Capitalism is an economic system based on private property and private enterprise and its great virtue is that driven by private gain for individuals and profits for businesses, it encourages enterprise and innovation.
Capitalism however, has weaknesses which the state is expected to address or redress, by providing the conditions for enterprise e.g. law and order, national defence, infrastructure, education and regulations of the market to level the playing field.
The most important role of the state is to redress the fundamental dilemma of capitalism which is the tendency towards inequality among different groups in society. If the state does not assist the poor and working class with social services, then material deprivation and social animosity can cause violence and behaviour which is detrimental to capitalism itself.
This was the rationale for the welfare state, democratic socialism and the mixed economy. The rich accept that their good fortune makes it possible to help the poor through taxation by government. The question is how much should be reallocated from the rich to the poor to prevent the society from falling into chaos.
The answer depends on philosophies of governance and social justice. At one extreme is the social pathologies which blame the victim e.g. “the poor are poor because they do not want to work or have too many children”, and at the other extreme is steep, possibly demotivating taxation in which the rich pay a larger percentage of their income as tax.
There is growing inequality of income and wealth across the world, in societies as widely differing as China, Sweden and the United States of America. The share of national income going to the richest one per cent of Americans has doubled to 20% in the last 20 years. The trend is evident in poor countries e.g. India has 48 billionaires and the richest man in the world is Mexican. The richest 1% of adults owned nearly 50 per cent of the world’s assets while half of the world adult population owns barely one per cent of global wealth. Nearly half the world’s population, three billion people survive on less than US$2 a day.
The richest country is Qatar with a per capita GDP of $104,284 and the poorest country is Democratic Republic of Congo, with less than $365. The gap between the richest and the poorest countries has grown significantly in the last 25 years.
The rich are getting richer and the poor are getting poor across the world. While there will always be poor people the world is getting richer and therefore has the means to alleviate and significantly reduce global poverty. Charity is noble and for the unemployable but the problem must be addressed by reducing unemployment and underemployment. Some of the resources to be used to reduce poverty must come from the rich and those who are becoming richer.
Governments can do this without depriving capitalism of the driving force of private initiative and private gain. The problem is that there has to be a societal consensus that everyone must get better off. This community spirit needs to be revived and those who raise the issues of inequality and poverty must not be viewed as undermining capitalism. At the same time, the Government must do all to make Jamaica a more business friendly country, without which we’ll all be poorer.
And, we can’t afford, as we are seeing in the US presidential election, to speak only of the “middle class”.