Should the Left Embrace Capitalism Today?

Ajith Rajapaksa

As we know, the primary aspiration of leftists has always been the establishment of a socialist society. In contrast, right-wing ideologies aim to construct a capitalist economic system. Now that a group claiming to be socialists and Marxists, who have fought for their ideals over a long period, holds state power in Sri Lanka, a just question arises: Will the new government operate under socialism or capitalism?

The key ministries of the new government such as finance, economy, defence, foreign affairs, land, health, agriculture, labour, industries, ports, and transport are all under the control of this leftist group. Similarly, in 1970, a leftist coalition composed of Marxists held key cabinet positions in the United Front government formed with the Sri Lanka Freedom Party. Notably, the leader of the Lanka Sama Samaja Party, Dr. NM Perera, served as the powerful Minister of Finance. Despite the coalition’s small size, the global socialist influence, particularly from the Soviet Union, provided significant space to implement socialist economic policies. At that time, the leftist group was represented by educated, intellectual individuals from the upper-middle class, often Western-educated. However, their initiatives to uplift the local economy through leftist policies were unsuccessful, leading to a significant food crisis, commodity shortages, increased unemployment, and economic stagnation. Consequently, the capitalist-oriented United National Party, advocating for an open-market economy, gained significant power in 1977, securing a two-thirds majority.

Now, 47 years later, the National People’s Power (NPP), led primarily by the Janatha Vimukthi Peramuna (JVP), a party that fought for decades against capitalism, American imperialism, and open-market systems, has come to power. This raises the question: Can a party rooted in socialist policies successfully recover a country from the aftermath of an economic collapse? To answer this question it is important to reflect back on the history of socialism and capitalism.

The Rise and Decline of Socialism

 Powered by FatChilli AdsSocialism first became a reality in the Soviet Union and later spread across Eastern Europe, China, Cuba, North Korea, and Vietnam. This expansion of socialism coincided with a Cold War between the United States, promoting global capitalism, and the Soviet Union, which sought to advance socialism. Over time, however, the Soviet Union shifted from promoting global socialism to focusing solelon protecting its own socialist system, halting the worldwide spread of socialism.

Stalin’s rejection of the Marxist belief that socialism cannot sustain itself without a global socialist bloc marked a turning point. Under his rule, the Soviet Union deteriorated into a brutal dictatorship, where dissenters were imprisoned, and many of the leaders who originally contributed to the 1917 revolution were executed. Even Leon Trotsky, a former Soviet defence minister who fled to Mexico, was assassinated by Stalin’s agents. During Stalin’s reign, over a million people were killed, and millions more died of famine. As the socialist economy weakened, so did smaller socialist economies dependent on the Soviet Union.

Meanwhile, under American leadership, capitalism expanded globally. The eventual collapse of socialist economies in the Soviet Union and Eastern Europe led to mass uprisings and their ultimate subjugation to capitalism. Although countries like Cuba and North Korea maintain socialist economies through harsh dictatorship, their citizens endure severe economic hardships without democratic freedoms.

China and Vietnam, while retaining the Communist Party’s authoritarian control, have embraced capitalism over socialism. Capitalism inherently concentrates wealth and power among a small elite, who exploit the labour of others for profit. While this system provides certain benefits, such as employment opportunities, housing, and improved living standards, it simultaneously widens the gap between the wealthy elite and the working class. The relentless pursuit of profit often sacrifices human values, safety, health, the environment, and freedom.

For example, in China, workers producing goods for global markets, including Europe and America, often face harsh conditions without independent trade unions or free media. Workplace safety and health standards are frequently disregarded. Additionally, a new class of industrial billionaires has emerged in collaboration with Communist Party officials. While China’s capitalist economic policies have lifted millions out of poverty, they have also created vast economic inequality. Without these reforms, the Chinese Communist Party might have faced the same fate as the Soviet Union. Thus, the question remains: can capitalism, even under a leftist guise, truly address the inequalities it perpetuates?

Capitalism

As an economic system, capitalism is widely regarded as being more efficient and productive than socialism. During the early stages of establishing the Soviet state, Lenin argued that economic development should first occur through a capitalist market economy. He contended that a foundation was necessary to transition from a less economically developed and socially backward state towards socialism by increasing production. Lenin believed Russia was not yet ready for socialism and advocated for state capitalism as a transitional phase. He considered the economic model in Germany at the time to be particularly suitable.

At this time, the economy faced severe difficulties, and food was distributed through rationing systems. However, hardliners like Trotsky opposed this approach, advocating for an uninterrupted revolutionary trajectory (theory of permanent revolution) directly toward socialism, rejecting the capitalist economic framework. Despite the gradual economic growth achieved under socialist policies in the Soviet Union, sustaining this progress proved challenging. Bureaucracy, inefficiency, lack of competition, and global pressures became increasingly severe. The economy stagnated, and inflation and shortages became widespread. Similarly, centralized economic planning was highly inefficient. For instance, attempts by the central government to regulate bread production for the entire city of Moscow often led to either overproduction or failure to meet demand. In contrast, in Paris, where a capitalist free market operated, independent private bakeries successfully met the demand for bread. Neither the government nor political parties intervened in determining the quantity of bread required; instead, bakers accurately gauged the necessary amount based on supply and demand. This small example is sufficient to understand the inefficiencies of centralized socialist economic systems compared to the competitive open market. Advocates of capitalism argue that market-based economies consistently outperform centralized planning.

Criticisms of Capitalism

While capitalism has enabled significant economic growth, it has also created a vast gap between the rich and the poor. Wealth became concentrated among a small segment of society, while the living conditions of ordinary working people did not improve proportionally. In 1917, the average per capita income in the United States was around $7,500, rising to over $82,000 by 2023. Similarly, the gross national income increased from $9.8 billion to $27 trillion. However, in the U.S., the wealthiest 1% own over 30% of the nation’s wealth, while the bottom 50% own only about 2.5%, primarily dependent on weekly wages. This disparity extends globally, where the wealthiest 1% own double the assets of the remaining 99% of the world.

According to World Bank data, 44% of the global population lives on less than $7 a day, while 8.5% survive on less than $2.5 a day.

Scottish economist Adam Smith, regarded as the father of the modern capitalist market economy, proposed a competitive market driven by supply and demand. While this system was initially promising, unrestrained competition and the pursuit of profit led to monopolies, multinational corporations, stock markets, financial derivatives, and bond markets. These developments highlighted capitalism’s darker aspects, which Smith did not foresee. Everything became commodified, intensifying competition and exploitation, which contributed to severe economic fluctuations and global conflicts.

What is the Alternative?

Socialism, while not focused on wealth generation, emphasizes equality, coexistence, and human welfare. Although it proposes a state-centred system for the equitable distribution of wealth, its ability to develop the economy and generate wealth has proven challenging. A free-market economy is essential for economic growth, necessitating a new economic model that combines free markets with equitable wealth distribution.

Today, global capitalism has reached its zenith and faces limitations. The crisis has evolved into a geopolitical, environmental, and social one, potentially leading to global conflicts. Even the United States, long regarded as the world’s most powerful state, faces significant challenges. The universal values it once championed, such as freedom, democracy, and human rights, are now inconsistent. In contrast, China, which poses a challenge to the U.S., also fails to uphold these values, focusing instead on its own economic and political agenda.

The global challenge lies in creating a new market economy that balances production and equitable wealth distribution, addressing the failures of both capitalism and socialism.

Yanis Varoufakis’s Perspective

Dr. Yanis Varoufakis, a Marxist intellectual and leader of the European democratic movement (DiEM25), claims that there is no longer a competitive free market. He argues that capitalism has ended, with global corporations like Amazon, Facebook, YouTube, Netflix, Microsoft, Alibaba, Walmart, Google, and TikTok controlling the world’s data, algorithms, and software. This situation, according to Varoufakis, has created a new form of feudalism where we pay rent to these companies, similar to how medieval serfs paid rent to landlords.

Varoufakis advocates for a market without capitalism, emphasizing the need to dismantle exploitative capitalist interventions and build a technologically advanced, democratically liberal socialist society. He believes the left has failed to provide an alternative vision to capitalism’s crises and has consequently lost relevance. Thus, the global challenge is to move beyond monopolistic capitalism toward a democratic and equitable economic system.

Sri Lanka

The challenges mentioned above have a significant impact on small nations like Sri Lanka, yet the ability to address them is highly limited. Decisions are predominantly made by powerful global entities. Small nations often find themselves trapped within the power dynamics of these global hegemonies. Sri Lanka, too, is grappling with numerous such challenges today. The primary issue is how to achieve economic growth in a nation that has defaulted on its debt and is caught in a debt trap. What strategies should be adopted? What political ideology should be followed?

We live in a capitalist global market economy where powerful nations like the United States, Russia, India, and China compete against each other. Hence, it is evident that there are no socialist solutions to the current crises. This leaves the promotion of capitalism as the only path to some level of economic growth. This involves allowing various corporations, multinational companies, and capitalists to exploit local labour and markets. Investors must be encouraged to start businesses, and the market must be liberalized. Tax incentives and other support mechanisms will have to be provided. The public sector will need to be downsized, and the private sector expanded. This approach would create jobs, generate wealth, and relatively raise living standards.

However, alongside these benefits, capitalism also brings the consequences it inherently produces, which will need to be managed to some extent. The only alternative to this is convincing all citizens to agree to a minimalist lifestyle. However, citizens who are inherently accustomed to consumerism demand that their various desires be fulfilled by the state. What they demand is capitalism. Promoting capitalism is naturally aligned with right-wing ideologies. If leftists attempt to do the same, it often leads to distortions or catastrophic failures.

The National People’s Power (NPP), led by the JVP, currently faces this dilemma. Pursuing socialist projects could lead to economic collapse and alienate international investors, including the IMF. On the other hand, embracing capitalism risks alienating their cadre. Some Marxists argue that this reflects the JVP’s deviation from Marxist principles since its inception. They claim that the JVP has often leaned toward nationalism and even supported leaders who implemented capitalist policies under nationalist pretences.

Thus, it might not be too challenging for such a pseudo-Marxist party to embrace capitalism. A significant portion of its base, however, still clings to the socialist dream. These are the people who carry out tasks like putting up posters and organizing rallies. It is this base that could face disillusionment in the near future. Meanwhile, the NPP appears more likely to align with liberal middle-class ideologies rather than strictly adhering to its traditional cadre’s aspirations.

The next challenge is how to attract the bourgeois class, capitalists, managers, factory owners, and other stakeholders essential for implementing capitalism on the ground. This will require moving away from traditional support bases like farmers, workers, teachers and trade union leaders and building alliances with investors, entrepreneurs, and elites. Creating a business-friendly environment will become necessary.

These challenges make it clear that, in this era, Marxists have largely limited themselves to advocating for democratic reforms within capitalism rather than overthrowing it. True alternatives to capitalism are unlikely to emerge from economically and socially backward small nations like Sri Lanka. They are more likely to arise in advanced capitalist nations. Therefore, any hope for such an alternative lies in the future of large economic powers like India.

While the realization of such a society may take considerable time, it is vital for progressives in Sri Lanka to join forces with like-minded groups across the Indian subcontinent, where the vision for such a society appears more attainable.

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Ajith Rajapaksa, Should the Left Embrace Capitalism Today?, Colombo Telegraph, 2024-12-05.

https://www.colombotelegraph.com/index.php/should-the-left-embrace-capitalism-today/