Capitalism has long been established as the most efficient way of generating wealth by effectively leveraging a variety of inputs such as capital, labour and other resources in producing something of value for mankind’s consumption. This is my understanding of the success of Capitalism as an economic practicality which has long superceded other forms of economic theories. Countries which have tried pure Socialism or pure Communal Economics (such as Communism) have long since failed in generating wealth for the countries and its people who pursued such economic philosophies.
Note: I am not an economist and my MBA has generally been useless in producing new thoughts in me – whatever I have conceptualized has been based mostly on simple common sense and some maths, and I have been more interested in a variety of topics, the articulation of which needs some level of mastery of the English language, which is where I am still focused on. If you find wrong economic principles, please send me a comment or email and I will make a correction after validating your point.
However, it is an acknowledged fact that Capitalism has had many flaws which have resulted in skewed distribution of wealth. In fact, wealth in a Capitalistic society such as the U.S. is largely concentrated in a fraction of its people – the GDP per Capita or per Capita Income is a wrong measure as it averages the inefficient distribution of wealth. It is a fact that social equity has not been achieved in any Capitalistic society, and it is not unusual to see large numbers of homeless people even in generally wealthy cities such as New York and San Francisco. There is nothing inherently wrong or immoral in the Capitalistic ways of economics. Combined with the manner in which the fundamental building blocks of society is constructed, Capitalism aids in making the rich folks richer as they get access to more business opportunities and more doors open for them than for the middle class or the poorer sections of society. Further, people who have been fortunate in securing high levels of education, obtain a disproportionate advantage over others in aiming for and securing significantly higher income and wealth. Social networks are skewed in favour of alumni networks or economic networks, so it is easy for the graduate of an elite institution in the U.S. to secure admittance to an elite club of alumni who are already in powerful positions in large corporations or banks, or founders of startups which go on to create wealth.
Where does that leave an average person in a Capitalistic Economy?
Where does that leave a relatively poorer person in such an economy?It is a known fact that Capitalism generates wealth and it also ensures that folks who are left behind are in no position to compete well in an equitable manner. I would like to be challenged here. I am one of those from an elite Indian management school who did not have the advantage of economic advancement before my time in that school, but secured a significant leeway once I passed out of that school. My classmates and I had a disproportionate advantage over others not from elite institutions of repute who received multiple placement offers from global companies.
Coming to think of it, while it is not something which went through my mind while doing my MBA, the fact that ivy league students possess undue advantages over even others who are from lesser reputed schools is well established, and this advantage then percolates up into the economic ladder of the society. I have seen many examples of such progression.
How do we bring social equity into a Capitalistic society? Bernie Sanders, the U.S. Democratic politician and a potential Presidential Candidate, is a proponent of social equity. His popularity even amongst teenagers was tremendous, as young people are waking up to the reality of social disparities which had made the U.S. rank low in economic equity (I am not getting into Gini Coefficient!).
In my mind, I think the only way to get there is to follow the “reservation” system – provide unequal access to education for the economically disadvantaged folks. Eliminate access to people who will automatically get access because they are big donors to educational institutions. Average and poor people need to get access to higher education to upgrade themselves – they might need lots of economic and social support and that has to be provided by the government. This is not a “subsidy” – this is “equal access which will now be termed as unequal access”. Once the proper set of conducive factors are in place, then the disadvantaged students will be able to compete with students who have had an “unequal” access in the past because they came either from wealthy families or were able to invest in better preparing for higher education via tuition, etc., which the poor people cannot afford.
Once education is handled properly, then the economy will reset itself with a broader perspective instead of largely being driven by economic greed alone; by principles which suitably combine Capitalism with Socialistic philosophy which should benefit the society at large in an equitable manner. Unless we tackle education in a fundamental way, society and economic philosophy cannot be reformed, and things will continue as before with no reforms and no changes which will benefit all.
It might feel strange that I am advocating “reservation” (the topic of reservation is a very sensitive one in India and is also practiced in other countries such as Malaysia – India has just passed the first reservation bill for the economically poorer section of the society without looking at their caste or religion, though the previous reservations based on social backwardness still exist on the statute), but it is worth considering given the economic neglect perpetuated by the Capitalistic ways of economic wealth building. Think about it deeply, and you will discover that it makes sense not just in a developing country such as India, but even in developed economies grappling with social and economic inequities.
Well, I think this is a rather heavy topic for weekend ruminations!
Enjoy the rest of the weekend,
12th January 2019