Saturday, 22 October 2011

Sticking up for Capitalism

Capitalism "An economic and political system in which a country's trade and industry are controlled by private owners for profit".

Socialism: "Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy"

I've been somewhat annoyed in the past few weeks, as I'm sure many people have, that the “occupy Wall Street" and “occupy the London stock exchange" are being seen as purely anticapitalist. Whilst the worldwide recession was no doubt due to an unregulated capitalist system, where a few had control over the many, and the wealth is held disproportionately by the few.But I think there are situations in which capitalism be a positive system, and that really depends on how the company works, and who the profits benefit.

'Shared Interest'

One of these examples of positive capitalism is the rise in microfinancing. This is a situation in which companies such as “Shared Interest" lend small amounts of money to businesses in developing countries, to enable them to start up businesses, develop businesses further, or offer training and loans for equipment to enable them to run more efficiently and with a greater profit margin. So many ways they are like banks, but with a number of important differences.

1) The company is owned by its members, the members have an equal vote regardless of their account size, meaning that the company doesn't become controlled by a few shareholders and this prevents collusion between the heads of the organisation and its shareholders.

2) Because its members are at shareholders, any interest gained goes directly back to the people who invested in it. Where is in normal banks the vast majority of the profits go back to a limited number of shareholders because those who bank with them are not shareholders.

3) It is an ethical company, and only invests in fair trade, mostly small businesses, which are ecologically sustainable. It has a social conscience, investing in businesses for people who would otherwise not be able to work such as disabled people and women. They invest in areas of the world which are sometimes dangerous such as the Democratic Republic of Congo, enabling people to make money who would otherwise not be able to.

4) It loans responsibly to businesses, not loaning more than they might be able to pay back after a careful evaluation of the businesses needs.

So this all sounds quite like socialism, but the businesses are run for profit, and that profits goes back to the members who are shareholders, it goes to the businesses themselves and the people who work for the business. And any extra profit that Shared Interest gains, is put back into training, and further investment, and in grants to companies who are in financial difficulty. A lot of the places in which they invest suffer environmental damage in the form of floods, or polluted water, and these grants are given to help the businesses back on their feet.

So everything in the company is put towards generating profit, it's just that that profit don't benefit the few but everyone. The members benefit by sharing in the profit, and in interest rates, the businesses themselves, and their owners benefit. But all so everyone who works in the business benefits because they are run according to fair trade policy. And because the businesses are environmentally ethical, the environment benefits as well.

This doesn't mean, of course, that you get much interest or profit as a shareholder. But I think that's really how it should be. Those who work in shared interests and the board of directors do not receive huge bonuses or salaries, as happens in banks. The businesses that they lend to you not scoop off a large part of the profit, as happens in large corporations, and the members who are the shareholders also don't make vast amounts of money as happens in most investment banking. But everyone makes some, everyone makes enough, and that is what I think the me is at the heart of this new movement around the world. People are asking the complete equality, just for the more fair society. And he think capitalism used ethically can help bring that about.

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