Everybody thought capitalism has won the day when the Berlin Wall fell and the Soviet Union not only started dismantling, but transforming its economy to became more market-orientated as well.
Yet, barely two decades later the flirtation with socialism has reached epic levels. Even in the United States of America, the grand old bastion of capitalism, a serious candidate for the Presidency during the 2016 Presidential election, Barney Sanders, has preached what he has labelled “democratic socialism”. His version of socialism includes a minimum wage and other measures to ensure greater equality in economic modelling. (However, it must be pointed out, for the sake of fairness, that several scholars have explained that Sander’s policies are not really socialism, but rather a comprehensive social welfare system).
The best way to define socialism is simply as a “softer”, less radical version of communism. In a communist state, the means of productions, property and ownership included, belongs to “the people [the workers]” (which, by the way, is a lie; it actually belongs to a small governing elite that use state instruments of power to retain centralised control). In a socialistic system, property and ownership are left in the hands of private individuals and companies, but equality is enforced through comprehensive policies and measures (enforced with government power) to promote equality, which ranges from less drastic measures such as social grant payment and minimum wages to severe state intervention through the nationalisation of key industries. The more fundamentalist socialism became, the closer it moves to communism.
Ironically no single country in the world is totally capitalist or socialists, all are in-between. Obviously, a country such as the United States is predominantly capitalist, and one such as Cuba predominantly fundamental socialistic (communistic). Nevertheless, both has elements of capitalism, as well as socialism in their governance model (regardless of how limited it may be).
In South Africa, there is an enormous movement (and with it accompanying pressure) to adopt a more socialistic government model. Not that we need it; to a large extend, the country is already a semi-socialist regime. Large providers of goods and services, with a turnover worth billions-upon-billions of rands annually, such as the state-owned-enterprises, enjoy monopoly status, in terms of state policies, and are therefore exempted from capitalistic competitive forces. (Ironically, this state of affairs have partly been inherited from the “capitalist” National Party state).
Furthermore, the social welfare net is wide and enormously expensive, with millions benefitting from it. A minimum wage is about to be implemented. Also, government policies to promote black economic empowerment and preferential employment are nothing else than government intervention in the economy to promote equality, and therefore socialism in action.
One must not confuse the economic system of South Africa, regulated in terms of government policies, with the beneficiation of a small governing elite close to the patronage network of the ANC (and the Guptas). South Africa already has, to some extent, diverse economic systems; one for the general population, and one for the governing elite. The one for the general population include undeniable elements of socialism, including BBBEE, employment equity, high tax rates and a wide social welfare net.
The one set aside for the “elitists beneficiaries” are purely capitalistic, and no state-owned enterprise or government property are hands-off to those in this inner circle (henceforth, pure capitalism).
But, to a large extent, that is precisely the point about socialism and communism. One fool oneself to think that socialism and communism end inequality. I still have vivid memory about the grand old days of communism in the USSR; the fancy and luxurious motorcars of the members of the Politburo, their wives in hugely expensive fur jackets, their official residences luxurious, with everything of the best (from the West). This is a trend everywhere in the so-called communist world, including North Korea, Cuba and Venezuela.
The loudest warning against socialism in recent history is Venezuela.
An avowed Marxist and protégé of Fidel Castro, Venezuela’s charismatic former President, Hugo Chavez, gradually seized control of every lever of state power in Venezuela after winning election. The constitution was rewritten to strip the legislature and judiciary of their independence, authorize censorship of the press, and allow Chavez to legislate by decree. Before long, the government acquired a stranglehold over the economy, including the huge and profitable energy sector. (Jacoby, 2016)
With petrodollars pouring in, Chavez had free rein to put his statist prescriptions into effect. The so-called Bolivarian revolution over which he — and later his handpicked successor, Nicolas Maduro — presided, was an unfettered, real-world example of anticapitalistic socialism in action. Venezuela since at least the 1970s had been Latin America’s most affluent nation. Now it was a showpiece for command-and-control economics: price and currency controls, wealth redistribution, ramped-up government spending, expropriation of land, and the nationalization of private banks, mines, and oil companies. (Jacoby, 2016)
In a Salon piece titled “Hugo Chavez’s economic miracle,” David Sirota declared that the Venezuelan ruler, with his “full-throated advocacy of socialism,” had “racked up an economic record that . . . American president[s] could only dream of achieving.” The Guardian offered “Three cheers for Chavez.” Moviemaker Oliver Stone filmed a documentary gushing over “the positive changes that have happened economically in all of South America” because of Venezuela’s socialist government. And when Chavez died in 2013, Jimmy Carter extolled the strongman for “improving the lives of millions of his fellow countrymen.” (Jacoby, 2016)
In the real world, however, socialism has transformed Venezuela into a Third World dystopia.
Venezuela this Christmas has been in sunk in misery, as it was last Christmas, and the Christmas before that. Venezuelans, their economy wrecked by statism, face crippling shortages of everything from food and medicine to toilet paper and electricity. Violent crime is out of control. Shoppers are forced to stand in lines for hours outside drugstores and supermarkets — lines that routinely lead to empty shelves, or that break down in fistfights, muggings, and mob looting. Just last week the government deployed 3,000 troops to restore order after frantic rioters rampaged through shops and homes in the south-eastern state of Bolivar. (Jacoby, 2016)
In the beautiful country that used to boast the highest standard of living in Latin America, patients now die in hospitals for lack of basic health care staples: soap, gloves, oxygen, drugs. In some medical wards, there isn’t even water to wash the blood from operating tables. (Jacoby, 2016)
Here’s my warning: Any more socialism in South Africa will destroy our ability to get economic growth back and track, and will cause enormous heartache and poverty. Socialism simply does not work. The ideology almost always, for a few years, seems like a miracle happening, an enormous success. However, this euphoria normally only lasted as long as the fat lasts, then the whole system collapses. This is because socialism, true to its very nature, collect (often in violent ways) almost all productive national assets and use it for redistribution. Naturally, for a while the poor and less fortunate sections of the population benefit substantially from the availability of resources not previously available to be distributed among them.
However, the problem with this theory is that socialism has no “reproductive and expansion” mechanisms. At best, in highly efficient and effective societies, such as the Nordic states, it will retain momentum for longer, but still the motivation to expand and increase is inherently absent, and eventually the system will start crumbling due to the depletion of available fat (resources).
Barney Sanders like comparing his version of socialism with that of the Nordic countries. Yet, the simple truth is that the socialism of the late 1990s that has resulted in the reputation of the Nordic countries’ as socialist success stories does not exist in those countries anymore, precisely because the system was an economic failure. The Nordic countries were just smart enough to notice and acknowledge it in time; early enough to change the system and prevent economic collapse.
It was the prime minister of Denmark that remarked, during a speech at Harvard University, as follows: “I know that some people in the US associate the Nordic model with some sort of socialism. Therefore, I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy.” (Iacono, 2016) Both Sweden and Norway has disbanded the socialist economies they practiced in the late 1990s and early 2000s; again, precisely because they realise that it will not work indefinitely.
Fact of the matter is that the Nordic countries’ economic model is nothing else than capitalism mixed with a comprehensive social welfare system; they are social welfare countries – but not socialist economies. All four Nordic countries are regarded as among the most globalised in the world.
Obviously, the main difference between the South African system and that of the Nordic countries, is the fact that these countries apply the wealth created through capitalism in social welfare programmes in balanced manner to benefit all in society – and that often stimulates capitalist innovation and creativity. In South Africa, a substantial part of this wealth is channelled to the crony capitalism in the restricted boundaries of the governing elite. Socialist policies are furthermore used to distinguish in economic opportunities based on race, and (in the process) wealth-creating innovation from certain racial communities are supressed.
Another example that are often used as an example of socialist success, is France. The truth is that the government of François Hollande is currently extremely unpopular, precisely because of socialism. It is not me saying that, but Hollande himself that has acknowledged the failure of his party’s socialist’ policies. In the process, he has experienced the same awareness as Francois Mitterrand, who has nationalised the banks and key industries in the 1980s, and even appointed communists in his cabinet, just to reverse of all these arrangements when the economy started collapsing.
Socialism in Britain reached its peak in the late 1970s, when labour unions basically ruled the country through their influence on the Labour Government. The tax level for the super-rich was something like 95%. Which motivation on earth can there be under such circumstances to start a new business, or expand an existing one? The economy was on the verge of collapse. It took Margaret Thatcher to save the day, by “reinstating” capitalism, lower the highest tax bracket to 45% and diminish the power and influence of the unions. Today Britain’s company tax rate is 18%. (O, by the way, in terms of personal income tax, Britons only became liable for paying tax when their personal income exceeds R177,000 per annum, and the highest possible rate is 45%, for individuals earning in access of R2,4 million per annum). Socialist taxation has brought their economy to it’s knees; capitalism has saved it and let it prosper. That is the story of countries and their economic ideologies all over the world.
It must also be taken into account that the Nordic countries and France are all rich countries; South Africa is not. For these countries, a comprehensive welfare system with socialist features could be sustainable, simply because they have available much more resources. South Africa has a GDP of US$350,6 billion and 52,98 million people, which translate into a per capita GDP of US$12,240; the figure for Sweden is US$579,7 billion (GDP) for 9,59 million people, translating into a per capita income of US$46,680; for Norway it is US$400billion (GDP) for 5 million people, translating to a per capita GDP of US$57,926; Finland has a GDP of US$267,3billion for 5,44 million people, translating into a per capita GDP of US$39,930 and Denmark as a GDP of US$335billion for 5,69 million people, translating into a per capita GDP of US$42,969.
South Africa cannot possibly nationalise any more industries (some of the largest and most valuable companies are already under government control, including Eskom, SAA, Prasa and Transnet). These are all in a state of collapse. The state simply does not have the capacity to effectively and efficiently manage large corporations; nowhere in the world, but definitely also not here, in this country.
Consider the proposed National Health Insurance Plan. The Nordic countries may have similar national health insurance cover, but the key difference (additional to the already mentioned wealth gaps between them and South Africa) is that South Africa’s public health infrastructure and services are desperately over-stretched, and in a state of chaos. In spite of enormous amounts of money poured into the system, there was no improvement; in fact, the infrastructure and systems have deteriorated even further.
The Nordic countries, on the other hand, have excellent public health care facilities and services; in fact, they are not only world standard, they are probably defining the world standard.
Dreams of socialism grandeur is exactly that: dreams. We will have to find another way to reduce inequality; best that socialism can possibly offer, is to reduce everybody’s wealth to the level of equal poverty. That is, except, of cause, the wealth of the few in the inner circle. Then the issue became clear: We are all forced into socialism in an attempt to centralise all meaningful authority and ensure tight control over all economic activity in order to make us serve the few in the inner circle. Perhaps that’s the whole point?
Bibliography
Iacono, C. (2016, February 25). The Myth of Scandinavian Socialism. Retrieved from Foundation for Economic Freedom: https://fee.org/articles/the-myth-of-scandinavian-socialism/
Jacoby, J. (2016, December 25). As socialism shattered Venezuela, the useful idiots applauded. Retrieved from The Boston Globe on-line: https://www.bostonglobe.com/opinion/editorials/2016/12/25/socialism-shattered-venezuela-useful-idiots-applauded/ZoQnAX5WksuCTauiAjCx4M/story.html
This article has been written in 2017 The author was Frans Minnaar
Image source: 123RF
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