Monetary Economy: An imperfect model III – Socialism

By Akhilesh at 31 May, 2009, 3:03 am

Socialism though thought by many intellectuals to be an alternative to Capitalism and a more equitable form of governing an economy is not very different from Capitalism. According to me, in this case also we follow the fundamental of scarcity and ownership. The only difference lies that the ownership of resources is controlled by the Government instead of private players, with a belief that the Government will distribute the resources equitably among the population and will create less of class discrimination.

Again, the same scenario arises that population at large is directly controlled by the government in charge. Since there are no extra reward points for extra effort, this kills the initiative for people to put in more effort. This attitude clearly explains that the motive of work is not the work in itself but the reward points. Thus, the search of extra reward points creates dissatisfaction, red tapism, lethargy and low productivity.

As reward points directly get translated into money the work in administration and governments become secured and are in high demand. It again allows the same thing to happen: too few people controlling all the resources which I think is no different from the Capitalist scenario.
The classic example of the above scenario going horribly wrong is the erstwhile USSR. The governments almost take the form of dictatorships and the people are left with no choice but to be governed by the dictators of their respective countries. Thus the country becomes no more than a fiefdom of the dictator. This creates revolutionaries, government coups, social unrest and chaos.

The above observations of both the scenarios tell us that whether an economy is Capitalistic or Socialistic- we work on two basic fundamentals to govern.

Scarcity of resources
Ownership of resources in the hands of few.

Mostly every one in the world at present will agree to the above two concepts as most basic concepts of economic governance. All demand and supply revolve around the above two concepts. And as we get into more macro or micro complications we shall see that everything will revolve around the above two basic fundamentals.

Now, the question I ask is that are these fundamentals really true? Why are we taking scarcity for granted? Why aren’t we questioning it? May be we should…

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Categories : Finance