27th April 2017
I think I now need some help. Totally flat out with 10s of things and no time to review in detail. I have received the following tw comments in response to my post here: Why doesn’t socialism work?
Could someone please review and provide any thoughts?
The term socialism has a range of meanings. What has been stated is the extreme communist variant. The way the term has been defined, India is hardly a socialist state. If socialism is conflated with social democracy or a welfare state, there is no nation in the world which is not so, almost all government budgets are around 30-40% of GDP. So what are we talking about. Are we saying regulation or provisioning of education, health, welfare, which is terribly less in India, is socialist?
Just to add a few more points to what has been posted by xxx.
“Capitalism is about enlightened ‘self-interest.” Sorry, can’t agree. It appears to be a self-contradictory statement. If u r saying that human beings r biologically programmed to only pursue their self-interest, how can u come up with the concept of “enlightened” self interest???
It’s only in theory. Even Smith, its author, towards the later part, got terribly frustrated with the lack of ‘enlightened’ aspect — the spirit of cooperation n collaboration among commercial people (the invisible hand theory) and concluded that pursuing of rabid self-interest cud only bring misery to many. And will not serve the interests of society as a whole….
Pardon me for this repeat post:-
The building blocks of Smith’s economic system do not allow concentration of wealth; the important point about Smith’s system is that it precluded steep inequalities. Once we put the building blocks of his system together, concentration of wealth simply cannot emerge.
In Smith, profits should be low and labour wages high, legislation in favor of the worker is “always just and equitable,” land distributed
First, Smith thought high profits denoted economic pathology. The rate of profit, he said, was “always highest in the countries which are going fastest to ruin.” This pathology was not simply a symptom of mercantilism, but resulted from the incentives on the economic groups living by profit alone.
Unlike Ricardo, Smith believed that the interests of profit-seekers were structurally and thus “directly opposite to that of the great body of the people,” because “the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries” (with a few exceptions, especially new economies). Accordingly, when the economy is sound, wealth concentration should not occur. Only when profit-seekers have rigged the system through legislation do concentrations occur. Smith states that fortunes would, indeed, not be high and that in any case they were prone to dissipation. Such a system cannot generate steep inequality.
Wages, at the same time, should rise with increased wealth. On this basis, Smith defends adequate labor wages, which had to be at least sufficient to provide the “necessaries,” covering lodging, food and clothes, the latter tailored to middle-class comforts. This baseline appears minimal, yet it provides for more than is covered by the contemporary minimum wage. Moreover, high wage levels should occur naturally. Wages are only lowered artificially, through state intervention, because of the sophistry of merchants and manufacturers who are much more adroit in manipulating legislatures to pass laws in their favor. Moreover, employers enjoy a bargaining advantage over workers and can coerce them to accept worse terms, because they need individual workers less than individual workers need employment. Wages are not the simple product of supply and demand in Smith; bargaining asymmetries are key.
Taxation is perhaps the most contentious topic today, with prescriptions of punitive levels as the main instrument applied to reverse inequality. As such, it is seen as a distorting intervention in the market and a departure from “free market” principles. Smith did not prescribe punitive taxation, but what is missed is that he praised the British tax system though it imposed double per capita taxes than the French. Yet, “The people of France…are much more oppressed by taxes than the people of Great Britain.” Why? Because taxes were less equitably distributed, falling disproportionately on the poor.
A fair distribution of taxation was key to the soundness of the English economy in Smith. The rich, he claimed, should be taxed “something more than in proportion” to their wealth. “The inequality of the worst kind” was when taxes must “fall much heavier upon the poor than upon the rich.” The reasons were not moral. Bad taxes were simply bad economics.
Smith’s overarching point was this: taxes were bad only when they undermined the productive use of capital. But taxation should be used to discourage unproductive economic activities.
What kind of enlightened self-interest is served with the latest Trump proposal of taxing corporates @ 15% but individuals at 35%. This’s just an example…!
Scientific socialism as a theory can’t be said to be based on wrong assumptions coz of its skewed implementation (of its practitioners). If Trotsky instead of Stalin had taken over leadership, the scenario wud hv been different. So why blame socialism in the same way why blame Smith’s theories: he never propounded “crony capitalism”?