Capitalism and socialism

The free market capitalism that the world has gone through in recent years has caused the collapse of the global financial system. Without regulation and restraint, it has created a large asset bubble in housing and has produced unjustified huge profits for the financial sector. The wealth taken away by the financial sector has improverised the rest of the economy and cause long term damage.

Some people think that the capitalist system will continue to work well, if there is stronger regulation. I agree that it is better than weak regulation, but it will still not solve the underlying problems of unemployment, exploitation of the weak and insecurity.

To solve these fundamental problems, we have to adopt socialist principles. It means higher taxes but better social security, such as employment, old age pension, affordable health care and education. More of the basic needs should be provided by society, and funded by taxation, rather than be paid individually (which allows the consumers to be exploited by the providers).

Examples of exploitation of consumers are the high charges taken away by financial institutions, doctors and lawyers for their services. The consumers cannot afford these high charges. If the basic services are provided by the state, and paid by the state, there is less need for consumers to have to pay higher charges for these basic services. These professions can continue to offer their services to the affluent and rich.

There is the fear that services provided by the state can be wasteful and abuse. This is a valid fear, but it can be managed and minimized by adopting transparency and accountability. Under the free market capitalism, there are also abuses, but they take the form of exploitation of the ignorance of consumers (i.e. cheating) and by profiteering (i.e. overcharging).

Socialism and democracy can go hand in hand. Europe has a democratic socialist model. It worked reasonably well in giving a satisfactory life for its people. It is not perfect, but neither is capitalism.

Some people don't like the world "socialism" or "democratic socialism". Professor Paul Krugman has used the world "social democracy", which sounds more acceptable.

What the people need to avoid are abuse of power by the people in charge. This applies to socialist and capitalist systems equally. There are some capitalist economies that are undemocratic and do not respect the will of the people.

Tan Kin Lian