Social democracy versus capitalism

BREAKTHROUGH - Elfren S. Cruz - The Philippine Star

Extreme income and wealth inequality is getting out of control. This is the principal reason for the rise of populism and the declining support for democracy, especially among the masses.

According to the NGO Oxfam, the world’s richest 1 percent have more than twice as much wealth as 6.9 billion people. The very top of the pyramid sees trillions of dollars of wealth in the hands of a very small group of people whose fortune and power grow exponentially. Billionaires now have more wealth than the 4.6 billion who make up 60 percent of the world’s population.

So far, the world is being made to choose between capitalism and populism as the formula for preventing the end of democracy and uplifting the lives of the ordinary people. The world has seen the chaos and the trampling of human rights by populist leaders in Brazil, Russia and even in the United States under Trump. If the alternative to populism is capitalism, then we will just see democracies dying all over the globe.

Pope Francis was the first major leader to warn us that the “trickle down” theory does not work. This is the belief that if the rich get richer, some of the wealth will start “trickling down” to the masses. This has never worked and, according to Pope Francis, this will never work. Instead of allowing their wealth to trickle down, the very rich will either accumulate their money in so-called financial instruments or splurge their money in luxury goods, multiple residences or kept in tax havens. The worst problem is that the very wealthy in poor countries send their funds for investments in the wealthy countries. This perpetuates the sorry condition in the poor countries.

Is there any alternative to capitalism and communism or pure socialism?

The answer hopefully lies in the social democratic movement that President Biden is slowly espousing in the United States. The columnist EJ Dionne has defined social democracy’s core idea: “That market economies can thrive only when governments underwrite them with strong systems of social insurance, new paths to opportunity for those cast side by capitalism’s ‘creative destruction’ and updated rules advance social goods that include family life, education, public health and the planet itself.”

The next country where social democrats could take over government is in Germany. Olaf Scholz is Germany’s finance minister in Merkel’s coalition government. An election is scheduled in September and Merkel is retiring. Scholz is the candidate of the Social Democrats for the position of chancellor. He hopes that his party will land second and form a coalition with the Greens, a pro-environment party, or with the Left. Scholz’s focus is on “human dignity.” He sees dignity and respect as key to making diverse societies work and to responding to the social distempers that have drawn voters to the far rights.

President Biden has been pushing an agenda that has all the characteristics of social democracy. He has convinced the G20 to impose a minimum global tax of 15 percent on all multinationals. He also signed an executive order targeting anti-competitive practices in tech, healthcare and other parts of the American economy. Biden said recently referring to big business: “Rather than competing for consumers they are consuming their competitors; rather than competing for workers they are finding ways to gain the upper hand on labor.”

Business groups in the United States expressed strong opposition to Biden’s proposals, arguing that the executive order would stifle economic growth. This is the old argument between capitalism and social democracy. One places a premium on economic growth and the other – social democracy – places a premium on wealth equality.

Social democracy

Social democracy is an ideology that advocates economic and social interventions to promote social justice within the framework of a liberal democratic policy and a capitalist oriented mixed economy. Ideally, social democracy seeks to humanize capitalism and create conditions for it to lead to greater democratic and egalitarian outcomes. It is characterized by a commitment to policies aimed at curbing inequality, eliminating oppression of underprivileged groups and eradicating poverty. It seeks to support universally accessible public services like care for the elderly, child care, education, health care and workers’ compensation. It supports collective bargaining rights for workers.

Democratic socialism is another ideology espoused by prominent political leaders like Senator Bernie Sanders and Congresswoman AO Cortez. Basically, this term refers to an economy in which the means of production are socially and collectively owned or controlled alongside a democratic political system of government. This system does not believe  in  centralized planning. In democratic socialism much properties are held by the public through a democratically elected government, including most major industries, utilities and transportation systems. Private property is allowed, but there is a limit.

There is one major issue that separates capitalists from social democrats. Capitalist believe that the most important economic target is economic growth or GDP. Social democrats believe that the most important economic goal is achieving income or wealth equality.

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Young Writers’ Hangout on July 24 with award-winning author Weng Cahiles, 2-3 p.m. Contact   writethingsph@gmail.com.  0945.2273216

Email: elfrencruz@gmail.com

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