The Tao of Charity

Most people would agree that poverty is a big problem in our world today. Let's rethink this notion. Is poverty or wealth more problematic? Which causes more problems and harm to the world?

A poor man may commit petty theft because he doesn't have enough to eat. On the other hand, a rich man has the potential to commit white collar crime, steal more money and cause more damage than all the poor people in the world put together. The worst part is, the rich man steals because he is greedy, not hungry. It is the wealthy and powerful men of this world that are destroying our planet for the sake of profit. The rich and powerful kill thousands of  innocent people without hardly lifting a finger. How much harm can a poor man really do?

Poor people suffer, and their children suffer. Millions of children die just because they are born into poverty. For most people, this is a big problem. However, isn't it better to die than to be the walking dead? To be a zombie. To be a slave to money and materialism. The wealthy may seem like they aren't suffering or anywhere close to starving, but I'm sure some of their spirits and souls are starved to death.

There's so much talk about alleviating poverty. We've been trying for ages to help the poor. Unfortunately, no amount of aid, money, or volunteers seem to be enough to even make sure that people do not starve to death. Isn't this absurd in a world where so much of food is wasted everyday? It makes you think.

Yin and Yang of World Hunger by David Revoy

Wealth causes inequalities. It is in the nature of wealth that only a few can be wealthy, since one person's wealth depends on other people's lack of it. Our economical system is like a game of musical chairs - the scarcity is created as the law of economics states that the lower the supply, the higher the demand. There are not enough chairs for everyone, and there is only one winner. We cannot all be rich. Some must lose for others to win. Some must starve so others can stuff themselves with food. This is the yin and yang of world hunger.

Wealth causes poverty, and then tries to alleviate it. It is clearly not working. Philanthropists are basically wealthy people that give money to the poor. But maybe poor people wouldn't have to suffer so much if philanthropists didn't feed the hand that bites us. You see, wealthy people feed the system - the capitalistic system which bites us when we are the weakest or poorest. Wealthy people make a lot of money, and they spend a lot of money. Without wealthy people or the working class heroes, the cruel capitalistic system would come crashing down. Charity is not only about giving, it's about not taking so much in the first place.

So now that we've established that wealth is the main problem, not poverty; let's turn the tables. Let's help to save the poor rich people instead. The UN's new goal should be to alleviate wealth! But there's something all of us can do to help eradicate wealth. What? How? Don't be greedy! Only take what you really need. Most of the problems in our world today are caused by over-consumption. Over-consumption leads to environmental destruction and the suffering of countless people and animals. And who consumes the most? Wealthy people of course. So what can you do? Live simply, so others can simply live.

A central theme in Taoist philosophy is Wu-wei - to do without doing. We can sometimes do more (and less harm) by doing less. In fact, we may cause more harm and damage running around trying to save the world. Our intentions are good, but the outcome is damaging. Aid creates dependency. Wealth begets poverty. Many people aim to be rich with the good intention of then being able to help the less fortunate, but unfortunately it's a vicious cycle. A farmer friend of mine told me once to look at the tree. It just stands there and seems like it's doing nothing, but it contributes so much to this world without hardly moving. On the other hand, humans are busy running around trying to improve and make things better, but only to cause more damage. We can be more effective and contribute much more to the world through quiet contemplation and mindful actions. This is the Tao of charity.

Understanding Varieties of Capitalism

         Hall and Soskice’s (2001) The Varieties of Capitalism is one of the more influential frameworks created to explain national differences in economic performance and policy. It basically offers a functionalist or inductive view by observing the existing array of capitalist outcomes, mainly Germany and the United States, and then hypothesizes an explanation of why they look the way they do. According to Hall and Soskice (2001), existing capitalist outcomes depend on nations’ specific historical and cultural circumstances. For an example, during the 19^th century, the change from an agricultural based economy to industrialization created a new form of capitalism. Major historical events such as World War 1 and 2 also changed the existing capitalists systems by disrupting the structure of some countries’ political and economic institutions.

        However, one of the weaknesses of Hall and Soskice’s (2001) Varieties of Capitalism in my opinion is that one cannot make accurate and specific predictions about other countries because by merely observing a few countries, it is difficult to make specific predictions about other countries in the future.

Varieties of Capitalism

      Hall and Soskice (2001) identify several key attributes that distinguish capitalist systems. Asset specificity was pointed out as one of the key attributes that distinguish Coordinated Market Economies (CMEs) from Liberal Market Economies (LMEs). They posit that relationships are more likely to govern the manner in which actors organize their economic activity, when assets are specific to the goods and services that are produced (like in CMEs). On the other hand, when assets are more general – meaning when they can more easily be switched from producing one kind of good or service to another, arms length interactions govern (like in LMEs). However, not all the countries neatly fit into this CME – LME continuum. The countries that do not fit into this continuum such as Italy, France, Spain, Portugal, Greece and Turkey are placed into a third category called Mediterranean or Mixed Capitalism. They are distinguished by their recent histories of extensive state intervention and large agrarian societies. Hence, the three main key identifications that distinguish capitalist systems from one another are identified by Hall and Soskice (2001) as asset specificity, the level of government intervention and the importance of the agrarian sector. Hall and Thelen (2005) further emphasize the distinction between LMEs, where firms rely heavily on competitive markets to coordinate their endeavours, and CMEs, where more endeavours are coordinated strategically. According to Schmidt (2004), there are four varieties of capitalism: the liberal capitalism of the United States and the United Kingdom, the coordinated capitalism of countries such as Germany, the Netherlands, Sweden and Denmark; the state enhanced capitalism of Italy, France and Spain, and the hybrid capitalisms of Central and Eastern Europe. Schmidt (2004) suggests that these differences are related to variations in firms’ levels of exposure to the financial markets, the bases of firm ownership and control, the nature of inter-firm relations, the organization of labour-management relations, the patterns of production and innovation, and the role of the state in the economy.

Identifying the Key Actors

        Actors are very important to the structure of any nation’s economy. Therefore identifying which actors matter the most will allow us to then observe how these actors influence the type of capitalist system in a particular country. According to Carney (2007), actors representing an economy’s main factors of production – land, labour and capital, are clear candidates. The importance of labour and capital to capitalism is hardly questioned by many people; however, some may view the relevance of farmers with scepticism. Carney argues that farmers have played an important role in determining the structure of the contemporary American financial system, the world’s largest economy (2007). Other than that, farmers are also an important player in China’s economy, which is likely to become the world’s largest economy in the next few decades. Also in view of their historical importance to OECD economies and their contemporary relevance to China’s economy and to other developing countries, to ignore farmers would be like ignoring the elephant in the room.     

        Therefore, farmers can be viewed as the main actors representing land. Actors representing capital on the other hand can be viewed as owners of firms both small and large. So to put the equation together, it can then be concluded that the critical actor for the development of the financial system and the structure of capitalism are the owners of large firms, since it is this actor more than any other that favours the development of equities markets.

        Labour, farmers and owners of small firms all prefer an economy organized around specific assets (e.g. long-term relationships, as with lending from the bank). Owners of large firms on the other hand are more likely to push the economy in the direction of general assets (e.g. arms-length interactions, as with equities markets).

            When owners of large firms control politics, they are likely to try and reduce transaction costs of external financing, and may seek to try and control it in order to have it for themselves. Hence, government intervention will be minimal, and agrarian financing will be low. However, when farmers and labour form coalitions, government intervention will be maximal and agrarian financing will be high. Yet another scenario is when labour wields exclusive political power. When this happens, a centralized, government- controlled banking system emerges. Labour seeks to control the financial system through nationalized, government run-banks in order to direct lending to specific firms and industries in exchange for high and stable employment.

            Therefore, financial and capitalist system outcomes depend primarily upon the coalitions formed between farmers, labour, and owners of large firms. Carney further reminds us that these actors do not necessarily form coalitions to achieve specific financial system outcomes; rather, they form political power-sharing coalitions from which financial and capitalist structures emerge (2007).

Varieties of Capitalism – An outdated approach?            

      

         Some question whether in this era of globalization, innovation and change, it still makes sense to speak of distinctive varieties of capitalism. “Are changes in the international economy enforcing institutional convergence on the developed economies?” (Hall & Thelen, 2005). Some analysts also believe that most political economies are becoming hybrids. Is the varieties of capitalism approach then outdated? In The Evolution of Varieties of Capitalism in Europe, Hall argues that the framework of varieties of capitalism is still functional in this era of globalization as there does not necessarily have to be rigid categories of which type of capitalism a nation falls into, rather the varieties of capitalism can help us to understand the dynamics of political and economical structures and how they create capitalist structures (2007). 

           According to Schmidt (2004), capitalist systems are becoming increasingly similar to resembling each other in their diversity. As all countries move toward greater market orientation, it seems like as if they are all coming together. However, Thatcher (2004) argues that nations maintain different varieties of capitalism in the face of economic globalization because of diverse domestic settings. I agree with this point of view because there are many other factors other than economic pressure that influence the varieties of capitalism in different countries. Schmidt posits that this convergence is related to a number of pressures: economic, institutional and ideational (2004). Increasing international competition in capital and product markets and the move from manufacturing goods to providing services is an example of the economic pressures faced in this era of globalization. All these bring change to national capitalist systems. Even China now is slowly being forced into a capitalistic system because of all the economic pressure upon it. In a comparative analysis done on national identity and varieties of capitalism, it was found that political and economic institutions that adapt to the challenges and changes of globalization are by far the most successful capitalists systems (Campbell, Hall & Pedersen, 2006). For example, Denmark has been identified as the most advanced capitalist country since the mid 1980s. “The Danish political and economic institutions facilitate bargaining and consensus building in ways that have enabled the state, businesses, and labour unions to adapt to the challenges of globalization” (Campbell, Hall & Pedersen, 2006). Denmark’s small population size, homogenous population and strong national identity is also part of the reason that it has such an adaptable and flourishing national political economy.  

       In my opinion, it is unfair to conclude that the varieties of capitalism is outdated and cannot be used to understand contemporary capitalist systems because the varieties of capitalism gives us a framework and structure which can be built upon in order to accommodate to the changes that globalization has made on political and economic institutions.

Conclusion

        

       In order to make a conclusion as to whether there are fundamental differences in national political economies conditioning economic performance and social well-being, one has to observe a nation’s specific historical and cultural circumstances. Variations in firms’ levels of exposure to the financial markets, the bases of firm ownership and control, the nature of inter-firm relations, the organization of labour-management relations, the patterns of production and innovation, and the role of the state in the economy are also important factors that should be taken note of. Identifying the key actors is also of utmost importance. Globalization has also brought many challenges and changes that have affected capitalists structures. Globalization also has added pressures: economic, institutional and ideational to political and economic structures which in turn influences the type of capitalist system.

References

Campbell, J. L., Hall, J. A. & Pedersen, O. K. (2006). National identity and the varieties of capitalism: the Danish experience. Studies in Nationalism and Ethnic Conflict, 3.

Carney, R. (2007). Deducing varieties of capitalism. Munich Personal RePEc Archive, 5145.

Hall, P.A. (2007). The evolution of varieties of capitalism in Europe. Source unknown.

Hall, P. A. & Soskice, D. (2001). Varieties of capitalism: the institutional foundations of    comparative advantage. Oxford University Press.

Hall, P. A. & Thelen, K. (2005). Institutional change in varieties of capitalism. International Sociological Association.

Schmidt, V. (2004). Capitalism and society. Transatlantic tensions from conflicts of interests to conflict of values colloquium.

Social Enterprise as a Mediator between Two Rivals – Capitalism and Charity.

Imagine capitalism and charity as two distinct personalities. Capitalism is a greedy fat cat dressed in a corporate suit, and Charity is a peace-loving love dove on an altruistic mission. Capitalism’s primary motivation is to gain the highest profits. On the other hand, Charity’s main drive is to change the world for the better. Now, do you reckon they are friends or rivals? 

 

Greedy fat cat

Peace dove

The former’s mission is profit, and the latter’s mission is helping others and preserving our planet. Until recently, capitalism and charity have been seen as rivals rather than friends. Corporate Social Responsibility or CSR has led to some change in perception. In the light of CSR, corporations are given a second chance in redeeming themselves, a second chance to show that they care not only about making the highest profits. However, their claims of caring for us and the environment are soon revealed to be nothing more than pretentious campaigns to improve their image in the eyes of the world.  

The evils of capitalism are not unknown to us. Capitalism is often portrayed as a ruthless entity which is notorious for exploiting people and destroying our planet in the name of profit. Charity, on the other hand, is no angel herself. Charity has often been criticised of doing more harm than good by creating strong dependencies on external money or installing technology where local communities have neither the expertise nor money to fix it when it inevitably breaks down. As it is becoming more obvious to us that neither capitalism nor charity can deliver the solutions to the world’s problems by itself, another path emerges that converges capitalism and charity – social enterprise. Social enterprise is the mediator that truly brings capitalism and charity together for the benefit of everyone. This movement includes for-profits whose main mission is social and positive change, and non-profits that use business models to pursue their mission. Rather than maximizing shareholder value, the primary aim of social enterprises is to generate profit to further their social and/or environmental goals.