Friday, January 21, 2005

"Socialism": Well, Alive and Thriving!!!

This is a continuation of my previous post... to have a relook at the much-criticised "socialist" economic model.

The fall of Berlin Wall, and the collapse of Soviet economy is widely described as the triumph of free-market capitalist economy over the flawed socialistic economy model (the fact that this connection is a pretty large leap of logic, is another story;0)... But such is power of this paradigm, that since then any information which contradicts this myth (e.g., when later Russia adapted the IMF-prescribed model of free markets, its economy went into even greater shambles), is forgotten, ignored, or at best, explained away as an exception.

Contrary to popular belief, the socialistic economies have been thriving, are competitive, and perhaps provide a better model of economic development than the free-market economies, as the data below shows.

While there is perhaps nothing wrong in the free-market capitalist economy (except that it is a contradiction in terms, as I had once pointed out earlier)[1], but there is a certain intellectual poverty in the blind belief that "one-size fits-all" - that one economic model is suited for all societies, irrespective of their unique history, local needs, cultural values, etc.

It is in this context, it is useful to study the The Scandinavian Socialist Model[2]. The Scandinavian countries - Sweden, Finland, Norway, Denmark, Iceland - are Socialist Welfare States, characterised by all those things which are nowadays seen as "primitive" and "backward" - high taxes, government subsidies, state interventions, etc.

The following is the global ranking of these countries - they feature in top 20 on all - on 5 indices of development:

1. GCI (Global Competitiveness Index): issued by World Economic Forum, and is based on a composite ranking of growth potential, business competitiveness, etc.

2. HDI (Human Development Index) : issued by UN which is a composite of education, per capita GDP, longivity, etc.

3. Gini Index: this a part of HDI, which ranks countries according income disparities in the society

4. IDC Information Society index: composit of computer/telecom penetration and e-nabled societal structrue etc.

5. Economist's Quality of Life Index: issued by The Economist's Intelligence Unit, and is a composite of 9 factors: material well-being, health, political stability, family and community life, climate and environment, job security, political freedom and gender equality.

Since the world - and definitely, India - has become quite "US-centric", I have color-coded the rankings of these countries and USA.

Think about it! - why do these facts never feature in main-stream media, are never discussed in public forums, are rarely taught in business schools or elsewhere?... and for that matter, why most of us never bothered to find out about these alternative economic models?!!!



Anonymous said...

I hope you are again iconizing US as the model of capitalism. All the other countries which are there in the table are also CAPITALISTIC. The comparison over a period of 40 years is also not so tenable. Say if you look at telecommunication. It was PM Rajiv Gandhi who changed the telecommunication scenario in the country. It is true that the country stagnated for long. The very fact that most of state PSUs are still facing huge losses is an example of the same.
And if you look at the Agency Theory perspective, the very existence of socialistic model cannot survive.
Another Management Dreamer

Madhukar said...

That is an interesting logic about Agency Theory!... if I understood correctly, the implication is that if theory cannot explain the facts/reality, then the reality must be flawed!! :0)

re the other "capitalist" countries in the list, if you study how their systems work, you will find that they are as similar to each other, as are human beings and whale (or bat) - all belong to the category of "mammals"... (in the same breath, must also mention that these "socialist" Scandenavian countries will also be as much different than North Korea, which is also "socialist")

and lastly, if you look at the data, even in telecommunications, then the number of installed phones had increased from 168k to 2800k between 1950 and 1980 (not '85).

I would rather look at the facts first before I dream up a theory...

srikar said...

Sir, as far as i know , the scandinavian countires score highly on HONESTY indices also. Comparing with India , our Nehruvian model of socialism and welfare state had limited success mainly because of stinking levels of corruption all around. I believe struggle for existence and limited wealth in india has lead people to run after more,through corrupt means. I feel somehow , enough wealth should be created through a capitalist model, where everybody ends up with food and good shelter and happy families. at this stage people should nt have reason to be corrupt as there is a sense of some financial security .And then the county should start moving more towards more of Welfare state model with high taxes, that can create a greater sense of overall security among all the citizens. this allows them to focus on more productive pleasures of life. this may sound childish , but i believe it works.
Anyway, please expalin the success of the scandinavian countries from socio-cultural perspective if possible.

Madhukar said...


in stead of repeating myself, there was something which I had written as a mail to some students, which they have posted on their blog. Have a look:

I don't think the issue is about socialism/capitalism, but of an economic model which suits our country. "socialism" worked well for India (if one looks at the actual growth which took place 1947-90, and doesn't go by media anecdotes)...

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