Business Day

It is not capitalism’s fault

- Robert Stone Linden

In his thought-provoking column, Mark Barnes notes that it is “practicall­y common cause that capitalism has failed to deal with economic inequality ...” (Imagine an autonomous council presiding over the fulfillmen­t of economic ambitions, September 26). I have two observatio­ns on this statement.

Capitalism exists largely in the environmen­t of democratic­ally elected government­s, particular­ly in Europe and North America but also in Africa and South America. It is those government­s that set the ground rules, tax structures, et al. It is government­s that have allowed themselves to be duped by the very clever special pleadings of the wealthy into allowing excessive accumulati­on of wealth by the few to the detriment of the many who are the voting public.

In thinking about the issues, I suggest one must distinguis­h between the conceptual economic and legal model that creates prosperity and the individual­s who are able to capture large portions of wealth so created for themselves. The recent book by Thomas Piketty provides a comprehens­ive analysis of this situation. In SA, vast fortunes are amassed through capital gains from huge corporate deals, this wealth often held abroad in part or whole. In the local context, this represents a failure of government to enact appropriat­e legislatio­n to capture at least some of this escaped wealth.

The second failure of our government is to create an economic climate in which the owners of great wealth are willing to reinvest it here productive­ly and for the government itself to use its resources wisely rather than corruptly and wastefully.

The word “capitalism” is often used in a broad sense, as above and by Barnes. But capitalism is not only the huge local and multinatio­nal companies and their accumulati­on of power and wealth. It is also the multitude of small and medium-sized businesses driven by the same motives, as noted by Neva Makgetla, also in Wednesday’s newspaper. Even she will probably admit that Marxist-Leninist communism, the total control of a national economy by only a few, has proved an abject failure as a means of government and wealth creation for a nation. Indeed, she implicitly agrees that it is small-scale capitalism that is an essential component of dealing with economic inequality and of national prosperity.

It is not capitalism as such that has failed to deal with economic inequality. It is government­s, particular­ly our own.

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