Crunch time for capitalism

THE minister of finance has been condemned for increasing the VAT rate by 1% in what is said to be a slap in the face for the poor.

I find it interesting that so many are always batting for the poor but very little seems to change for the poor, who arguably have become poorer over the past decade.

An interesting Business Report article recently stated South Africa’s salvation could come only through economic growth.

On the face of it, this is common knowledge, but the rider came in the author saying exploitation had lifted a billion Chinese out of poverty and it was far better to have a low-income job than no job.

The writer added that the Eastern economies of China, Vietnam and Singapore were among the purest forms of capitalism.

What he confirmed was that the only way capitalism could now work was if you paid workers low wages.

Certain political commentators like the EFF and BFLF movement place a lot of emphasis on white monopoly capital, which they see as the enemy of the poor.

They have the notion that the only way to solve the problem of white people owning all the wealth is to confiscate white-owned land and radically transform the economy by nationalising banks and other vital industries.

In a way, they’re correct, not just here but the world over. Most of the world’s population is held hostage by massive corporations who can ultimately dictate small countries’ policies.

Capitalism has always supported free-trade structures, and during the glory years from 1930 to 1970 in the Western countries of Europe, the UK, North America and, to a lesser degree, Japan, we saw a corresponding rise in the earning capacity of citizens and business thrived.

The capitalist model seemed to be working.

This largely depended on the supply of cheap raw materials from Africa and South America where the labour force was paid low wages.

Capitalism has inherent faults. The most challenging of these is that it seeks to become ever more efficient with decreasing costs and does this mainly by cutting its workforce and replacing humans with machines.

We’re always reading about the increasing rate of unemployment globally, with computers and robotics having replaced millions of jobs worldwide.

Once the Western capitalists had cut as many jobs as they could, the only option open to them from the 1970s was to relocate factories to China, India and Indonesia, where labour rates were cheaper, and they could thus produce more goods with fewer labour problems at a fraction of the price.

But the unintended consequence was that this drove down wages worldwide, which meant that now more people were unemployed and those lucky enough to have work had less disposable income, so there was less money in circulation, which ultimately meant production would have to slow down.

Capitalism has now realised its success depends on low wages, and yet, the top 1% continue to earn million-dollar salaries.

Another unintended consequence is that social spending as a percentage of gross domestic product has risen globally from 10% in the 1960s to more than 20% now.

Countries have tried socialism, communism, combinations of socialism and capitalism and pure capitalism. None has been able to bring about a just society.

Good governance is supposed to bring about this balance and provide for the well-being of all citizens. Clearly, this hasn’t happened.

The capitalist model now applied distributes the lion’s share to the rich and the scraps to the poor, with the middle class shrinking fast. And the rich have devised ingenious ways to ensure their continued status.

I believe capitalism has reached the last chance saloon. It must either devise a way to more equally distribute wealth or we can look forward to The Hunger Games becoming a reality.

PETER WORMAN

Bluff