THE big story about capitalism is not the kind of crisis that it has often presented, such as the world financial crisis of 2007/2008 but the tremendous material abundance that it has brought, wherever it exists, Professor William Easterly once observed.
Capitalist societies have seen a huge mass escape from poverty in the period of 1960 upwards. It does indeed have bad times, and it goes off the rail temporarily.
I am aware that talking about capitalism in this part of the world is like discussing Communism during the Cold War in the Western hemisphere. But whether we like it or not, capitalism is a system,which we have lived with and is still here with us.
It is true that in the period before independence, Africa had very few or no black capitalists, but today, in post independence era, Africa boasts of great men and women who are proud owners of the means of production.
Therefore, the views or perception about capitalism as an alternative economic system seem to be changing.
Economic growth under capitalism may have surpassed that of other economic systems, but inequality remains one of its controversial attributes. The gap between the poor and the rich continues to widen under the system of capitalism.
Do the dynamics of private capital accumulation inevitably lead to the concentration of wealth in fewer hands, or do the balancing forces of growth, competition and technological progress reduce inequality,?Jahan and Mahmud once asked.
I believe these questions need some answers.
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Various development experts have taken different approaches to establishing the driver of economic inequality. A recent analysis of a collection of data to uncover key economic and social patterns, concluded that in contemporary market economies, the return on investment frequently outstrips overall growth.
And if that discrepancy persists, the wealth held by owners of capital will increase far more rapidly than any other kind of earnings like wages for example.
Capitalism is an economic system where the means of production are in the hands of private individuals. On the other hand, capitalism is often thought of as an economic system in which private actors own and control capital in line with their interests and the motive being to make profit.
There has been a lot of debate on whether China's state capitalism is the ideal economic system for the world or is it America’s market capitalism.
Different development economists have different views. But John Maynard Keynes argued that markets cannot function properly without periodic government intervention. Government should come in with rules and regulations for markets to operate better and deliver better results to society.
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As firms expand their production to meet more of rich people's needs, they hire more of unskilled workers to perform the job and in the process the firms will be driving the incomes of poor people.
As firms invest in machines to increase production for the rich market, they drive up the productive power of workers, further increasing wages of poor people.
Furthermore, firms have an incentive to continually search for new technologies that make both machines and workers more productive, which once again, drives the wages of the poor.
Indeed, the world was poor before the industrial revolution.
Under capitalism, it is the rational self-interest that can lead to economic prosperity. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.
I believe much strongly, that Adam Smith’s comment about our daily bread needs to be altered for the benefit of modern times. Today a village baker has been replaced by multinational food giants with capabilities of shaping societies in which they are embedded, for better or for worse.
While capitalism is the best way to put bread on poor people's tables, enlightened self-interest by modern capitalists can potentially put better bread on more tables faster and can hugely address inequalities.
To me the debate about capitalism should focus on the details of what can be done better and not about whether capitalism makes sense in principle.
This is an economic system, which has moved millions of people from poverty to prosperity. But I believe the same system can be made even better.
Capitalism has been blamed for periodic economic crisis, such as the great depression of the 1930s and the world financial crisis of 2008, but the genius of a capitalist system is that it is self-correcting.
In order to address inequalities, governments must endeavor to maintain stable macro-economic environments and I believe introduction of taxes such as wealth tax will help alleviate the inequality gap.
Although it has been a little complicated in implementing in a number of countries, wealth tax has the greater potential to redress inequalities created by way of illicit activities such as tax evasion.
In addressing these gaps, I believe it is important to assist the poor to help themselves. I think it is wrong for governments or anyone to do anything for the poor, which the poor can do for themselves.
I believe government has no role in making individuals rich, but has a role in creating the necessary conditions, under which hard-working citizens who desire to become rich can realise their aspirations.
An economic system that allows the ordinary people to take charge of their individual responsibility, allows for innovation and creativity. One that does the opposite, alienates them to the realm of impotence.
This completely discourages creativity. People must be aware that, yes government can provide food hand outs and so on but government can not provide you pride. You earn pride from the profits of your sweat, the profits of your hard work which gives you dignity too.
I believe a government can be generous to its people. Any government should be generous to the need, the poor, the elderly, the disabled and orphans.
This generosity is welcome and somehow necessary, but when generosity goes to the extent of destroying the value of our currency, when it raises the prices of goods and services that we buy, we must condemn such generosity.
That kind of generosity robs the poor, it robs our pensioners, it robs our thriving private enterprises and it robs the savings of ordinary people.
We must make every effort to restore the value of our currency. When we preserve the value of our dollar, we preserve pensions and savings, and ultimately address inequalities.
- Dr Nyashanu @integraltransformation writes in his personal capacity. — +263772989148.