What Lies In The Space Between Capitalism And Socialism?

Sydney Savion fulfilled a 21-year career in the US Air Force (active duty and reserves) in the fields of aerospace operations and joint plans and operations and honorably retired as a commissioned officer. After retirement, Dr. Savion received a PhD in human and organizational learning at The George Washington University. Her research focused on the social phenomenon of life course observations of transition that shape individual lives. Dr. Sydney looks at this interplay between Macro politics and personal dignity.

A poor, intellectually brilliant Caribbean immigrant and a wealthy intellectually-gifted citizen’s political, social, and economic philosophies collide over escalating personal and political tensions which culminated in the most famous duel in American history.

It was an early, warm, muggy morning on 11 July 1804 when two high-profile politicians in postcolonial America rowed in their own boats from Manhattan across the Hudson River to a wooded green space known as the Heights of Weehawken, New Jersey, then a widely accepted duelling ground below a rocky cliff of the Hudson River Palisades, to challenge each other in a duel. This was one of the most notorious duels of all time. This was the standoff between Alexander Hamilton, a leading Federalist and former secretary of the treasury, and Aaron Burr, who was then serving as Vice President under Thomas Jefferson. Hamilton had come to detest Burr, whom he regarded as an opportunist, and vehemently campaigned against him during his failed 1804 bid to become Governor of New York. Burr resolved to restore his reputation by challenging Hamilton to an “affair of honor”. The duel ended with Burr mortally wounding Hamilton, while Hamilton shot into a tree behind Burr’s head.

Much like the Alexander Hamilton and Aaron Burr duel of 1804, there is a perennial modern-day duel that continues to loom large. Especially when a disruptive force, whether that is a pandemic, technology or unknown event, throws the Klieg searchlight on the inequality gap. That duel is capitalism and socialism. One philosophy claims the economy is working well enough, people need only lean in and seize it; whereas the opposing philosophy claims the economy is only working for the wealthy, who stave off the notion there is not enough for the multitudes.

In the run-up to the pandemic, inequality was the object of this duel between capitalism and socialism. The World Economic Forum contends it has now become the defining social, political and economic phenomenon of our time. Just 1% of the world’s population now holds over 35% of all private wealth, more than the bottom 95% combined. The economic and social disparities are evidenced in the poor and marginalised racial and ethnic groups from every little corner of the world, from first-world to developing island nations. “In fact, the pandemic is threatening to yield the biggest rise in inequality since records began.” This only intensifies the modern-day notorious duel between capitalism and socialism.

And this duel isn’t just playing out in statistics and GDP figures. It is creating a generational divide that is literally spilling out into the streets. Whilst the post-2008 credit crisis saw protests against the banks and the funds that had created an almost legalised Ponzi scheme of packaged loan derivatives, these were mainly protests about the lack of accountability for the people that caused the crisis and the “1%” that has enough of a financial buffer to ride the ups and downs of the market and profit, while the remaining 99% lose. And in many cases people lost their homes and their life savings and their dignity. Whilst still connected, protests today are more macro in nature and connect social and environmental failings to the wealth gap and the sense of a manipulated system behind it. This embering sentiment exploded after the murder of George Floyd which saw millions of protesters in thousands of cities worldwide take to the streets in support of Black Lives Matter. Whilst horrific, in itself it seemed like the death of George Floyd was a catalyst for people up against a much more complex system of power than police brutality.

“The global wave of demonstrations is giving expression to an immense wellspring of social and political anger. It is the response to decades of unending war, the destruction of basic democratic rights, and a massive concentration of wealth in the hands of a tiny ruling elite.” – wsws.org

This has also happened in an environment where the universities also seem to be cementing their position – particularly in the United States. The Econ Journal Watch published a study conducted by professors from Brooklyn College and George Mason University, which found liberal professors and researchers outnumber conservatives nearly 12 to 1, while The National Association of Scholars, reports that 40% of top-ranked liberal arts colleges have no professors who are registered Republicans.

Yeonmi Park, a North Korean defector who moved to the United States recently spoke about being surprised at the level of anti-Western sentiment at Columbia University. When she admitted she enjoyed classic literature such as Jane Austen, she was told “those writers had a colonial mindset”, were “racists and bigots and subconsciously brainwashing you”.

And while tertiary level education seems to be doubling down on the left, there is a growing shift to the right in those without university education. Scott Morrison in Australia, Donald Trump in the US, and Boris Johnson and Brexit in the UK have all leveraged these trends. Trump in particular tapped into a community of people who felt overlooked by not only the educated “elites”, but also the mainstream media. The ironic thing is that the steelworker in Pittsburg or the mill owner in Missouri, who suddenly felt like Trump was their spokesperson, were really looking for someone to intervene in the decades long movement to free market structures. This irony comes from a very binary view of right and left politics and the reality, especially when globalisation is concerned, is more nuanced than that. The problem is that we seem to be losing that middle ground nuance.

How Did We Get Here?

“By the 18th century, England had converted into an industrial nation, and the dawn of the Industrial Revolution saw an explosion of manufacturing overtake the island. It is within those smoky factories and flammable textile mills that our modern idea of capitalism — and the opposition to it — began to fully flourish.” – Kim Kelly, Teen Vogue.

Capitalism

Let’s travel back in time a tad bit, say 245 years ago. The Wealth of Nations, a book published in 1776 is where Adam Smith, an 18th-century Scottish moral philosopher and political economist described the fundamental pillars of capitalism— pursuit of private property; self-interest; competition; a market mechanism; freedom to choose, guided by the “invisible hand” of the free market, rather than the “visible hand” of the government. A revolutionary thinker of his time, Smith’s basic premise was if people were left alone to better themselves, it would produce economic prosperity for all, without the interference of regulation of commerce. Smith is widely known as the “father of capitalism and modern economics.” A visionary, he formulated ideas, even as we know them today; for example, free trade, assembly-line production methods and the gross domestic product (GDP).

The purest form of Smith’s ideas of capitalism is that private individuals and businesses who own capital goods are unrestrained. They get to decide where to invest, what goods and services to produce or sell, at prices driven by supply and demand of the market economy; in most cases without checks or balances, such as interference of regulations of commerce. Most first world countries follow a mixed capitalist system that is a blend of government regulation of private individuals and business ownership across a range of industries.

Unlike the purist intent of Smith’s nearly two-and-a-half century old Inquiry into the Nature and Causes of the Wealth of Nations, today capitalism is viewed by many as a system with more sinister intent.

It is framed as an economic system in which industry, profits, trade, and by extension wealth, are controlled by private individuals and businesses. This whilst the individuals and society writ large devote their time, labour and community to generate the goods, services and revenue, only to receive an unfair pittance relative to business’ monetary gains. As a result, this is triggering the younger generation to increasingly snub capitalism. The impetus for their challenge has risen from their feeling that the system is unfair, inhuman, unsustainable and lacks the capacity to fix many of the prevailing problems that are not just plaguing society today, but will impact generations to come, like climate change, economic, health and social inequalities. Meanwhile the richest 1% are continuing to accumulate ever-more wealth, even though they give tens of billions to charitable causes annually. While philanthropy is universally supposed to convey money from the rich to the poor, this wealth sharing is not closing the social and inequality divide. This continues to be a chief complaint of capitalism. This generational opposition casts a long shadow over capitalism based on the notion those who embrace it believe “greed is brilliant,” because it drives innovation, goods and services creation, profits and powers the market economy. This is only in their self-interest to forge an ecosystem that yields more options for those who have enough resources to access them. Moreover, the opposition suggests capitalism is inherently unequal on both the demand and supply side of the economy, therefore the upshot of practicing it can only result in a society of “the haves and have nots.”

The gap between the haves and the have nots is further widened when levers intended to keep the economy functioning, such as low interest rates and quantitative easing put upward pressure on asset prices meaning that those with assets do well and those without slip even further away from being able to establish any sort of intergenerational wealth through investment. An example of this can be seen in New Zealand with property prices. While some might argue that reserve bank meddling is not a function of capitalism, there is still something about this eco-system that creates an exponential reward system for those on the asset train, while it moves further and further away from those waiting at the station.

In her first interview as Prime Minister in 2017, Jacinda Ardern suggested that “homelessness proves capitalism is a blatant failure”. Labour’s approach has been one of intervention, which Arden did foreshadow at the time. “When you have a market economy, it all comes down to whether or not you acknowledge where the market has failed and where intervention is required. Has it failed our people in recent times? Yes. How can you claim you’ve been successful when you have growth roughly 3 percent, but you’ve got the worst homelessness in the developed world?”

Where Does This Leave Us On The Duelling Ground?

According to the World Economic Forum, the global economy is not working well enough, for enough people. Inequality is also a problem that exists on both the demand and supply sides of the economy. On the demand side, large numbers of people are excluded from the fruits of the economic process as they lack access to basic healthcare, education, nutritious food and clean energy.

This is largely an emerging world problem, but it is also increasingly a problem in the developed world. On the supply side, large numbers of people are excluded from the economic process because they are shut out of employment in high-value-adding industries which rely heavily on skills and technology. This is largely a problem in the developed world, where globalisation and tech have hollowed out manufacturing, but it is a problem in some developing countries too.

Margaret Thatcher, British Conservative Party politician and Prime Minister (1979​–90), on one hand was lauded on restoring the “nervous system” of capitalism, while on the other hand criticised for crushing the poor and working class under the weight of it. Her belief in capitalism was immortalised in her slogan, “There is no alternative” to it as an economic system. The prevailing thought of those who oppose capitalism contend that rather than the individual being the epicenter of importance, focus high intention on the collective being at the epicentre which forms the basis of socialism – the age-old opponent of capitalism.

Socialism, the stalwart challenger

Let’s take another voyage back in time, say 154 years ago. Capital, Volume 1: A Critical Analysis of Capitalist Production, a book published in 1867 is where Karl Marx, German Communist philosopher, economist and the most famous opponent of capitalism in history, lays to bare the contradictions of the capitalist means of production. Like Adam, a progressive thinker of his time, Marx, perhaps as an unintended consequence, lent a hand to popularising the term “capitalism” laid out in his opposing position. Socialism can take many forms; however its essence is based on an economic system in which the government owns the means of production, and government-owned enterprises pursue maximising social good as opposed to profits. Marx argues that under capitalism, individuals are exploited and dehumanised. On the effects of rising productivity of labour, Marx underscored, “they mutilate the labourer into a fragment of a man, degrade him to the level of an appendage of a machine, destroy every remnant of charm in his work and turn it into a hated toil”. As the digital and automation revolution continues to perpetuate economic, health and social inequality around the world, it increases the burden on the poor and marginalised communities. Marx emphasised, “Just as man is governed, in religion, by the products of his own brain, so, in capitalist production, he is governed by the products of his own hand”.

A key feature of socialism is that the community, along with private individuals and business, equally control the means of production, rather than at the sole discretion of private actors. The widely held opposition of socialism asserts, for example, that it causes-slow economic growth, scant entrepreneurial opportunity and competition, unmotivated individuals have fewer incentives to innovate, and reduced prosperity. Moreover, the prevailing economic opposition to socialism suggests, “The chief economic problem of socialism has been the efficient performance of the very task for which its planning apparatus exists—​namely, the effective coordination of production and distribution”. Therefore, with government as the sole locus of control on both the demand and supply side of the economy, the effect of practicing socialism can result in a society of surpluses and political corruption leading to higher inequality, not less.

In some cases, this political control can go far beyond corruption. It is thought that over 20 million Soviet citizens were put to death by the regime during its history. This includes 200,000 killed during the Red Terror from 1918 to 1922; 11 million from famine; 700,000 executed during the Great Terror from 1937 to 1938; 400,000 more executed between 1929 and 1953; 1.6 million dead during forced population transfers; and a minimum 2.7 million dead in the Gulag. And while it’s easy to get emotionally buffered by the scale of numbers, The Gulag Archipelago, a three-volume non-fiction text written between 1958 and 1968 by Russian writer and dissident Aleksandr Solzhenitsyn, shares utterly horrific stories of the brutality of humanity when pushed either by oppressive control or just basic desperation for survival. And it wasn’t just death at the direct hands of the regime or by slow hunger, cannibalism between the prisoners was common.

While kids marching today with Marxist posters aren’t advocating for this kind of world, the problem is that history shows us the extremes of both sides. And we seem to be drawn to these extremes. But there might be some middle ground still.

Pure capitalism and pure socialism have notoriously juxtaposed each other in an age-old duel. Even though modern economies may present a blended system, an alternate economy lies in the space between for an emergent ground-breaking economic system.

Alternative Economy That Lies In The Space Between

There is an alternative to the notorious duel between capitalism and socialism and that is what lies in that space between in its purest form.

In concept, this is really about bringing in some pragmatic balance, stepping outside of ideological tribes and looking at the best elements of both socialism and capitalism to create opportunities for communities through free market trade. There is an example of this operating out of the Pacific known as Enua. It is a groundup system that is developing tools to solve the economic, health and social inequalities that impact many small communities who have lost out in the shift to the economies of scale of globalisation. Enuaism was borne out of a small community in the Cook Islands which was fighting a losing battle to retain autonomy and viability over the natural resources that they had been custodians over for thousands of years.

On a wet tropical day at the airport in Rarotonga, a young man retrieves a frozen meat pack from the luggage belt. As the rain pelts the tin roof, he holds the pack close to his chest and hopes that no one notices the wave of nervousness that has gripped him as he shuffles through the Customs check. The customs officer opens up the bag and admires a layer of still frozen pork chops before closing the bag back up again and ordering the man through. The man tries to the hide the instant relief that surely must be written all over his face, because underneath two layers of pork chops was a two month supply of Fentynal, a powerful synthetic opioid that is not only a morphine alternative, but is also a growing recreational drug fueling the opioid crisis in the United States. The man’s interest was in the former use. Down the road from the airport is the Rarotonga Hospital and on an isolated wing is a basic room that overlooks a small garden. It would almost be pleasant if the room wasn’t really just a waiting room for death. Inside, the man’s grandmother is waiting desperately for some form of pain relief from the cancer that has riddled her body. Unfortunately for her, she was allergic to morphine and there was no local supply of any alternative – hence the slightly chilled delivery of Fentynal. For the next two months, it was left to the family to administer the pain relief and try to keep her comfortable before she passed away. The family tried hard to bring some dignity to the 84-year-old woman, a daughter to a once powerful and respected chief and now waiting to die in an old block room on a basic steel bed with no air conditioning. It was in this room where the concept for Enua was catalysed. As that man tried to reconcile the situation and how, in amongst so much natural resources, millions of dollars worth of aid and a bustling tourist industry, basic fundamental services, like palliative care, could be so lacking. The answers are a frustrating interconnection of simple and complex factors that have compounded over the years.

For the past 30 years, the Cook Islands in the South Pacific have been developing a successful tourist industry. But the country is now 82 percent food-import dependent, and the traditional diet has been replaced by imported, often calorie-rich and nutrient-poor processed foods. Rates of obesity have skyrocketed to 80-90 percent among adults, and 81 percent of adult deaths are now due to non-communicable diseases, like diabetes and heart disease. It is widely known a disproportionate prevalence of these diseases are strongly associated with the health-demoting conditions of poverty, according to New Zealand Population Review (2014) Evelyn Marsters.

So crazy is this reliance on imported foods, but every year $400,000 worth of tropical fruit is imported from New Zealand into the Cook Islands. Just think about that for a moment. Not only is this a bit of humorous irony, but it is a part of a trade deficit that has an impact on a number of factors, including social, health, economic and environment. Not only is a constant supply of cheap calorie intensive food contributing to skyrocketing non-communicable diseases as mentioned above, but it is also contributing to increasing amounts of plastic waste that the islands don’t have the capacity to properly deal with. It is also creating a vulnerability in food supply and it is wiping out any relevant modern day viability for working the land that is so connected to social identity. This trade deficit really works hand-in-hand with an increased focus on tourism. On paper, tourism is a great earner and in many ways, it has brought a lot of wealth to some in the islands. Yet, as we have seen last year, it can be a dangerous thing to have almost total reliance on one sector, especially one that relies on open borders in a pandemic.

To pull back another level though, it is not the fault of increasing tourism that local food production and export dried up, it is the mechanics of a free market economy that rewards the efficiencies of scale. And in that respect, a small island cannot beat a large country when it comes to primary produce.

Enua works to create connected scale between communities through shared resources, logistics, research and collaboration. This is really not a new concept for tribes who have worked together like this historically, but it is disruptive within the current situation. This scaled community approach allows for people to leverage their shared resources to partake in global trade, while still retaining individual sovereignty. It advocates a quest to increase economic returns, food self-sufficiency, food security and to diversify the local economy through value-add processing. It is a significant measure in the battle against economic, health and social inequality in poor and marginalised communities. This has the potential to address both the supply and demand aspects of inequality through the establishment of short supply chains of fresh local foods and access to international markets.

On the supply side, the Enua concept utilises production technologies which increase off‐season supply, as well as processing technologies to provide a market for second grade fruit and vegetable products during periods of oversupply. Enua assists with government goals to improve economic resilience and productive employment; achieve food security and improved nutrition. A short supply will decrease the carbon footprint by limiting transport (local supply vs import), while preserving cultural identity by providing a means to live off the land. On the demand side, this will build resilience by offering preserved food for all, year-round while providing export pipelines for value-add products. Inclusive to this is social empowerment by creating more employment; giving incentives to start, continue & expand farming activities.

Final Thoughts…

Every nation relies on a decision-making structure for its economy as a means for production, distribution, and allocation of resources, goods, and services. This in essence forms the basis of their economic system. While capitalism is the fundamental essence for most economies today, clearly the ageless hallmark of capitalism remains with the individual and business squarely at the centre of the economic system, while the classic hallmark of socialism places the collective and government at the heart of the economic system.

Much like Burr, who represented the “affairs of honour” of the little guy, and Hamilton, representing the more powerful, advocates of capitalism and socialism have lionised their own economic systems in the interest of the little guy and the more powerful, respectively.

That said, the COVID-19 pandemic has amply exposed that the gripping duel between capitalism and socialism has outlived its usefulness to close the inequality gap, as evidenced by the World Economic Forum’s projection that we are on track to towards seeing the “biggest rise in inequality since records began”. Enuaism is a breakthrough that lies in the space between – a reimagined decision-making philosophy for an economy which places the community at the soul of the economic system. It is an example of the potential to move away from ideological divides, to allow for a sensible, fair, and sustainable way to organise; for poor and marginalised communities to fix many of the prevailing economic, health and social inequalities, while driving innovation and products and services creation in favour of the community’s wallet, well-being and enduring self-sufficiency.

Dr. Sydney Savion, is a behavioral scientist and Chief Learning Officer of Year 2020.