Capitalism & Socialism: Two Old Economic Visions
Theories, we are often told, are merely abstractions with no
real practical impact, but hardly anything has impacted modern history more
profoundly than capitalism and socialism. ~ Riane Eisler, The Real Wealth of
Nations
For most of recorded history, whether Eastern or Western,
the vast majority of people were poor, and, as they had been taught to do,
accepted poverty as their inevitable lot. But as the industrial revolution
gained steam in Europe, so did the possibility that the world can change. By the
middle 1700s, the vision of progress through human intervention was applied to
economics. If people could improve the means of production, perhaps they could
also improve the economic system. With a better understanding of how economic
systems function, we could make them work for the greater good of all.
Out of this new probing of economic patterns, two economic
theories emerged. The first theory described what we today call capitalism. The
second theory is what its proponents called socialism.
Theories, we are often told, are merely abstractions with no
real practical impact, but hardly anything has impacted modern history more
profoundly than capitalism and socialism. Understanding these theories and the
times out of which they came is key to recognizing the dominator assumptions
embedded in them, and to building a new economic theory called partnerism – one
that really works for the greater good of all.
The Capitalist Vision
Adam Smith (born in Scotland in 1723) wrote his famous
Inquiry into the Nature and Cases of the Wealth of Nations in 1776, the same
year the United States was born. Smith's book, better known simply as The
Wealth of Nations, became the “bible” of capitalist theory. Smith’s was an optimistic vision of the future. He
basically accepted the dominator belief that people are inherently selfish. But
in his view, this selfishness could work for the common good – if only the
market was left to regulate production and commerce without government
interference.
Smith wrote in a time of massive social and economic
dislocation. The gentry had appropriated most of the lands that were commons,
and hordes of dispossessed farmers reduced to paupers were roaming the
countryside. There were also already signs of what was to come with the advent
of full-fledged 19th century industrialization. In some places, young children
worked in mines 12 hours a day as did women, including pregnant women, who
sometimes gave birth in mine shafts. Conditions in some manufacturing towns
weren’t much better, with children tending machines round the clock for twelve
to fourteen hours at a stretch.
Yet the government –
which was entirely in the hands of the landed and merchant classes
– did nothing to change any of this.
Instead, it often exacerbated matters with short-sighted policies designed to
further the narrow economic interests of those in power.
When Smith argued against government interference, he was
indirectly challenging the economic control of the upper classes. He would have
shuddered at the thought that his economic theory was to be used to justify
rapacity and greed.
He believed the forces of the market would counter
selfishness through competition. As he put it, the “invisible hand of the
market” would ensure that the public isn’t cheated and that living standards
rise.
Smith did not say that government has no role, nor did he
advocate privatization of government services. He stated that government has
the duty of an “exact administration of justice” for all citizens. He also
wrote that governments must erect and maintain “those public institutions and
those public works which may be in the highest degree advantageous to a great
society” – noting that these “are of such a nature that the profit could never
repay the expense to any individual or small number of individuals.” And he
warned that the rising industrialists “generally have an interest to deceive
and even to oppress the public.”
Nonetheless, at the center of Smith’s thinking was the
belief that the primary engine for building a better society is the market
– that is, the production and exchange
of goods for profit through commercial transactions. He believed the forces of the market would
counter selfishness through competition. As he put it, the “invisible hand of
the market” would ensure that the public isn’t cheated and that living
standards rise.
This argument, which he expounded in the 900 pages of The
Wealth of Nations, became the underlying rationale for capitalism.
The Socialist Vision
However, capitalism emphasized individual acquisitiveness
and greed (the profit motive), relied on rankings (the class structure),
continued traditions of violence (colonial conquests and wars), and failed to
recognize the economic importance of the “women’s work” of caring and
caregiving.
In important respects, capitalism was a step forward in the
move from a dominator to a partnership way of life. It gave impetus to more
socially accountable political forms, such as constitutional monarchies and
republics, and was a major factor in the creation of a middle class. Certainly
capitalism was preferable to the earlier feudal and mercantile economic systems
in which nobles and kings owned most economic resources.
However, capitalism emphasized individual acquisitiveness
and greed (the profit motive), relied on rankings (the class structure),
continued traditions of violence (colonial conquests and wars), and failed to
recognize the economic importance of the “women’s work” of caring and
caregiving. In these and other ways, capitalism retained significant dominator
elements.
By the 19th century, when it was clear that capitalism was
not fulfilling Smith’s vision of an economics that works for the common good,
Karl Marx and Friedrich Engels proposed a very different theory. Theirs was to be known as scientific
socialism, and it challenged just about everything Smith had believed –
particularly his faith in the forces of the market.
Marx’s and Engels’ scientific socialism was an alternative
to what they dismissed as the utopian socialism of theorists such as Robert
Owen and Charles Fourier. Marx and Engels believed that class conflicts are
historically inevitable, and that the victory of the bourgeoisie or merchant
class over the feudal landed aristocracy would inevitably be followed by the
victory of the working class or proletariat. But they were not only committed
to constructing a new economic theory; they were also committed to seeing it
put into action.
In time, Marx’s and Engels’ dream of a successful communist
revolution was realized. But not in an industrialized capitalist nation, as
they had predicted. Instead, revolution
came in a agricultural semi-feudal society: the Russia of autocratic tsars and
nobles.
Part of the problem lay in communist theory itself. Not only did it dictate the abolition of private
property and class warfare; it also failed to abandon the dominator tenet that
violence is the means to power, as in the well-known adage "The end
justifies the means."
Although socialist policies ended mass hunger and
destitution and vastly improved healthcare and education, traditions of
domination in both the family and state did not change. What Marx called the
dictatorship of the proletariat turned into just that – another violent and
despotic regime.
The central planners created a top-down form of state
capitalism where resources were controlled by a small group of men from the
top. In Moscow, government apparatniks got perks such as seaside villas and
sumptuous banquets, while the mass of people lived in overcrowded flats and
often lacked staple foods. In the provinces, warlords became communist
commissars and continued to terrorize their people.
Part of the problem lay in communist theory itself. Not only did it dictate the abolition of
private property and class warfare; it also failed to abandon the dominator
tenet that violence is the means to power, as in the well-known adage "The
end justifies the means." But an even bigger part of the problem was the
rigid dominator nature of the culture that preceded the Soviet Union.
The Russian tzars were despotic autocrats in a largely
feudal society. Serfs were not freed until the 19th century. And then this
freedom, like that of freed slaves in the American South, was largely illusory
since the power structure did not really change. Moreover, the Soviet Union took over a
culture that was rigidly male-dominated.
This domination of one half of humanity over the other, buttressed by
traditions of wife beating and other forms of violence, provided a basic model
for inequality and exploitation.
Gender, Politics, and Economics
This connection between gender, politics, and economics is
one of the most instructive lessons of modem history. We see it vividly in
Stalin’s brutally autocratic regime.
When Stalin came to power, he repealed Soviet policies enacted under
Lenin to shift to more equal relations between women and men. At the same time,
the Soviet Union regressed to even more violence and top-down economic control,
including the killing of millions of small landowning peasants and the purging
of anyone Stalin viewed as a threat to his absolute control.
In this return to a more rigid dominator configuration, the
totalitarian Stalinist regime was no different from the totalitarian fascist
regime of Hitler in Germany. For Hitler, as for the famous German philosopher
Friedrich Nietzsche, equality, democracy, humanitarianism, and women's
emancipation were "degenerate" and "effeminate" ideas. For
him, as for Stalin, control was an obsession: just as "socially pure"
men must rule over the rest of mankind, men must rule over women.
Through economic and military assistance, conquest, and
propaganda, the Soviet Union spread socialism worldwide. For a few decades,
half the world was socialist, including Eastern Europe, parts of Africa, China
and other Asian nations, and even a few countries in the Americas.
Capitalism was declared the winner in the ideological
struggle between it and socialism.
Then, following the fall of the Berlin Wall in 1989, the
Soviet Union’s communist regime collapsed. Capitalism became the new economic
system for Russia and Eastern Europe. China too turned to private enterprise,
and was soon (still under communist party control) on its way to becoming a
major capitalist power.
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