Public vs Private Ownership - Research Paper Example

Public vs. Private Ownership Does history repeat itself? The age old adage may ring true, especially when it comes to an analysis of the Great Depression, almost eighty years ago. The United States is in presently in the worst financial crisis since the Depression of 1929. In the wake of the Cold War, the United States of America emerged as the dominant global economic and military power and ushered in a new world order of capitalist-inspired economic growth and prosperity. Virtually uncontested at the helm of the world’s strongest economy, the United States has recently witnessed ominous signs of an impending economic meltdown. A variety of factors precipitated the current economic crisis, an event which draws parallels with the Great Depression eighty years ago. Some of the precursors to the current financial crisis include the implosion of the American sub-prime lending market, a mortgage market in crisis and an induced credit crunch with global ramifications. Banks are foreclosing, people are losing their homes and the international economic situation is precarious as global lenders are closing their doors and filing for bankruptcy. The correlations with this financial crisis to the Great Crash of 1929 are so similar that it is eerie. Whenever an economic crisis occurs, such as that of today or the Great Depression of the 1920s and 30s, people start to question the notions of private vs. public ownership of property and goods. Essentially, these questions are questions about ideology; about which political, economic and social system should govern our society. Capitalism is arguably the dominant economic system in the world and it is based upon the notion of private poverty. Private poverty is at the core of capitalist ideology and it is arguably the most basic tenant of the modern Western world. Socialism, on the other hand, is based upon collective ownership and the idea that communitarianism and public ownership of goods and property reign supreme. China, an avowedly socialist country, just recently legalized private property in 2004. As the BBC reports, “members of China's National People's Congress have introduced a proposed amendment to the constitution, which will legally protect private property rights for the first time since 1949” (BBC, 2003). For someone who lived and grew up in a capitalist society it is incredulous to think that private property, an idea so basic in the Western world, was not made official in China until 2004. Unbelievable really. Seeking to explore the dualities between private ownership and public ownership, this essay will explore capitalism and communism in comparative perspective. We now turn to an overview of capitalism and private ownership. Capitalism and Private Ownership Capitalism is arguably the most well-known model of economic development and growth and is responsible for the globalization of international trade, foreign capital and the growth and development of much of the Western world (excluding Cuba and including Australia, which is commonly included in economic analyses of the “West”). Capitalism advocates free market economic principles of development and believes in deregulation, a belief in the invisible distributive hand of the markets and the promotion of a market-oriented society. From this perspective, the role of the state is to promote economic development through policies which are beneficial to market-oriented economic growth. Capitalism has propelled the advent of economic globalization and the strong economic growth and development exhibited in the countries of the West. It is currently being embraced as a development model by the formerly socialist countries of Eastern Europe (former states of the U.S.S.R.) and is responsible for tremendous economic growth on a global scale. Globalization, as it exists today, rests largely on the shoulders of neoliberal economics and the global entrenchment of capitalism as the dominant economic system in the world. Inspired by Realist ideological doctrine, neo-liberalism is the belief in laissez-faire economics and its early proponents were Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States in the 1980s. US President Ronald Regan famously remarked “government was not the solution but the problem” (Hobsbawm 1994). Neo-liberals put all of their faith in the distributive capabilities of the invisible hand of the free market, and believe that business was inherently good and that government bad. The government was longer interested in the provision of welfare but existed to stimulate the capitalist economic market. The United States under Ronald Reagan was thus described as the “greatest of the neo-liberal regimes” (Hobsbawm, 1994). Accordingly, The essence of neo-liberalism, its pure form, is a more or less thoroughgoing adherence, in rhetoric if not in practice, to the virtues of a market economy, and, by extension, a market-oriented society. While some neo-liberals appear to assume that one can construct any kind of ‘society’ on any kind of economy, the position taken here is that the economy, the state and civil society are, in fact, inextricably interrelated (Coburn, 2000). At its core, capitalism is about private ownership and the role of individual in determining his or her own economic fate. Capitalism is also about a market-based economy in which speculation reigns supreme. John Kenneth Galbraith analyzed the economic situation in the United States leading up to the Depression in a profound book entitled, The Great Crash. In this tome he outlined the preconditions for the crisis. Seeing the rise in speculation as perhaps the most important precondition for the Great Crash of 1929, Galbraith emphatically argues that an economy based upon speculation, such as through stocks, bonds, currencies, real estate, derivatives, and commodities is inherently unstable from a macroeconomic perspective and prone to a burst in the speculative bubble. Optimism is a characteristic of the speculative investor and Galbraith argues that an economic system with a speculative basis is liable to crash and subsequently a shaky basis for an economy. In addition to the risks caused by a speculative market, income inequality, so pervasive in the United States during the period further contributed to an unstable economy and this income distribution imbalance exacerbates instability. Accordingly, when “5 per cent of the population with the highest incomes in that year [1929] received approximately one third of all personal income", an economic crisis is sure to be on the horizon. Additional antecedents to the collapse include a weak banking structure, imbalance in foreign trade, weak economic intelligence and problems in the structure of US corporations. He argued that as economic actors, corporations in America were structured to contribute to the deflationary cycle as opposed to opposing it. As we can see, market-based speculation and inherent inequalities are part of the private property model of economic growth, capitalism (Galbraith, 1992) Socialism and Public Ownership An ideological paradigm promotes public ownership of goods and a society in which equality and egalitarianism reign supreme, socialism is an important political theory which continues to resonate in international affairs. Socialism has traditionally advocated a strong state-centric approach to control over the means of production and is critical of private property, private ownership and what it views as the inherently exploitative nature of the capitalist economic system. With a strong role for proletariat social class and the state in promoting social change through revolution, the socialist experiment has frequently been associated with revolution and violent social change. Initially seen as the antithesis to capitalism and capitalist modes of production, socialism today represents a variety of ideas which blend modern capitalism and socialist ideas about redistribution and the role of the state in economic affairs. Seeking to explore the history of socialism and thereby analyze its future in international affairs, this essay will chart the history of socialism through an in-depth analysis of the U.S.S.R. and China. Each country represents socialism in practice and will be used to discuss this important political theory. Socialism in Context: The U.S.S.R. Early socialists such as Karl Marx advocated proletarian revolution and mass mobilization to correct the social inequality perpetuated by capitalism. The public ownership of goods was an integral component of this revolutionary rhetoric. Marxist thought inspired socialists around the globe including Fidel Castro in Cuba, Mao in China and Lenin in the Soviet Union. According, in the Soviet Union, Vladimir Lenin established an authoritarian political system, which grew out of mass discontent associated with the First World War. The October Revolution of 1917 – also known as the Bolshevik Revolution – had an enormous impact on Europe’s social, political and economic landscape and accordingly “produced by far the most formidable organized revolutionary movement in modern history” (Hobsbawm, 1994). The Bolsheviks, led by Vladimir Ilyich Lenin, viewed themselves as the shepherds of a new international communist order in necessary conflict with the old order, embodied by bourgeois liberal capitalism. A centrist planning economy necessitated activist governmental intervention in all aspects of the state’s social and economic growth. Additionally, an important component of this state’s ability to mobilize was the 600,000 member-strong, centralized and highly disciplined Communist Party. Because the Soviet Union removed itself from the global capitalist economic world system following the October Revolution, it was effectively immune to the crisis caused by the Great Depression in 1929. Through bureaucratic regulation and heavy governmental economic intervention, the Soviets worked towards the establishment of a modern, communist utopia (Hobsbawm, 1994). Controlling the means of production and severely curtailing civil liberties, the global Communist community established themselves as “the Second World” during the Cold War. Accordingly, due to an overbearing state apparatus and inefficiency inherent in the socialist mode of production, the global Communist community was severely undermined by economic and political crises which began in the late 1960s. The result was political and economic disorder. Economic crises undermined the political foundations of states like China and the USSR – particularly after the deaths of men such as Mao & Brezhnev – and the centrally planned economic systems of these countries remained under stress and increasingly precarious. The Soviet world was also not immune to global economic crises as evidenced by effects of the OPEC crisis of 1973. These aftershocks paved the way for perestroika and glasnost in the USSR, the implosion of Yugoslavia and popular Chinese dissent expressed in Tiananmen Square and captured live on camera. The political and economic fragilities of the Second World were exposed following 1968 and slowly led to political decay, leading to the eventual implosion of the Soviet Union. The fall of the Berlin Wall signaled the end of socialist experiment in much of Eastern and Central Europe and for many was the death knoll for communism and state-sponsored dogmatic socialist principles (Strayer 1998). Socialism Today: China China is an ancient civilization with a long tradition of dynastic rule and strong leaders. China has been ruled by the Communist Party of China (CCP) since 1949, an avowedly socialist form of government which established the People’s Republic of China, and initially viewed capitalism through a skeptic’s lens. As a socialist party with communist leanings, successive Chinese governments undertook disastrous social and economic initiatives including Five Year Plans, the failed Great Leap Forward and the violent Cultural Revolution. Despite these early years, China has cautiously embraced economic liberalism and a capitalist economic orientation, albeit with strong authoritarian tendencies. China today has the 4th largest economy in the world behind the United States, Japan and Germany, estimated at $2,645 billion per year. With a population of more than 1.3 billion, China remains a largely rural country with 43% of its labor force employed in agriculture with another 25% in industry and 32% in the service sector. Industry, however, has driven the economic growth of this country which represents 49% of the total $2,645 billion GDP. Accordingly, the average annual growth in China over a ten year period was an astonishing 10.5% (1996-2006). Much of this growth is tied to the global economy and China’s role in international economic affairs today (The Economist, 2008). Chinese development, while embracing market-oriented economic policies, differs substantially from the other Asian Tigers in that it has chosen to gradually liberalize its economy but has resisted pressures to democratize in the face of an opening in the economic sphere. Based upon the principles of economic liberalism but with a strong role for the state, China began with the creation of attractive economic-oriented trade zones to appeal to foreign investors and stimulate national growth. Industrialization and export-oriented development were key to China’s development model which blends socialism with capitalist ideas about economic growth. Accordingly, this model of growth is a modern attempt at harnessing the forces of global economic capitalism through state-led development. China’s form of development focuses on macro-economic concerns (raising the Gross Domestic Product, decreasing the national unemployment rate, etc.) by attracting foreign investors and utilizing the resources already available to stimulate growth. While his form of economic development is currently being practiced around the world, it has been particularly successful as a developmental model in the case of China (Clark and Kim, 1995). Concluding Remarks Should property be privately owned or does the state have a stake in collective ownership? Socialism today represents a variety of ideas which blend modern capitalism and socialist ideas about the role of the state in economic affairs. As the case of China emphatically demonstrates, socialism can remain a potent force if it evolves in line with the global economic community. Avowedly socialist countries which have removed themselves from the global economic community, such as North Korea, Cuba and the U.S.S.R., have withered away or imploded in today’s era of globalization. Although Chinese repression and authoritarianism remain infamous, it has successfully harnessed the capabilities of an entrenched socialist state and has successfully blended socialist authoritarianism with the principles of free-market capitalism and the introduction of private property. References Clark, G.L. & W.B. Kim. (1995). Asian NIEs & the Global Economy: Industrial Restructuring & Corporate Strategy in the 1990s. New York: Johns Hopkins University Press. Coburn, D. (2000). ‘Income inequality, social cohesion and the health status of populations: the role of neo-liberalism’, Social Science & Medicine, vol. 51, no. 1, pp. 135-146. Galbraith, J.K. (1992). The Great Crash, 1929. New York: Penguin Books. Hobsbawm, E. (1994). Age of Extremes: The Short History of the Twentieth Century: 1914-1991. London: Abacus. The Economist. (2009). Pocket World in Figures, 2009 Edition. London: Profile Books. Markus, F. (2003). China to protect private property. BBC.com. Web. October 16, 2009. http://news.bbc.co.uk/2/hi/asia-pacific/3340161.stm Strayer, R.W. (1998). Why Did the Soviet Union Collapse? Understanding Historical Change. New York: I. E. Sharpe. Read More