Beyond capitalism and socialism

Of late, there have been some attempts to resurrect value of capitalism. Baulmol et al. (2008) argue that the basic tenets of capitalism such as incentives and entrepreneurship are still valid though capitalism is not a simple and undifferentiated form of economic organization. There are different classes of economies of capitalist countries:

• state-guided capitalism, in which government tries to guide the market, most often by supporting particular industries that it expects to be become “winners”;

• oligarchic capitalism, in which the bulk of the power and wealth is held by a small group of individuals and families;

• big-firm capitalism, in which the most significant economic activities are carried out by established giant enterprises; and

• entrepreneurial capitalism, in which a significant role is played by small, innovative firms.

After examining the merits and demerits of each type of capitalism, Baulmol et al. (2008) arrive at two conclusions: (a) incentives or rewards for activities conducive to economic growth are important for growth; and (b) entrepreneurs play a substantial role in the growth process. Wherever these conditions are fulfilled there is development irrespective of the type of economic system.

There are many similarities between capitalism and socialism. The most prominent of them is the idea of incessant economic progress. In the second half of the last century this idea had come under attack by environmentalists and critical theorists. Economics is in need of a new theory which solves the environmental and class related problems of economy while at the same time not restricting the further advancement of it.