Free-market capitalism is well known for its innate problems: total freedom in economy (the slaves are free to drudge), zero regulation (except during a recession, when those capitalists themselves are in trouble), extreme inequality, and profit-oriented, commodity-based, abolition of public property.
In 1989, the Berlin Wall fell. Savants everywhere claimed that it signified the end of communism, and the success of unregulated capitalism. Unfortunately or fortunately, it also meant the beginning of the end of unrestrained capitalism. Nevertheless, in a way, we owe much of what we have today to capitalism. In the nineteenth century, capitalism was production-oriented. That suited the political need to build an advanced industrial nation with a complex infrastructure — industrialization. Capitalist goods were sturdy and long lasting. A person might own a single pair of shoes for years. Production in capitalism was about functionality and utility: everything had to be useful, practical and enduring. As Marx observed, capitalism was just like an ingenious magician who summoned up all of the inbuilt labor force into society. Its achievement during those 100 years surpassed even what humanity had acquired over thousands of years. But most importantly — and tragically — capitalism released the greed of humanity, and the desire to devour as many assets as possible: for the first time in history, ordinary people were granted the opportunity to do everything they could to turn finite public resources into private assets, even at the expense of others. The state was no longer owned by monarchs and feudalists, so ordinary citizens could give it their best in a scramble for everything.
On the other hand, communism emerged as a mighty and inescapable rival of capitalism. After the industrialization, a group of capitalists, whose elevated wealth they obtained during the industrialization, benefited by increasing their riches and passing them on, generation after generation. They had displaced the feudalists as the new elitists. Communism is based on the idea of a moneyless and classless communistic state (commonwealth). Students are told in school that China and Russia were once communist; however, China and Russia can be considered as only the closest thing to communism yet. They were not true communistic states. True communism has never been achieved in history. So, what did people do in the name of “communism” or “socialism”?
The Chinese Communist Party revolted against the National Party under the banner of “agrarianism”; in fact, they were agrarians, not communists. After the Communist Party came into power, they were supposed to actualize their idea of a dream state that they had once sold to their soldiers: they should have agrarianized the land, but they didn’t. Rather, they collectivized the land for one single purpose — industrialization. Disturbingly, farmers became the unavoidable victims, as the majority of the population was diverted towards industrialization. Farmers were forced to generate the same, or even more output, with far less input. Famine inevitably resulted. Again, most of the victims of the famine were the farmers themselves, rather than workers! It was because the state seized the harvest in order to support the workers, especially the scientists. This is exactly what happened in Russia, as well. It was reported that the standard of living for ordinary citizens in Russia in 1952 was far worse than it was before the October Revolution. As one Chinese scholar observed, the “communists” built a “new capitalistic state where they themselves [were] the new capitalists,” but in the name of “communism”. The Communist Party took control of everything in a much wider scope compared to the capitalists. They were the new elite. Did people in China and Russia have any say regarding the resources they died for under communism? No! People starved to death, and leaders drank fine wine, all under the banner of a communistic state. The soldiers died for something they opposed, and we now call it communism? It’s ridiculous! The Communist Party killed the tyrant, and then became the tyrant. In the end, industrialization — not the interest of people — became the first priority in the face of western powers, and people were starved by their revolutionary leaders, who had once given them hope.
Marx asserted that there are two prerequisites for the establishment of true communism: 1) The willingness and spontaneity of the people, 2) The sustainable technology to satisfy the material needs of people. Obviously, neither existed in Marx’s time, particularly in China and Russia. The communist leaders longed for the establishment of true communism on their own soil, but they were so hasty that they thoroughly ignored and bypassed these two prerequisites — or they falsely assumed that they had gone beyond it: as Mao famously said, people “sprint to communism”. Even in the 21st century, communism is still thought of as a utopia. Hence, no one can formally declare the death of communism, since she has never really been alive.
Karl Marx was extremely scornful of the commodity-based economy that characterizes capitalism. He regarded it as a total misallocation of resources. Under a commodity-based economy, resources are falsely arranged for pure profit. Every economic activity is profit-oriented. It produces useless rubbish. Emphasis is given only to fashionability and turnover rate, not durability and serviceability. The frailer the product is, the higher the turnover-rate, and thus the more profitable it will be. The profiteer preachers brainwash the congregation into internalizing the concept of “outdatedness”. In order to be “up-to-date”, people supposedly need to purchase new things perpetually. Let’s have a glance at Apple, Inc. Consider how very frequently they release their new products. What is the substantial difference between iPhone 4 and iPhone 5? How many suckers buy this garbage, despite receiving such a deplorably small pittance at work? Meanwhile, people are starving on the other side of the world.
No consideration is given to anything other than profit. Profit is everything. Marxism is based heavily on the principle of complete collectivization of all means of production. Under Marxism, economic activity would be led by the state for the optimal allocation of resources, an idea known as “econometrics”. Econometrics within the Marxist model is based on the belief that there is somehow an omnipotent way to accurately calculate every economic activity outside of the existence of the marketplace. For instance, today, markets indicate how a certain product appears because of supply and demand. Although the markets are rigged, econometrics in Marxism thoroughly denies the influence of the market and proposes that the state, by some sophisticated calculation, knows best. The market is dead in Marxist-econometrics. The state represents all the people and their physical needs, preferences, dislikes, hobbies, desires, knowledge, etc. The state can orchestrate a plan that fits everyone; hence, the so-called optimal allocation of resources could be attained. In fact, what they were really doing was nothing other than modeling thousands and thousands of slaves. Every farmer eats two meals a day with the same rations, and every piece of agricultural land is furnished with the same plows and manpower. Everyone is bound to a specific piece of land, regardless of whether or not someone proves a redundancy problem here or an urgent need of manpower there, since the state knows what is best for everyone. Workers are barred from applying new methods or technology, even if they could help improve efficiency, since the state — again — knows what’s best for everyone. This is exactly what happened in China under the so-called econometrics.
In 1957, Mao Zedong visited Russia and was astounded by the high output of their metal smelting furnaces. He decided that the output in China could be enhanced from 35 million to 40 million tons within a span of 15 years. His personal prediction suddenly became the econometrics of the new output target, without any examination (no one dared to challenge him). Maybe we should call it “economy by decree”. It was no accident that the Soviets failed in comparison to the West. So, do commodity-based economies warrant destruction? Yes, and what we need is a serviceability-based economy, but with some commodities still allowed. Unlike free markets, it would be put under strict supervision. Manufacturers should be reasonably rewarded only if they are capably producing serviceable goods for the state. The state would decide what goods or services are healthy or necessary for the people (direction), and then let the market help with development (refinements). Merchants like Apple, with their junk trinkets, wouldn’t survive long enough to see their most recent iPhone become obsolete.
In other words, Social Capitalism is the reasonable next step. It’s social, but with plenty of room for competition. It’s capitalism, but with restraints. Social Capitalism is the Meritocratic answer for the healthiest and safest economy possible.