency to “privatise” many aspects of society, and Govts, keen not to increase taxes on the populace, have grabbed at the one-off sale, with little regard for long-term consequences.

But there is a recent reaction to this, and “For the Many, Not the Few” was the motto of British Labour Party in the June 2017 election, with a platform of restoring many utilities to public ownership.

Yet even the UK Labour Party doesn’t commit to the next stage of Democracy –
Industrial Democracy, which is the only way to finally end the “Class War”.

The concept of Industrial Democracy is not new, as it is represented by:

• Guild Socialism in Britain,
• Anarcho-syndicalism in France,
• Industrial Unionism in the United States, and,
• The Mondragon company in Spain.

Co-operative Societies, as distinct from the usual Corporation or Company, have the same or similar characteristics, depending on circumstances.

All aim for the democratisation of Industry.

But, you might say, Industry is already democratic, at least to the extent of having the Board of Directors elected by Shareholders at the Annual General Meeting.

True enough, but voting at an AGM differs from that at a General Election for Parliament in that in a General Election a rich man only has one vote, whereas at a Company’s AGM he might have many votes depending on the number of shares owned.

This disparity is valid if we consider the History of the Joint Stock Company (and how WORDS have changed their meaning over time).

One key word is that of “STOCK”, which originally applied to a stock, or quantity, of actual goods/merchandise, but nowadays tends to be purely financial – where not in an inventory sense at an annual stocktake. Likewise, a “stock exchange” was where you swapped goods with other merchants. Today, a stock exchange is a financial body.

Dr. Samuel Johnson gives us a clue to the meaning of several “economic” terms, at least how they were used back in Johnson’s era (the 1700s).

A merchant was “one who trafficks to remote countries”. Whence a “merchantman” was a ship which carried merchandise.

A tradesman was a shopkeeper; whereas a craftsman was an artificer or manufacturer.

A company was a group of people acting together in consort (same as now); but a “joint stock company” has been so lost in the mists of time that any current historical reference has only financial connotations.

We can only assume that a company of merchants engaged in foreign trade initially sold their goods separately, but eventually combined them in some type of joint sale – the proceeds being split in accord with share of each member.

Thus share, and hence “dividend” – i.e. how proceeds were divided up.

Today, in USA, “stock” is a fully-paid-up share.

When the financiers moved in on the Merchant Company of Gentlemen, the actual traders might go off by ship, while those paying for the enterprise remained at home. Of course, a ship might be lost at sea, i.e. sink, with all hands and cargo, such that the financiers lost all – which is when Lloyd’s of London stepped in with Insurance. The unsecured nature of risk involved was born by the Names, but the average company today uses Limited Liability so shareholders aren’t bankrupted. Even the Names at Lloyd’s has dropped to 2%.

So, we can see that, today, the concept of a commercial company has changed, from the idea of physical goods to purely financial, at least insofar as corporate structure and the “stock exchange” is concerned. This can be harmful, at it is pointless saving money in a Superannuation Fund if the goods (food, clothing, etc.) to be purchased from it are no longer available – because the Human Habitat has been destroyed, deliberately or by neglect. [Even our Great Barrier Reef has now been translated into financial terms – valued at $56 billion (“The Age”; 26/6/17) - so even a Business Man can appreciate it.]

Let us now consider PROFIT.
Is it OK to “make a profit”? What happened to: “Fair exchange is no robbery”?
[See: Oxford Dictionary of Economics” (1987); page 158; “exchange”]

Presumably, the original Merchants, back in Samuel Johnson’s time, went to foreign lands to swap goods with the aliens, and any surplus or deficit on current account was adjusted on the spot or soon thereafter. It was only later that a Profit and Loss Account became legitimate Bookkeeping.

Not that “ripping off the mugs” was never practised down the Ages. The people in Feudal Times might try and con their customers, but a turn in the stocks or pillory could effect a cure.

Today, of course, every business aims to make a profit. If it doesn’t, then not only will it go broke, but its Shareholders will flee elsewhere. But we are entitled to ask: “Whom are you ripping off?”

Indeed, capitalism must constantly expand, with the Big Fish gobbling up the Little Fish, or capitalism starts to implode. Also, capitalism rips off the workers, and over-production meets under-consumption, until the whole system gets so top-heavy that it crashes into – a World Depression.

Capitalism realises this may occur, and can ward it off by being “liberal”, and loosening up the purse strings, to give a Recession instead. But the trend is there.

Hence, if Capitalism and Market Forces are inadequate then what is the Solution?

Certainly, we have plenty of Geographic Democracy, even if it is losing its grip.
And the Welfare State totters on, as Economic Democracy.

But it is Industrial Democracy, as part of over-all Socialism, which is needed.

Why? Because Capitalism has the same defects it always had, and THE Economy under Neo-Liberalism is insufficient to cope.

The following is a Program to implement Industrial Democracy:
1) Only the Workers in any industry are entitled to be Shareholders therein.
2) The Stock Exchange will be a Stock Registry – of businesses and participants.
3) Both Business Associations, and Trade Unions will be phased out, as no longer needed.
4) Every Firm will be run by internal Democracy.
5) Even if “Sack the Boss” may not apply, certainly matters will be put to a Vote.
6) The present Senate in Parliament will be replaced by a House of Industry.
7) Such House will consist of Representatives from Business Firms (ANZSIC Classification).
8) The existing House of (Geographic) Reps will be retained.
9) There will be a Third House, or Consultative Body, which will vet all Legislation to consider Ecological Impact – with Right of Veto. All Members will be Scientists – or, at least, scientifically literate.
10) Elections may change Representatives, but not the basic structure.

As for over-all Socialism:
1) This is needed to preserve the Welfare State from Predatory Wealth (capitalism)
2) True Economy (frugality) will replace the Extravagant Exploitation of Resources which passes for Modern “Economics”.
3) A Govt Competitor, e.g. In Health Insurance (shunned by USA rivals of Obamacare), “to keep the bastards honest”. This will be created as deemed necessary.
4) The State, Public, and Co-operation, shall have primacy, over Foreign Investment, Privatisation, and Competition.
5) Nationalisation of Public Transport and Utilities (Electricity, Gas, Water, etc.), will be implemented, if and as, deemed necessary.
6) Socialism need not be Totalitarian or Authoritarian, and private property will not be abolished (own your own home), nor Freedoms unduly limited. But this “Third Way” (between Capitalism and Communism) will not try to replace Callous Capitalism with Kindly Capitalism.
7) The Profit Motive will be viewed with suspicion, if not abolished.
8) Taxation of Super-Profits will be a source of Govt Revenue.
9) Foreign Investment will require obedience to local laws, and must prove of local benefit.
10) If something can be grown or made here, it should be.
11) Fair Trade (with other nations) shall take priority over Free Trade.
12) Protectionism is a valid concept – for all Nations. As is Peaceful Resolution of Disputes.

This is all very well, you may say, but HOW is it to be implemented?
By Revolution, or Evolution, if at all?

Why do/did Western Powers fear Anarchism, Communism, and, now, Terrorism?
Because they meant ‘business! They took action to change society.

The trouble is – any Revolution tends to revolve: dump the Czar, and you get “Czar” Stalin.
Also, as in “Animal Farm”, you swap one Elite for another.

Communism became a New Religion, with Marxism-Leninism as the New Scripture, Marx as Jesus, with Lenin as St. Paul. Catholics who switched to Communism felt at home in the new Hierarchy.

On the other hand, Evolution can be a slow and uncertain process, with erstwhile Radicals succumbing to the Siren Song of Plutocratic Capitalism. “Her Majesty’s Loyal Opposition” is already on the skids to capitulation. Fabians might try erosion, but be eroded instead.

However, the Rise of Bernie Sanders in USA, and Jeremy Corbyn in UK, show what ONE person can accomplish if persistent and consistent. We might mention Al Gore and Michael Moore also.

Of course, why should any of this be needed? Surely, if a proposition is seen as Rationally Desirable, Society would jump at the opportunity to implement it? You must be kidding!

Vested Interest in the Status Quo, Inertia, Complacency, and Suspicion of Change, are enough to stymie any such movement.

But if Capitalism is seen, and becomes, incapable of solving social problems, and the Welfare State is too diminished by Predatory Wealth, then human discontent will grow – which is maybe why Anti-Terrorism and Big Brother are needed to stop Change. If Terrorism did not exist it might have been necessary to invent it. George Orwell’s “1984” is the new Bible.

Which brings us to another problem – Population.

The British Labour Party’s motto in the June election was “For The Many, Not The Few”; but how many? The Rev. Thomas Robert Malthus warned, years ago, about over-population, and he opposed welfare for the poor, as it only encouraged them to breed.

Egalitarianism is better than Elitism, as being more Just, but there is a limit – at least to how many any society can cope with. If we Humans don’t voluntarily limit our numbers, then Nature will impose a limit – by famine, disease, pollution, war. Many nations are already trying to restrict refugees from flooding in, but then the Refugee Crisis needs a solution at its source.

But, back to our original discussion – of Capitalism and Socialism.

Let’s consider the Family Firm.

So, you want to start up a business, granted that most niches in the Business World are already filled. Mum or Dad is the initial Entrepreneur, with other members of the immediate family subsequently joining in – all with equal say, and all working to benefit of each and all.
The business thrives, and needs to expand. More capital is desired, and more workers.
Ah, here comes the crunch: to raise funds the Firm -
• takes on non-working Shareholders; and,
• takes on non-sharing workers, i.e. Employees.

Congratulations, you have just started up the “class war”!

Only if all are full participants, and all are shareholders, can this be avoided.

If you need funds, borrow from a bank.

Presentation by Don Humphries, Sunday 6th August, 2017, to The Philosophy Forum

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