Sisteme economice » Abordari moderne-en

Modern approaches adapted to public discourse

Most specialized works created in the modern period and received as such in the public space categorize economic systems into three categories:

(A) capitalist, organized based on free competition,

(B) socialist-traditional, characterized by the quasi-general control of the state,

(C) socialist-reformed, designed as a mix between the actions of private agents and the participation of public authorities, aimed at mitigating economic imbalances.

Capitalism is primarily based on elective democracy, private property, individualism (oriented towards profit-seeking—the main motivation for economic action), and competition.

Traditional socialism (orthodox, original) is associated with "popular democracy," state ownership, governmental control, planning, and political monopoly.

Reformed socialism (social-democratic type) values collective, group, or cooperative ownership, significant redistributions of factors and income among all members of society, trade unionism, and competition in strategically significant areas.

A. Capitalism

The essence of this formation is identifiable in the economic field, based on the concept of capital – “tangible reality, designating the totality of means insertable in the production process” (Tiberiu Brăilean).

It was first used by Karl Marx and gained notoriety with the appearance of Werner Sombart’s work “Der moderne kapitalismus” (1902)..

In parallel, there was an accommodation with pro-bourgeois intellectual environments, as a result the concept was taken over by a series of important theorists (Durkheim, Weber, etc.), thus entering (also) into social-political terminology.

For Ludwig von Mises, capitalism is “the result to which man’s efforts to adjust his action (...), the strategy that allowed him to progress triumphantly from a state of savagery to that of civilization”.

In contrast, one can place the considerations of those researchers who emphasized the extra-economic elements of capitalism: for example, Max Weber insisted on the spiritual-religious determinants, Friedrich von Hayek highlighted the rule of law, freedom and democracy, Milton Friedman advocated for state non-interventionism, Peter Drucker took into account its sociological dimension, etc.

Regardless of whether we understand it as a model of explanation or as its natural state, capitalism “deserves neither outpourings of hatred nor manifestations of enthusiasm” (Jean Baechler). One can even say that “only capitalism is effectively anti-capitalist”, because it always denies its conditions, reconsiders them through the perpetual hurricane of creative destruction, which determines the emergence and affirmation of new values (Joseph Schumpeter).

The main structures that capitalism has developed are:

a. Economic structures – private enterprise and the market (create a decentralized economy, where prices guide/optimize the behaviors of requesters and offerers);

b. Cultural structures – individualism, utilitarianism (any behavior is directed by calculation, in order to maximize the pursued interest and minimize failures) and the “spirit of capitalism” [material success is a sign of divine choice, provided that it is accompanied by a quasi-ascetic type of life, which favors saving and reinvestment (Max Weber)];

c. Legal structures – private property rights and contract law;

d. Political structures – the rule of law and civil liberties;

e. Social structures – economic development and democracy determine the societal construction around a vast middle class (Alexis de Tocqueville).

A series of authors, good connoisseurs of economic developments in recent decades, have identified several organizational modes within the capitalist formation.

For example, William Baumol, Robert Litan, and Carl Schramm, in "Good Capitalism, Bad Capitalism and the Economics of Growth and Prosperity" (see the 2009 edition published by Polirom), referred to:

(A1) state-managed capitalism (the government attempts to guide the market by supporting more efficient industries),

(A2) oligarchic capitalism (power and wealth are held by a small number of individuals/families),

(A3) big firm capitalism (the most important activities are carried out by large enterprises),

(A4) entrepreneurial capitalism (the role of small, innovative firms is predominant).

A1. State-managed capitalism

This subsystem operates in countries where governments, not private investors, are the principal decision-makers in economic policy. It does not represent a break from capitalism because the state recognizes and protects the right to private property and contractual rights, while markets set prices for goods and services produced, as well as wages. The majority of economic activities are private.

Governments control economic processes, and political leaders use their power to support successful industries/firms. The most important means by which executives dominate the economy is their authority over banks, the primary channels for transferring capital from savers to investors (see, for instance, the case of South Korea).

The executive power can manage capitalism in other ways—preferential tax exemptions, exclusive licenses, public orders. Additionally, the state supports the economy with protectionist measures, directs (foreign) investors towards certain sectors (under certain conditions), organizes and finances innovation. Last but not least, the government plays a significant role in providing public goods and services to the population, ensuring fundamental infrastructure, and promoting research (consider examples from Southeast Asia and Latin America).

The type of capitalism we refer to presents several disadvantages, ranging from excessive investments in certain industries and the erroneous selection of the best companies (the predisposition to corruption) to the difficult exit from the system and redirection of government resources.

A2. Oligarchic capitalism

This subsystem is defined when government policies predominantly promote the interests of a very small and very wealthy segment of the population. Among its distinguishing features are the extremely unequal distribution of income and wealth, weak competition, pushing entrepreneurial energies towards less useful domains for society, and hindering foreign investments.

Many of the oligarchs rely on significant natural resources. In this respect, it is worth recalling Thomas Friedman’s consideration—"the price of oil and freedom always move in different directions": the well-known journalist referred to Saudi Arabia, but the picture can be completed with most Gulf states and some republics in the CIS region.

A3. Big firm capitalism

The economic construction in question, visible in continental Europe, Japan, and partially in the United States, includes oligopolistic markets, where large firms influence/control prices, obtain above-normal profits, affecting consumer interests. These situations lead to few innovations, and even obstruct the introduction of new technologies.

Large firms, essential for the functioning of any economy, although they allocate significant budgets for research and development, often prefer to expand through constant improvement of existing products and services (developing new ones only after rigorous market studies). In relation to small firms, on one hand, they tend to subcontract part of their activity, while on the other hand, they usually adopt the most promising innovations.

The tendency of large firms not to innovate constitutes the weak point of this subsystem of capitalism: the inclination towards continuous improvement can diminish; rigidity and bureaucracy threaten economic growth, and employees’ priority becomes job security, not self-improvement (a rigid labor market constitutes a handicap in economic competition).

A4. Entrepreneurial capitalism

The model discussed is supported by a large number of economic agents, motivated to innovate and capable of marketing their innovations. The branches driven by these innovations intensify productivity and contribute to economic growth. The spirit of competition is alive within this subsystem.

Countries such as the United Kingdom or Israel have abandoned the administrative role of the state in their economies, relying on entrepreneurs. The United States is the most suitable example for the combination of entrepreneurial capitalism and big firm capitalism, which has led to accelerated development of innovation.

In other words, entrepreneurial capitalism is the subsystem most conducive to radical innovations, whose producers are especially small firms. However, large firms remain very important because they perfect and subsequently insert innovation.

B. Traditional socialism

This economic system abolishes individual ownership of the means of production and entrusts governance to a political party, which claims to represent the interests of the working class. Furthermore, it configures a society that is much more egalitarian compared to capitalist ones, suppresses fundamental freedoms, and makes the taste for profit forgotten.

The state becomes a true factotum: owner, entrepreneur, organizer, fixing prices, wages, and priorities. Everything is planned regarding production, distribution, and exchange. Enterprises are public, wage inequalities are minimal, unemployment is low, and economic performance is also low. Political-administrative commands overshadow economic logic.

The economy is run with the help of annual and multiannual (indicative) plans, garnished with indications from political leaders. Agriculture is largely collectivized, with a small cooperative sector existing in the realm of small crafts and services.

The main focus is on large infrastructure projects, carried out at very high costs, and the generalized lack of efficiency leads, over time, to the impoverishment of the population and ultimately to the implosion of the system.

C. Reformed socialism (social-democratic type)

We consider an organizational mode that does not exclude elective democracy, and in economic terms, it offers a significant role to the state and cooperative groups. As an "entrepreneur," the state owns numerous enterprises in all sectors of activity, not just in the less profitable ones (see Scandinavian countries). Thus, there is a socialization of production, which does not mean the abandonment of capitalism: profit remains the main motivation, but changes are made in the sphere of distribution.

Unlike traditional socialism, the system presented is associated with a political life dominated by parliamentary democracy, where key actors are parties, trade unions, and cooperatives, alongside which manifest employer associations, property owner groups, social clubs, or parish organizations.

In the early 2000s, a series of reconsiderations were made regarding the system discussed, in line with new realities, recommended by a new triumph of liberal ideas: capitalism as a political and economic aggregate, the enterprise as a creative matrix of wealth, and the individual accompanied by free initiative had come to compose the dominant credo, against the backdrop of exhaustion of socialism/socialisms' resources, distancing from the specific problems of contemporary society.

Thus, Anthony Giddens, Bodo Hornbach, and other theorists imagined a shift towards the center of social democracy with the replacement of "class struggle" with the dynamics of "included-excluded" (generally renouncing Marxist theses as the doctrinal basis), labor market flexibility, engaging employees in the ongoing effort to achieve profit and assume risks, abandoning the passive Welfare State model in favor of the Investor State, where each person is called to get involved in the organization of a "Welfare Society."

In the order of ideas presented, reformed socialism becomes a system capable of changing from within, as demonstrated during the period when it definitively distanced itself from traditional socialism (the first interwar decade)—it accepted pluralism and rational dialogue from the "bourgeois society" in political terms, the logic of the market, and the pursuit of maximum monetary gain in economic terms, reserving the state a primary role in the distribution sphere, favoring "fiscal revolution" to reduce income and wealth inequalities among individuals, instead of "social revolution"—as well as in the years when it built the policies of the "new center" (the first decade of the current century), pragmatically, detached from any radicalism, with the state positioned as the main guarantor of social justice, promoting consensus as a mechanism of public life, encouraging innovation and individual initiative.