09 May 2017

Social Capitalism, Capitalism, and Social Capital

Social Capitalism - a socially minded form of capitalismSocial capitalism is best understood as classic capitalism with a focus on improved social outcomes, or at least economic social responsibility. You could think of this as egalitarian economic practices that aim to ameliorate the social problems caused by capitalism, primarily inequity.

Social capitalism is related or associated with the Third Way, the humanisation of capitalism, democratic capitalism, and social democracy. This would describe a practical mid-way point between “late-form capitalism” and “socialism”.

What is Social Capitalism?

Social Capitalism can be defined as a socially minded form of capitalism, where the goal is making social improvements, rather than focusing on accumulating of capital in the classic capitalist sense. It is a utilitarian form of capitalism with a social purpose.

Does social capitalism relate to social capital?

Yes. In classic capitalism the factors of production are land, labour, and capital. But social capital does not match the definition of capital since it is not privately owned and cannot be readily traded. Ownership is embedded in social relationships between people, so is not owned by any one person. And social capital also relies on context (and even chance) to be manifested so cannot be readily exchanged for economic outcomes.

I’m not saying that social capital isn’t capital, otherwise I wouldn’t be using the term at all. Social capital clearly has productive benefits that I am happy to call capital. But classic capitalism does not account for the exchange and trade of intangibles such as those involved in social capital.

While classic capitalism clearly uses the factors related to social capital it does not place a value on it or attempt to account for it.

Social capitalism recognises social capital as a factor of production. For this to happen society must reorganise itself to account for and value the determinants of social capital.

The capitalist definition of a social capitalist

In one sense a social capitalist is a person who invests in building social capital. They build a network of relationships because they believe that social capital is the most important factor to an organisation or individual’s success.

But that isn’t social capitalism as I understand it.

The definition of a social capitalist for a new paradigm

If someone elects to direct any portion of labour or capital toward the public good, via the private or public market, they are a social capitalist.

An organisation engages in social capitalism when it makes a profit and is for all purposes capitalist, but acts toward a social benefit in its end product, hiring, investing, or production, even if it’s a traditional for-profit company.

In this way, social capitalism is not a top-down regulation of capitalism for the social good. It is a deliberate choice made by individuals to promote equality, fairness, and justice for all. It is a choice to improve societal and environmental outcomes for the betterment of all, including future generations. It is a value system, not an economic or political system.

What does social capitalism look like?

It is not socialism, and it is not capitalism. It is not charity nor is it philanthropy. It is about directing capital towards the common benefit via markets as individuals and collectives.

It is about solving social issues and making a profit, and has an ideology of liberty, equality, and justice.

Liberty because all action is elective, equality because anyone can be a social capitalist and no group is excluded from its benefits, justice because it is moral and ethical to care for the public good, and utilitarian because its ends are ethically-based happiness for the many.

Social capitalism is about:

  • Non-profit companies working to solve a social or environmental issues, or redirecting profit back to the public good.
  • For-profit companies that choose improved social and or environmental outcomes even when it doesn’t maximise profit. And for-profit companies that redirect some profit back to the public good.
  • Investment in companies that are socially and or environmentally responsible, or at least those that do not create social or environmental problems or exploit these for profit.
  • Working for or with companies that are socially and environmentally ethical and care for the public good.
  • Actively seeking out and purchasing products from companies that are socially and environmentally ethical and care for the public good while boycotting companies that do not.
  • Actively talking about and sharing information about ethical companies to encourage others to engage with or buy from them.
  • Actively sharing information about unethical companies to discourage others from engaging with them.
  • Valuing people for more than their labour or profit they can make a company. It is about creating a positive empowering culture that allows people to be happy and reach their potential.
  • Replacing short-term goals that result in exploitation with long-term goals that support investment, growth, and sustainable prosperity.

Some other definitions for clarity

Socialism describes an economic and social system with social ownership of the means of production. Social ownership may refer to forms of public, collective or cooperative ownership, or to citizen ownership. There are many varieties of socialism – some that are completely different to capitalism and some that have monetary prices, factor markets and in some cases the profit motive.

Capitalism is an economic system based on private ownership of the means of production and their operation for profit. The key characteristics of capitalism include private property, capital accumulation, wage labour, voluntary exchange, a price system, and competitive markets. Common criticisms of capitalism include social inequality; unfair distribution of wealth and power; materialism; repression of workers and trade unionists; social alienation; economic inequality; unemployment; and economic instability. Capitalism is inherently incompatible with the democratic values of liberty, equality, and solidarity.

Social democracy is an ideology that supports interventions to promote social justice within a political democracy and capitalist economy. It involves measures for income redistribution and regulation of the economy for the interest of everyone in society. Social democracy aims to create the conditions for capitalism to lead to greater liberty, equality, and solidarity.

Democratic socialism is political democracy with either social ownership of the means of production or democratic management of economic institutions. Democratic socialists are committed to systemic transformation of the economy from capitalism to socialism whereas social democracy is supportive of reforms to capitalism. As socialists, democratic socialists believe that the systemic issues of capitalism can only be solved by replacing the capitalist system with a socialist system; by replacing private ownership with social ownership of the means of production.

Communism is a socioeconomic order structured upon the common ownership of the means of production and the absence of social classes. The idea is to share all economic and material products between everyone in society so that all may benefit from everybody’s work.

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Comment List

  • Vicente E. Arrebola February 15, 2019

    With the wave of progressive Democrats now in Congress, the old debate between socialism and capitalism has taken center stage in our national discourse. Unfortunately, and as is often the case, the hyper rhetoric used by both sides of this argument fails to educate, and mostly confuse, the citizens of our country. Those that support capitalism regularly cite the failed economies of Cuba, Venezuela and other socialist/communist countries as examples. Progressives first, and often only, speak of the need to “tax the rich” in order to pay for universal healthcare and to provide free/affordable childcare and education for all citizens. While these statements, on their own, are or may be valid, they are usually made in a vacuum. The omission, whether accidentally or by design, of comparative examples and fully developed explanations, results in the misinformation of the citizenry on this hot topic. It behooves progressives to use the real and tangible examples of countries such as Germany, Sweden, Norway, Denmark and the Netherlands, among others, to bolster their position and debunk the either/or argument of those that favor capitalism. In these Western European countries, the means of production, as well as other business entities, are privately owned, for-profit enterprises whose business plans are not set by a central government bureaucracy. However, the government of these countries, using their regulatory and taxing authority, provide for the general welfare of its citizens and the economic welfare of the country. These societies are thriving and its citizens enjoy a high standard of living. These outcomes can be attributed to the success and profitability of their privately owned business enterprises, and to the social policies established by government which are funded by, and benefit, all of the citizens. Perhaps it is time to stop speaking about “socialism” and start touting “social capitalism” as implemented in these countries. This is something that local, state and national elected officials, or those aspiring to be, need to educate themselves in, explain to the citizens and make part of their position papers and plans.

    Reply
    • Lee howell June 6, 2019

      Those countries you write about , Germany , etc….depend on the goose that lays the golden eggs ( capitalism or market economies ) to create the wealth. There is nothing to Tax ( at 70-90 percent } or Redistribute if it is NOT First Created. Socialism like communism kills the Goose ( capitalism ) and the leaders at the top get all the wealth. Democratic Socialism has to replace Self-Ownership and Self-Interest with Collective Ownership and Collective Interests. It destroys the SELF ( individual ) and allows the State to take complete control….misery

      Reply
      • Vicente Arrebola June 6, 2019

        Thank you so much for your comments. I could not have made my point more clear. Those countries that I wrote about, and you commented on, have a capitalist/market economy system that creates wealth. Their governments, who are freely elected by its citizens, use their taxing and legislative powers to distribute a large chunk of that created wealth for the benefit of all the citizens. Some of the countries you mentioned, such as Germany, even require that worker unions be represented on the Board of Directors of those private enterprises. And, as I am sure you know, by almost all indicators, the citizens of those countries enjoy a higher standard of living than us in the USA.
        Thank you again for making my point more clear and understandable.

        Reply
  • James Roberts May 25, 2019

    I agree wholeheartedly with this. So much so that I plagiarized part of it for a comments section entry on Medium. I hope you don’t mind. You write so well on the topic. Thanks.

    Reply

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