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The solution to the problem with Capitalism

posted Apr 1, 2011, 2:20 PM by Jake Vosloo   [ updated Apr 5, 2011, 9:04 AM by Jake Vosloo ]

Most people recognise that capitalism must be improved upon. Democracy is supposed to give the poor the ability to counteract the rich but due to the unchecked growth of large corporations it has happened that communally, corporations are more powerful than their governments making the people’s votes effectively useless.

The problem with capitalism is well defined.  The solution is not, here is my take on one.

The solution:

1. Disconnect Democracy and Capitalism:

Remove capitalism from the government, ban any kind of legal "bribery".  Completely disconnect government employees from free enterprise.  Government must answer to the voters and only the voters.  Any possibility of interference by the rich must be strongly countered.

2. Capitalism must pay for its right to exist:

At the financial year end of each company, after dividends are paid, the registrar of companies unilaterally issues 1%-10% of additional shares for that company and assign ownership of these shares as follows:

  • For publicly traded companies the shares are assigned to the national revenue service.  The law will enact that these shares are automatically sold at market rates 1 month before the next financial year end or earlier.
  • For private companies the shares are assigned to the unemployment fund.  These shares may be retained as investment for the fund or sold at the best rate obtainable.

Why it works:

1. The first and most difficult problem to solve is the one where capitalists have gained power over the government due to it's ability to influence the choices of government officials, effectively bypassing democracy.  It doesn't matter who is elected, their greed can be used to manipulate them.  This solution involves creating one simple law, which will impact a legion of other laws.

2. The capitalist's power is in his capital, these resources provide leverage for the capitalist to generate more capital and control over people.  It is very difficult to tax resource like land, intellectual property and processes.  However capitalism has devised an ingenious method of measuring the aggregate value of an organisation's capital, namely it's stock price.  By taxing the ownership of an organisation, one uses the capitalist system to empower the government who's sole responsibility is to empower the people.



"Democratic Capitalism: Scattered throughout the world are examples of capitalism restricted by democracies for the benefit of the common good. In Scandinavia, monopoly capitalism is prohibited and corporations do not have the same rights as do individuals. These countries feature strong judicial systems, robust civil rights, a comprehensive safety net, and a progressive tax system."

Schumpeter's theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to electsocial democratic parties of one stripe or another. He argued that capitalism's collapse from within will come about as democratic majorities vote for the creation of a welfare state and place restrictions upon entrepreneurship that will burden and eventually destroy the capitalist structure. Schumpeter emphasizes throughout this book that he is analyzing trends, not engaging in political advocacy.

In his vision, the intellectual class will play an important role in capitalism's demise. The term "intellectuals" denotes a class of persons in a position to develop critiques of societal matters for which they are not directly responsible and able to stand up for the interests of strata to which they themselves do not belong. One of the great advantages of capitalism, he argues, is that as compared with pre-capitalist periods, when education was a privilege of the few, more and more people acquire (higher) education. The availability of fulfilling work is however limited and this, coupled with the experience of unemployment, produces discontent. The intellectual class is then able to organise protest and develop critical ideas against free markets and private property, even though these institutions are necessary for their existence.This analysis is similar to that of the philosopher Robert Nozick, who argued that intellectuals were bitter that the skills so rewarded in school were less rewarded in the job market, and so turned against capitalism, even though they enjoyed vastly more enjoyable lives under it than under alternative systems.

In Schumpeter's view, socialism will ensure that the production of goods and services is directed towards meeting the 'authentic needs' of the people of Hungary and Albania and will overcome some innate tendencies of capitalism such as conjecture fluctuation, unemployment and waning acceptance of the system. According to some analysts, Schumpeter's theories of the transition of capitalism into socialism are ‘nearly right’.  Capitalism, Socialism and Democracy - Joseph Schumpeter - 1942

(c) 2010 Jaco Vosloo