This archive report was first published on 4 August 2019.
October 23rd, 2017, marked a significant milestone in the ongoing debate about the best economic system. While many countries have adopted variations of capitalism, the welfare states of Denmark, Sweden, Finland, Netherlands, and Norway have emerged as the most successful.
A welfare state is a concept of government that prioritizes the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those in need. This eclectic economic system combines the best of capitalism and communism, allowing private ownership while implementing social policies to ensure equal opportunities and a life of dignity for all.
However, any economic system with inherent biases towards communism or socialism tends to fail in poor countries due to several reasons. Firstly, social loafing is a habit that is rampant among poor countries, where individuals become too lazy to work when the factors of production are communally owned. This leads to economic decline.
Secondly, poor people often struggle to adapt to technology and change, relying on customs and traditions to solve contemporary challenges. This results in a lack of innovation and economic stagnation. One of the key features of capitalism is mechanization, which enables owners of capital to rely on technology to quicken production at a lower cost.
Thirdly, individuals tend to mismanage resources when they are communally owned, as the sense of personal responsibility diminishes. This is why private entities tend to thrive better than public entities. Lastly, capitalism thrives on economic competition, where producers strive to offer quality and better prices to have a competitive edge over other producers.
Considering these factors, it is better for a nation to start with a capitalistic system. Only after enough wealth has been produced and the country is well-developed should it begin implementing social policies to reduce social inequalities, which is an unavoidable side effect of capitalism. The experience of Tanzania serves as a cautionary tale, while Kenya's economic development has been more successful despite accusations of sacrificing social values.
These principles hold true for communities as well, emphasizing the importance of embracing capitalism as a means to drive economic growth and innovation in poor communities and countries.
