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Eureka: Alternatives to Capitalism and Communism
by Jay Gutman
2017-06-07 10:17:40
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One of the main questions political scientists and economists have been pondering is whether there are alternatives to two widely used economic systems: Capitalism and Communism.

Rather than going in lengthy explanations, the two systems differ in terms of who does the investments: the government or private citizens and individuals. I would argue that no system is completely Capitalist and no system is completely Communist.

capit01_400To redefine economic systems, here are what I perceive as economic systems. The first system is one where the government is the main source of investment, and by investment I mean injecting money to create richness and wealth. In the second system, large conglomerates, who are often very well connected with governments, inject most of the investment funds in any given country. In the third system, private individuals and groups of individuals are the main source of investment in small businesses, that is businesses that create relatively small richness and wealth as a return of investment.

In the first system, one where the government is the main source of investment funds, the problems are well known. Business leaders tend to be government officials and tend to be appointed by the government, tend to have little incentive to fructify the investment, and tend to value their careers over business growth. Anyone who lived in a Communist or Socialist country or who worked for a government-owned business knows the system very well: add a zero here, add two zeros there, add three zeros in the profit report, and pray to God, or just pray that there will be no inventory. If an inventory is ever made, keep some cash in the safe and share some of it with the government officials. All in all, such companies and countries tend to suffer low growth.

In the second system, one where large conglomerates tend to inject most of the investment funds, there can be several problems as well. Because reports tend to take time when being drafted before reaching the high leadership of conglomerates, employees seeking job security above all else will add a few zeros here and there to the reports before submitting them. The tactics are well known, such as creating divisions or sub-divisions which are really ghost divisions, put it on the stock market and collect shareholder money, or create a division in city A and another in city B and sell products back and forth between city A division and city B division to make it sound like profits are being made. Overall, a country where large conglomerates dominate the economy tends to suffer from low growth, because small businesses can’t compete and large businesses are constantly embellishing reports.

In the third system, one where most of the money invested comes from the savings and small loans of small independent individuals or groups of individuals, investment tends to be wiser, more careful, and there tends to be more of a pragmatic approach to profit-making. Independently-owned grocery stores, pubs, bakeries, sports clubs, gyms or farms tend to benefit communities at large, while keeping the economy healthy and those are economies that grow, although consumers don’t always benefit, as independent investors tend to close shop early, tend to offer less product variety and tend to put less emphasis on quality than large conglomerates.

So back to the question. Is there an alternative to Capitalism and Communism? Perhaps a healthy economy is one where there is a good balance between government-led investment, large business-led investment and private investment. Most governments have more cash than large companies and can take care of the larger investments before gradually shifting ownership to several large enterprises, large enterprises can make big investments before gradually shifting ownership to independent investors.

However, in cases where governments and large enterprises tend to work together too much, there can often be conflicts of interest, as in the government ceding large portions of land or expensive products at ridiculously low prices to larger companies who then sell such property at ridiculously high prices to private individuals.

Perhaps the alternative to Capitalism and Communism would be ethical capitalism, one where the economy benefits all and a high level of ethics is applied, but then governments and large conglomerates should be willing to engage in such ethical behavior.  

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Emanuel Paparella2017-06-07 10:42:50
"Willing to engage in such ethical behavior." Indeed, here is the philosophical conundrum: a Positivistic world based on science and its laws is governed by necessity devoid of freedom; a world based on humanistic values is based on freedom, the freedom to choose good and avoid evil, which is the essence of ethics. Positivists and deterministic progressivists of all stripes refuse to content with this crucial conundrum then delude themselves that they are envisioning an alternative to both capitalism and socialism... Which is to say, Vico and Jung had it on target: back to family, language and religion; they are the core of any human culture and without them progress is a delusion wrapped in an illusion.

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