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Capitalism vs. Democratic Socialism


A very brief discussion about capitalism and democracy. Before the industrial revolution started in the 1700s and gained steam, pun intended, in the mid-1800s, when the start of mass production of goods became de rigueur, capitalism as we know it didn't exist. If you want more detail on the history of industrialization, it's available online, https://www.britannica.com/summary/Industrial-Revolution-Timeline.

Before the explosion of factories and mass production, each worker or artisan was a business unto himself (most women didn't get to play the game yet). Whether a farmer, wheelwright, farrier, doctor, painter, or tailor, each person produced goods or a service and sold the output of their labor directly to local customers or bartered what they had created for something they needed or wanted from their customers. Shop owners usually bought their inventory directly from the producer rather than a middleman.

With the advent of industrialization and factories, companies hired people to perform their work specialty in a factory setting. No longer interacting directly with the customer, they were paid a salary when they completed their task. The factory owner kept the fruits of their labor to be sold to the customers, hopefully for a profit.

The output became voluminous with a factory of, say, 30 workers. Their customer base was now many people spread over a larger geographical area, not just one local person, giving rise to warehouses, salespeople, distributors, and sundry storage and transportation specialists between production and the customer. Each of them wanted to make a profit in their specialty. Where business had initially been between the producer and the customer, the process now had to support multiple disciplines on the way to the ultimate consumer. Each service and its expected profits were layered on top of the original cost of producing the goods, causing the prices to rise.

Demand dropped because customers couldn't afford the goods if the price rose too high. The factory owner had to find a way to produce everything cheaper by increasing productivity or paying workers less. Where quality of work and enough money to live on had been the hallmark and motivation of individual laborers, now the focus for the factory owners was corporate profit and expanding business and customer base. Capitalism, it would seem, was making a profit off of the labor of others. Minimizing costs and maximizing profits often came at the expense of the worker's wages prompting workers to organize.

Socialism is an economic doctrine that calls for public rather than private ownership or control of property and natural resources. According to the socialist point of view, individuals do not live or work in isolation but live in cooperation with one another. History has shown that this approach, in its purest form, doesn't work. From the failure of communism worldwide to the collapse of the communes back in the days of Hippies, it just doesn't work for humans. How can a system that values (in terms of salary) the dishwasher as equal to the brain surgeon possibly work? It simply makes no sense.

We have evolved a brain that needs more than just slogging down the trail behind a group of people like ants. We prefer freedom in our lives to pursue our interests. We want independence, to a degree, but because we are also clan animals, we need an organization with leaders and workers, like many other species on the planet.

Democratic capitalism is what we strive for in the U.S. This economic system supports a capitalist free market economy subject to control by a democratic political system supported by the majority. It contrasts with authoritarian capitalism by limiting the influence of special interest groups, including corporate lobbyists, on politics. Sadly, our current government has leaned too far in the direction of corporations.

Social Democracy or Democratic Socialism seeks a blend of capitalism and socialism into one management system, with some of the more liberal factions wanting to lean heavily on the socialism part of the equation. Social programs cost money, and we need a robust business and labor industry that pays taxes to support the social side of the ledger.

If we look at everyone involved in the pursuit of success, we see that we all want Freedom with a capital 'F.' Freedom to make a lot of money throughout the system, freedom to make decisions, freedom from over-regulation, freedom to organize, freedom of movement between jobs, and freedom from tyranny.

The wild card in achieving these grand goals is often avarice or greed. The businesses/corporations want to make large profits, with executives receiving huge salaries and bonuses. The workers also want to make good money and enjoy great benefits, which naturally cuts into the business goals. I doubt you would find many workers turning down a job that paid what they make now with all the same benefits but only having to work 20 hours a week. Money is the driver and motivator for everyone in the game. A report by the AFL-CIO states that CEOs averaged $18.3 million in compensation for 2021-324 times the median worker's pay,

Regardless of what you call it, we need a system that allows as much freedom and success for both business and the workers as possible while ensuring that neither side is getting screwed in the deal. For instance, what if CEO compensation was capped at 50 times the average worker's salary? The average pay in 2021 was $53,924.00. Fifty times that number rounds up to $3,000,000 a year. That would seem reasonable compensation for a CEO. But that $53k average is not applicable across the board; different skill sets expect different pay scales. This approach would likely have to be indexed by industry based on industry-specific averages. In IT land, for example, the average salaries might be around $110,000 per year, so that executive tops would be approximately $5.5 million. What about entrepreneurs like Gates or Musk? Again, the salary rules would also apply to them with some rules to prevent them from hiding their salary. At the same time, if the entrepreneurs are successful and can have a net worth that's over the top based on stocks and assets, so be it as long as they are paying their fair share of taxes. We don't want to discourage visionaries who have been responsible for a multitude of breakthroughs, new technologies, jobs, and growth.

Such a program isn't easy; we'd already have been doing everything right if it was. We're not there, but we aren't all screwed up; we need to level the playing field a bit. It would take some work, it would have to have some flexibility, and it has to encourage success, but I believe there could be a workable system.

One of the key ingredients in all this is trust, trust on both sides, business and labor. That trust comes from honesty on both sides and then solid negotiations based on that honesty and trust.

I think we're close in the U.S., but there are still way too many inequities, tax corruption, and outright thievery. This is where we, the people, have to be more diligent and discriminatory about who we put in office.