Before we start, on a side note, there were at least 4 mails in my inbox after the posting of the previous part which said that I have missed out one of the most important reasons for failure of economic systems - Sudden Economic or Geographic variations - If there is a wide set of people who think that this is an independent reason enough, then I guess I would still humbly excuse myself with the opinion that while it is of course a significant risk to the economy, it still wouldn't classify as a strong enough reason for failure of the overall system.
Let us have a quick look at reason - 1 - do not complement each other sufficiently. There is a very popular phrase that is doing rounds these days that sums it all - Privatization of profits and Socialization of losses. While profit making companies strive to make more money and increase their net personal gains, sometimes by hook or crook, the burden of failure unfortunately seem to exist with taxpayer money. There have been discussions and blogs and talks on the "correctness" of such actions - I have myself talked against such rescue plans for the fear of encouraging blinded risk taking by institutions who have the comfort of a couch-catch during a free fall.
However such a support is imperative. No matter what we crib about the protection being extended to foolhardy greedy behavior it is an absolute must. What is missing however is the kind of regulation that will keep blind risks in decent check in this case. Every time when excessive greed and immature policies bring about a halt in the flow of wealth creation, leading to losses and slowdown, collective responsibility steps in to smooth the fall. This has happened time and again, thanks to the voice of West in protecting the capitalist system.
The reverse support however is not happening that common. When socialistic structures crumble, the World watches reporting this downfall in full steam. The West hails this as a failure of communism and the so called World saving financial institutions like IMF and World Bank watch this as an opportunity to impose their "liberalization" policies as soon as possible into the falling nation, not worrying about the fact that the country may not just be ready to face that.
But why does this situation occur in the first place? To put it simply, everyone in the world (nation) needs to get a fair share of everything. While capitalism creates wealth and makes the human race rich, one of the many downfalls of the system is that, by itself, it doesn't do anything to the rich-poor divide other than increasing the gap. Hence a definite structure like socialism has to set in to ensure that everyone gets a fair share of wealth created. There is nothing wrong with that. But the problem comes, when people begin to question - WHEN?
How long does one wait to get a fair share before it can be distributed? Europe suffered centuries of dark ages and so does Africa today. If people today need to work tirelessly now so that wealth can be created over a period of time and then distributed, every worker will feel left out of enjoying the wealth that he/she helped create. This feeling worsens when they see some set of people (burgeoise - upper class) enjoy the wealth already. The unrest created leads to communist principles set in and socialism introduced prematurely. So now the nation tries to bridge the gap between rich and poor without proper means to do so. While initially this looks to work because of the iron hand with which this gets implemented, slowly and surely this model is bound to fail as it doesnt stand on a stable platform where wealth has been really created.
Let us have a quick look at reason - 1 - do not complement each other sufficiently. There is a very popular phrase that is doing rounds these days that sums it all - Privatization of profits and Socialization of losses. While profit making companies strive to make more money and increase their net personal gains, sometimes by hook or crook, the burden of failure unfortunately seem to exist with taxpayer money. There have been discussions and blogs and talks on the "correctness" of such actions - I have myself talked against such rescue plans for the fear of encouraging blinded risk taking by institutions who have the comfort of a couch-catch during a free fall.
However such a support is imperative. No matter what we crib about the protection being extended to foolhardy greedy behavior it is an absolute must. What is missing however is the kind of regulation that will keep blind risks in decent check in this case. Every time when excessive greed and immature policies bring about a halt in the flow of wealth creation, leading to losses and slowdown, collective responsibility steps in to smooth the fall. This has happened time and again, thanks to the voice of West in protecting the capitalist system.
The reverse support however is not happening that common. When socialistic structures crumble, the World watches reporting this downfall in full steam. The West hails this as a failure of communism and the so called World saving financial institutions like IMF and World Bank watch this as an opportunity to impose their "liberalization" policies as soon as possible into the falling nation, not worrying about the fact that the country may not just be ready to face that.
But why does this situation occur in the first place? To put it simply, everyone in the world (nation) needs to get a fair share of everything. While capitalism creates wealth and makes the human race rich, one of the many downfalls of the system is that, by itself, it doesn't do anything to the rich-poor divide other than increasing the gap. Hence a definite structure like socialism has to set in to ensure that everyone gets a fair share of wealth created. There is nothing wrong with that. But the problem comes, when people begin to question - WHEN?
How long does one wait to get a fair share before it can be distributed? Europe suffered centuries of dark ages and so does Africa today. If people today need to work tirelessly now so that wealth can be created over a period of time and then distributed, every worker will feel left out of enjoying the wealth that he/she helped create. This feeling worsens when they see some set of people (burgeoise - upper class) enjoy the wealth already. The unrest created leads to communist principles set in and socialism introduced prematurely. So now the nation tries to bridge the gap between rich and poor without proper means to do so. While initially this looks to work because of the iron hand with which this gets implemented, slowly and surely this model is bound to fail as it doesnt stand on a stable platform where wealth has been really created.
(This principle is something many of us tend to follow even though we laugh at socialism/communism. Will any of our IT Services friends reading this blog will agree to an arrangement if their company said that they will have to work for the next 20 years so that their company can create wealth and become profitable and if profits are created, they will be shared with their children later. We will crib at the top management for drawing handsome salaries while we slog around to help them make money. We will demand equal share of profits, equal salay across employees etc.)
And that is why precisely both models must work together. When capitalism is going about churning money, socialism has to step in to ensure that the rich-poor divide does not go out of control. And if prematurely induced socialism starts to crumble, there must be way to infuse wealth into the system so that the socialistic structure can hold ground.
And that is why precisely both models must work together. When capitalism is going about churning money, socialism has to step in to ensure that the rich-poor divide does not go out of control. And if prematurely induced socialism starts to crumble, there must be way to infuse wealth into the system so that the socialistic structure can hold ground.
So when the statement gets repeated that Socialism failed, one needs to understand that it is only the shortcut and premature inducing that has failed. On the other hand, capitalism will also crumble in the same account if losses were not socialized or if the rich-poor divide goes unchecked.
Posts
2 comments:
The Capitalists and the Socialists want more on either of their side. So if they sleep on the same bed, they push each other to get a bigger space. Should there be a third solution to bring the balance? Should that be third ground up solution? Granted we cannot feasibly do a new concept, but is there a possiblity so that they both can sleep on the same bed with the feeling of having sufficient space for each other?
There is no question of third anything here. The balance between both systems is delicate and bringing them together in the same bed is like Sleeping with the enemy for each one of them. Nevertheless getting the right balance is what is the trick and attaining perfection is one of the biggest human challenges possible.
Post a Comment