The Occupy Wall Street movement, which spurned many other Occupy movements in the US and around the world, is the epitome of what went wrong with Capitalism. With the wake of the 2008 financial crises, and the current on-going European crisis, ‘Capitalism’ has become a notorious word. Many have even declared ‘Capitalism’ evil and put the blame of the massive income inequalities experienced worldwide, squarely on Capitalism.
In a 2011 report, the OECD said that the level of income inequality in the 22 member nations it studied increased by 10% since the mid-1980s, with conditions deteriorating in 17 of them. Another recent report further highlighted this point. Conducted by the Institute for Policy Studies, a Washington based think tank, the report found that CEOs at large US firms earned, on average, $10.8m in 2010, a 28% increase from the year before, while the average worker took home $33,121, a mere 3% more. At that level, CEO’s paychecks are 325 times bigger than their employees’.①
Reports like these have further supported the notion that perhaps Capitalism IS the culprit. Spreading dissents have led to the coining of the term ‘remaining 99%’, in an effort to bring attention to the needs of the majority at large. Michael Schuman, in his Jan 30 TIME article, has written that ‘capitalism often appears to benefit only the connected and privileged.’
So, is Capitalism dead? Shall we be looking for a brand new system to lead the world in this new millennium?
Before we proceed further, let’s look at what Capitalism is. In the Oxford dictionary, Capitalism is stated as an economic and political system in which a country’s trade and industry are controlled by private owners for profit. In the same Jan 30 article, Michael Schuman also wrote that ‘Capitalism is a meritocracy that rewards the hardworking and talented.’
There is no consensus on the definition of Capitalism. It is often associated with terms like ‘private ownership’, ‘profit’ and ‘accumulation of capital’. It is often equated with terms like ‘globalization’, ‘democracy’, ‘meritocracy’, ‘freedom-of-speech’, ‘human rights’, ‘equality’ and many other western ideals. Is Capitalism a subset of the above terms and ideals? Or, does Capitalism encompass all western practices?
Perhaps it is time to isolate each of the above terminologies. Let’s not insist that they are all interrelated and that one ideal cannot exist without the other. Must a democratic society be capitalistic? In fact, democracy and capitalism can be the opposite of each other, if viewed from a purely literal platform. A democracy is described as a form of government in which the majority has a say in who should hold power and how it should be used. But capitalism, often than not, brings about a society which is controlled by a minority of elites and privileged through a meritocratic system. At the end of the day, a meritocracy can only reward a small number of people to keep its rewards attractive. If a whole society is equally ‘rich’, then nobody will be encouraged to work harder. The basic idea behind meritocracy is the premise of a ‘privilege and elite’ status if one shows merit. Capitalism, being a system controlled by the private sector driven by results, must at the end of the day, results in the formation of a small circle of elites which are in control of things.
So, if a government were to take hold of and control a country’s land, transport, natural resources and chief industries, and managed it for the good of the community as a whole, that is, the majority, are we to say that the government is not democratic? Worse, are we to say that the government is socialist? Or, communist? As Kishore Mahbubani in his book ‘Can Asians think?’ wrote, “Societies should ultimately be judged on their ability to deliver most of their citizen’s human needs: food, shelter, health, education, a clean environment, a sense of community, and a sense of purpose in life.” So, if a government holds certain citizens deem ‘revolutionary and troublesome’ in detention, to prevent societal friction, does this constitute a violation of human rights? If a nation decides to provide subsidies to certain industries so that thousands of workers get to keep their jobs, does this constitute anti-globalization?
We live in a murky world, and so our ideals may be murky at best of times. As what Max Weber said, “It is not true that good can only follows from good and evil only from evil, but that often the opposite is true.” Thus a good government should just be one who can provide a decent standard of living for the 99% of its people. In other words, keep the 99% of a nation happy. This can only be done when the government takes control of some parts of the country’s economy and resources. “When matters like the global environment or regulation of derivatives trading are left to market forces, for instance, outcomes tend to serve the most powerful because markets neither have a conscience nor do they ensure opportunity.” ②
Just look at Fannie Mae and Freddie Mac in the US.➂ When left to their own devises, top management has once and again proven to be unscrupulous, folks greedy for personal wealth and are not concerned about the well-being of the average citizen. Industries as important as the mortgage industry and finance industry must be closely monitored to protect the majority 99% of the nation.
Another example of why key industries must not be run purely by the private sector can be seen in the Tokyo Electric Power Company (TEPCO), which runs the nuclear plant in Fukushima. TEPCO is a private company which has to report to shareholders and its board of directors. As in all private enterprises, its main purpose is to create profit. When the company failed to ensure the safety of the nuclear plant in the wake of the tsunamis, an entire nation has to fork out a large amount of money to help clear up the mess. Then the company turns around and raises the electricity bills of the average citizens in the name of staying afloat. The government, having spent much of the taxpayers’ money in dealing with the situation, is in the red and has to increase taxes to pay its bills. All these extra burden on the average citizen while the politicians and executives of TEPCO continue to get paid (much more than the average citizen).
In Singapore, we see the example of the failures of SMRT. In my comment on TODAYonline, I had questioned why the SMRT, which is responsible for operating the lifeline of the majority 99% of the nation, is run like a business unit, its performance measured by the amount of profit it generates. A public system should be run with the public in mind, not shareholders or management.
Having quoted the above three examples, I, contrarily, do not reject meritocracy. Meritocracy is the tonic that drives people to work hard and excel. It is the dream that keeps the young in believing in a better tomorrow. The goal of becoming the elite 1% of the population is the driving force behind a nation’s prowl.
Neither do I reject Capitalism too. I will like to think that Capitalism cannot succeed by itself. A healthy nation must maintain a balance between its private and public sectors. A good government’s bottom line must be to keep its 99% majority happy by providing dependable infrastructure, affordable housing and quality education. It must then drive its citizen to excel by dangling the 1% elite status as the carrot. Capitalism, coupled by Meritocracy and government participation, must be the best answer in moving our nation forward.
① Source taken from an article written by Michael Schuman, in Time Magazine, Jan 30 2012
② Quote from an article written by Raghuram Rajan, in Time Magazine, Jan 30 2012.
③ Reckless Endangerment, How outsized Ambition, Greed, and Corruption led to Economic Armageddon, written by Gretchen Morgenson and Joshua Rosner.