Capitalism or Communism?

The polarisation of this question generally provides only the answer the particular protagonist wants and that is an absolute. Sadly this always masks several important points, one being that neither is actually 'perfect' for everyone or for every economy. Both have serious flaws in practice. So I was recently very pleased to see the following answer to an online debate.

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Eivind Kjørstad, 

Communism and Capitalism are abstract ideas. None of them can function in a hypothethical "pure" form, because both of them carry in them the seed to their own destruction: "pure" capitalism unhampered by restrictions or government oversight would lead to crises and excesses that makes the current financial crisis seem like peanuts; you'd have people starving on the streets, and a handful of people owning everything. We already live in a world where the wealthiest 85 people on the planet own more than the poorest 3.5 billion. A world where it instead was the wealithest 10 people on the planet owning 99% of everything would not be desirable. 

But pure communism is also unworkable: attempting to remove the profit-motive never works, and if it did, the result would be a catastrophic fall in productivity and a world of poverty as a result.

Real economies are a mixture of ideas from many different inspirations, including communism and capitalism. Good governance is not about finding the ONE TRUE ANSWER and then implement it in it's purest form. Good governance is about finding a reasonably good balance between the many competing priorities.

Enough capitalism to make people productive. Enough communism to avoid having people starve on the streets. Enough capitalism to make it worthwhile to start businesses, yet also enough of a social security-net that even if the business fails, you'll still not need fear for your basic nessecities.  

It's not always a conflict, sometimes there's synergies: A good social security-net makes it easier to start a business, because that's always going to be a risky thing to do (most businesses fail in their first 5 years), and knowing that you'll still be fed even if you fail, makes it easier to accept that risk. 

So the question should not be: What is better, capitalism or communism ? 

The question should be: What is the right balance of ideas ? What are the good parts of communism, and how can we incorporate them, while minimizing the downsides ? What are the good parts of capitalism, and how can we benefit from them while reducing the downsides as much as possible?

I find this writer has summed up my own feelings on this question perfectly, the only problem is that, at present, both the 'capitalist' and 'socialist' political party types are too close to, if not in thrall too, the absolutist proponents of both philosophies.

The Pensions Debacle ...

I used to have a quote on my office 'action board'. I can't recall who said it originally, but it summed up the constant state of financial difficulties over a wide range of issues. It said simply: Don't expect me to drop everything to deal with some crisis caused by your lack of planning.

As I follow the dispute between the serving fire fighters, the government, and the employers over their current pension age and pension provisions, I am constantly struck by how the pensions crisis is now the fault of the fire fighters, pensioners and everyone else. It is a crisis created by the abysmal planning and practices of the politicians and civil servants (who have looked after themselves very nicely - thank you), and it could have been foreseen - in fact some did - more than sixty years ago. The Fire Fighters Pension Fund should have been revised in 1974 when the service underwent a massive re-organisation and expansion, but then, as now, all the politicians and civil servants involved saw, was a nice source of 'revenue' from all those extra contributions.

The root of the problem actually goes back, in the UK, to 1908, when a Parliament dominated by middle class and aristocrats with a paternalistic mindset, voted to create a State Pension to be paid to all working class men reaching the age of 70. It seemed safe enough at the time perhaps, as the average age at death of 'working men' then was a mere 45 years of age. Note the pension was only for men at the time, but post WW1, it was expanded to include women and the retirement age was lowered - but what everyone failed to notice was that the introduction of the first generation antibiotics, better working conditions, healthier food and access to better medical care also increased the life expectancy of the people it covered. Suddenly many more people were qualifying for a pension - and drawing it for longer. Did Parliament, the civil service or anyone else make any change to the way they were funding it? No. They continued to collect the small contribution each worker paid into it, and treated it as 'revenue' to be spent on any and every pet project and expansion of the State.

This is a particularly sore point for the fire and rescue service personnel. There were, and still are, very good reasons why they retired at 50 or 55. Only officers above the rank of Senior Divisional Officer could continue to 60, and it all has to do with your reflexes, your bodies ability to recover from heat and cold stress, injury and general health and fitness. The vast majority of people cannot achieve the levels of fitness now being demanded of fire fighters at age 50, let alone 55 and as for at age 59 - forget it. Worse is that the Minister concerned and his civil servants are being decidedly 'economical with the truth' when they say that only a small number of fire fighters will be affected. Their own report states that as many as 90% of fire fighters could fail to maintain the fitness level at age 55. They are also failing to be honest about how much the fire fighters are contributing to their pensions. Where the majority of Pension Funds have taken between 4 and 9% of salary from their members, the Fire Fighters are contributing 14 -17% of income.

It doesn't take a genius to realise that our local and national politicians have squandered the money (we won't mention Gordon Brown's raid of 8 billion on private pensions that destroyed the majority), treating the contributions as a nice way to subsidise the local and national tax pot. Of course, it would all have been fine and dandy as long as the workforce continued to grow. As long as more people were 'in work' and paying into the pot, everything is hunky-dory and we can get away with this sort of economic sleight of hand. Unfortunately, the 1930-40s dream of 'full employment' and state run industrial and commercial activity fell apart - and the politicians and civil servants can't bring themselves to admit that it was not only never achievable, but is a direct cause of their present crisis.

Not one penny of the money they have collected for the last 106 years was ever invested to cover the promises they made year after year, election after election. As for the Treasury's 'economists' - I wouldn't trust them to invest the small amount of money I once had in an ISA! Frankly, if anyone ran a business the way they run the national economy, the Serious Fraud Squad would be considering a major prosecution. The fire fighters have a right to be up in arms, and their current Chief Fire Officers are as much to blame as the politicians they serve. The various Local Authorities have taken the contributions from the men and women in their service for years and used it to subsidise the Rates and now the Community Charge.

Now that the revenue is shrinking as they cut down the service side (while expanding the paper shufflers and 'non-operational' side), they want to cut their losses by blaming the fire fighters. There are claims that a fire fighter that is fired at 51 because he can't maintain the fitness level or has been injured, can be 'redeployed', but this is false. Until ten years ago, he or she could have been, but since Labour' modernised the service, all the posts they could have been redeployed to have been stuffed with 'non-operational' and non-fire fighting staff. It was claimed then that this was 'cheaper' - so the fact that these folk are now, on average, earning the same as or more than the fire fighters they replaced is possibly another small problem the politicians are being 'economical with the truth' about. The truth is - and the reality - is that someone being 'let go' for health or fitness reasons at 51 is highly unlikely to find employment at anything like the income he or she enjoyed at that point. Nor will they be able to claim their full pension, or any pension until they reach 60 and then the new threshold of 67 for the State Pension.

Tough one, and I'm sure all the lovely and caring politicians and civil servants will pat him or her kindly on the back, and tell them the usual platitude that it's a tough deal, but you could have made provision for this contingency yourself ... Then they'll take their gold plated tax payer funded pensions and their knighthoods and laugh all the way to the bank and the bistro.

I have used the fire fighters as an example here, but the truth is that all pension funds are in the same state, and all pensioners and contributors to pension funds are being put under similar pressure. Suddenly it is their fault that the Treasury, the politicians and the civil servants have, down the years, squandered the money they have taken from us. If an insurance company did the same with its policy holders premiums the courts would deal with it very quickly indeed. Perhaps that is what we should now be doing, bringing prosecutions for fraud against the various public bodies that have taken our money on false pretences and now want to change the rules to shift the blame.

Now there's a thought for those of a legal mind and ability ...