The Blanket

The Blanket - A Journal of Protest & Dissent

Capitalism and Socialism

Liam O Ruairc • 5 October 2005

Every year since 1990, the United Nations publishes its Human Development Report. It contains the most authoritative data on the state of the world. These reports are available online: Based on those reports (referred to by year, followed by page), what does our world look like?

We live in a capitalist world. Capitalism is a very dynamic system that produces a tremendous amount of wealth. Never has the world been so rich.

Global output increased more than eleven fold between 1850 and 1960, from $611 billion to $6,936 billion in 1993 dollars. The world's population more than doubled during the same period, rising from 1.2 billion in 1850 to 3 billion in 1960. The net outcome: nearly a fivefold increase in per capita income. During the same period, the goods and services produced in the industrial countries expanded nearly thirty fold, from $212 billion to $6,103 billion (1996, 12)

Between 1960 and 1993, global income increased from $4 trillion to $23 trillion, and per capita income more than tripled. (1996, 12) If trends continue, it should grow form 23 trillion in 1993 to 56 trillion in 2030. (1996, 36)

Global GDP increased nine folds from $3 trillion to $30 trillion over the past 50 years. (1999, 25)

It has allowed a huge development of consumerism. Private and public consumption expenditure reached $24 trillion in 1998, twice the level of 1975 and six times that of 1950. In 1900, real consumption expenditure was barely $1.5 trillion. (1998, 1)

But capitalism has made the world a very unequal place.

The people living in the 20% richest countries in the world have 86% of global GDP (global income), 82% of world export markets, 68% of Foreign Direct Investment. (1999, 3)

The richest 1% of the world received as much income as the poorest 57%. The richest 10% of the US population (around 25 million people) have a combined income greater than that of the poorest 43% of the world population (around 2 billion people). (2001, 19; 2003, 39)

The poorest 40% of the world's population account for 5% of global income, the richest 10% account for 54%.(2005, 4)

The 20% of the world's people in the high income countries account for 86% of total private consumption expenditure. The poorest 20% for a mere 1.3%. The richest fifth consume 45% of all meat and fish, 58% of total energy, 65% of electricity, 84% of all paper, have 74% of phone lines and own 87% of the world’s vehicle fleet. The poorest fifth consumes 5%, less than 4%, 1.1%, 1.5%, and less than 1% of all this. (1998, 2)

The poorest 20% of the world's people saw their share of the global income decline from 2.3% to 1.4% in the past 30 years, meanwhile the share of the richest 20% rose from 70% to 85%. (1996, 2)

Capitalism not only creates inequality, but it increases it both between and within countries. The income gap between the richest countries and the poorest countries was a ratio of 1:3 in 1820. This increased to 1:7 in 1870 and 1:11 in 1913. In 1960 it was 1:30 and in 1990 1:60. In 1997 it was 1:74. (1999, 3)

Measured at the extremes, the gap between the average citizen in the richest and in the poorest countries is wide and getting wider. In 1990 the average American was 38 times richer than the average Tanzanian. Today the average American is 61 times richer. (2005, 37)

A Zambian today has less chance of reaching thirty years of age than someone born in England in 1840. (2005, 4, 26)

A study of 77 countries with 82% of the world's population shows that between the 1950s and the 1990s, inequality rose in 45 of those countries and fell in 16 countries. (2001, 17)

Inequality within countries has been increasing over the last 30 years. Among the 73 countries with data (and 80% of the world's people), 48 have seen inequality increase since the 1950s, 16 have experienced no change, and only 9 (with 4% of the world's people) have seen inequality fall. (2002, 20)

Between the 1980s and the late 1990s inequality increased in 42 of 73 countries with complete and comparable data. Only 6 of the 33 development countries saw inequality decline, while 17 saw an increase. "In other words, within national boundaries, control over assets and resources is increasingly concentrated in the hands of a few people." (2003, 39)

Inequality is on the increase in countries which account for 80% of the world's population. (2005, 6)

Between 1979 and 1997, US real GDP per capita grew 38%, but the income of a family with median earnings grew only 9%. So most of the gain was captured by the very richest people, with the incomes of the richest 1% of families growing 140%, three times the average. The income of the top 1% of families was 10 times that of the median family in 1979 and 23 times in 1997. (2002, 20)

The USA has the same infant mortality rate as Malaysia, a country with an average income one quarter that of the USA. And the Indian state of Kerala has an infant death rate lower than that for African Americans in Washington DC. (2005, 58)

At the end of the 1970s, the richest 10% of the UK population received 21% of total disposable income. Twenty years later, it received 28%, nearly was much as for the entire bottom half of the population. Average annual incomes for the richest 20% increased at about ten times the rate for the poorest 20%. (3.8% compared with 0.4%) The UK's GINI coefficient climbed from 25 to 35 by the mid-1990s, one of the biggest increases in inequality in the world. (2005, 68)

As a system, capitalism does not work for the vast majority of the world's population; it fails to provide for their basic needs.

Of the 4.4 billion people in developing countries, nearly three fifth lack basic sanitation. A third have no access to clean water. A quarter do not have adequate housing. A fifth no access to health services. (1998, 2)

More than one billion people lack access to safe water. (2005, 24) More than 2.6 billion lack access to improved sanitation. (2005, 24) More than 850 million people, including one in three preschool children suffer from malnutrition. (2005, 24)

One in five people in the world, more than one billion, still survive on less than $1 a day in abject poverty. (2005, 24) "Living on $1 a day does not mean being able to afford what $1 would buy when converted into a local currency, but the equivalent of what $1 would buy in the United States, a newspaper, a local bus ride, a bag of rice." (2003, 41)

Another 1.5 billion people live on $1-2 a day. (2005, 24) "One fifth of humanity lives in countries where many people think nothing of spending $2 a day on capuccino. Another fifth of humanity survives on less than $1 a day and live in countries where children die for want of a simple anti-mosquito bed net." (2005, 3)

There are 854 million illiterate adults, 543 million of them women, 325 million children (one in seven) out of school at primary and secondary levels, 183 million of them girls. (2001, 9) More than one billion people live without adequate shelter, sanitation, electricity, and there are 100 million people homeless sleeping in the street. (1996,24)

But capitalism allows a tiny minority to accumulate a vast amount of wealth.

The 350 largest companies in the world account for 40% of global trade and their turnover exceeds the GDP of many countries.

The turnover of General Motors ($168.8 billion) exceeds that of the GDP of Denmark ($146.1 billion).
The turnover of Ford ($137.1 billion) exceeds the GDP of South Africa ($123.3 billion).
The turnover of Toyota ($111.1 billion), Exxon ($110 billion) and Royal Dutch/Shell ($109.8 billion) exceeds the GDP of Norway, Poland and Portugal ($109.6, $92.8, and $91.6 billion respectively).

The turnover of IBM ($72 billion) is greater than that of Malaysia ($68.5 billion). The combined assets of the top five corporations ($871.4 billion) is greater than that of the combined GDP of South Asia ($451.3 billion), Sub-Saharan Africa ($246.8 billion) and least developed countries ($76.5 billion). (1997, 92)

Between 1989 and 1996 the number of billionaires increased from 157 to 447. Today the net wealth of the ten richest billionaires is $133 billion, more than 1.5 times the total national income of all the least developed countries. (1997, 38)

The world's 200 richest people more than doubled their net worth in the four years to 1998, to more than $1 trillion. The assts of the top three billionaires are more than the combined GNP of all least developed countries and their 600 million people. (1999, 3)

The world's 225 richest people have a combined wealth of over $1 trillion, equal to the annual income of the poorest 47% of the world ($2.5 billion). It is estimated that the cost of achieving and maintaining universal access to education for all, health care for all, reproductive health care for all women, adequate food for all and safe water and sanitation for all is roughly $40 billion a year (0.1% of world income). This is less than 4% of the combined wealth of the 225 richest people in the world. (1998, 30)

The material resources to end poverty and inequality are there.

To provide universal access to basic social services and transfers to alleviate income poverty with efficient targeting would cost roughly $80 billion. That is less than 0.5% of global income and less than the combined net worth of the seven richest men in the world. (1997, 112)

Redistributing 1.6% of the income of the richest 10 percent of the global population would provide the $300 billion needed to lift the one billion people living on less than a dollar a day out of extreme poverty. (2005, 4)

However, meeting the basic needs of the world's population is not a priority for capitalism.

The annual expenditure necessary to provide basic education for all around the world is $6 billion. In comparison, the annual expenditure for cosmetics in the USA is $8 billion.

Annual expenditure to provide water and sanitation for all is $9 billion. In comparison the annual expenditure on ice cream in Europe is $11 billion. The annual expenditure to provide reproductive health for all women is $12 billion. In comparison, the annual expenditure on perfumes in Europe and the USA is $12 billion.

Annual expenditure necessary to provide basic health and nutrition is $13 billion. In contrast, annual expenditure on pet foods in Europe and USA is $17 billion. Compared to all those, annual military spending in the world is $780 billion. (1998, 37)

For every $1 that rich countries spend on aid, they allocate $10 to military spending. Current spending on HIV/AIDS, a disease that claims 3 million lives per year, represents three days' worth of military spending (2005, 8)

The $7 billion needed to provide 2.6 billion people with access to clean water is less than European spends on perfume and less than Americans spend on elective corrective surgery. This is for an investment that would save an estimated 4,000 lives each day. (2005, 8)

This is because capitalism is a system based on profit rather than need. Food production has increased and prices fallen.

"If all the food produced worldwide were distributed equally, every person would be able to consume 2,760 calories a day -- hunger is defined as consuming under 1,960 calories a day." (2003, 87)

But as a result of the operations of capitalism, every day, 800 million people (almost one in five) go hungry, and every year ten million people die of hunger.

Millions of people are in desperate need of medicines. But as the pharmaceutical industry is capitalist in nature, less than 10% of global spending on health research addressed 90% of the global disease burden and health problems of 90% of the world's people. (2002, 7) People dying of hunger in a world where there has never been so much food, and people dying because they lack essential medicines because less than 10% of global spending on health research and production addresses 90% of the global disease burden shows that a system based on profit rather than need is irrational and inhuman.

The human costs of maintaining the present system are far too high. Every year, 10.7 million children died before five of preventable causes (2005, 24) This means that every hour of everyday, 12000 children die of preventable causes. (2005, 1)

In the 1990s the number of children killed by diarrhea exceeded the number of people killed in armed conflicts since the Second World War. (2003, 104)

Some 500,000 women die in pregnancy or childbirth each year, one for every minute of the day. In Sub-Saharan Africa, a woman is one hundred times more likely to die in pregnancy or childbirth than in a high-income OECD country. (2003)

The environmental costs of maintaining capitalism are also too high. The problem is that corporations resist regulations and do not take into account damage to the environment; resulting in water scarcity, deforestation, desertification, pollution and natural disaster. Annual carbon dioxide emissions quadrupled over the past 50 years. Sulphur dioxide emissions have more than doubled during the same period. (98, 4)

Burning of fossil fuels has almost quintupled since 1950, consumption of fresh water has doubled since 1960, marine catch has increased fourfold, wood consumption is now 40% higher than 25 years ago. (1998, 2)

In industrial countries, per capita waste generation has increased threefold in the past 20 years. Water's global availability has dropped from 17,000 cubic meters per capita in 1950 to 7,000 today.

A sixth of the world's land area (2 billion hectares) is degraded as a result of poor farming since 1945. Forests are shrinking, since 1970 the wooded area per 1,000 people has fallen from 11.4 square kilometer to 7.3. Some eight million to ten million acres of forest land are lost each year.

Fish stocks are declining with about a quarter in danger of depletion and another 44% being fished at their biological limits. Wild species are becoming extinct 50 to 100 times faster than they would naturally. (1998, 4)

And during 1967-1993 natural disasters affected three billion people in developing countries with more than seven million deaths and two million injuries. At current rate of loss, 15% of the earth's species could disappear over the next 25 years. (1996, 26)

Air pollution is a serious problem for 700 million people, primarily women and children. 2.7 million deaths each year from air pollution (1998, 5)

A common objection is that capitalism might not be good, however there are no alternatives. Socialism does and did not work, the fact that countries in Eastern Europe and the former Soviet Union abandoned it and adopted capitalism proves it.

However, the UN's Human Development Reports show the achievements and successes of socialism. It notes that socialism was one of the world's history's "great ascent from human poverty". "There have been two great ascents from human poverty in recent history: the first in industrial countries during the late 19th and the early 20th centuries, and the second in developing countries, Eastern Europe and the former Soviet Union after the Second World War. They had similar elements, but the second had a larger scale and a faster timetable. Eastern Europe and the former Soviet Union made advances: infant mortality was reduced by half, from 81 to 41 per 1,000 live births. Life expectancy increased from 58 to 66 years for men and from 63 to 74 years for women. And income poverty was declining. In Hungary between the early 1960s and 1972, the proportion of people living below the poverty line fell from 60% to 14%". (1997, 25)

If we compare similar countries today on the basis of Human Development Indicators, socialist China and capitalist India, or socialist Cuba and capitalist Latin America, the achievements successes of socialism compared to capitalism are evident.

Since 1949, China has made impressive reductions in human poverty. Between 1949 and 1995 it reduced infant mortality from 200 per 1,000 live births to 42 per 1000 live births, and increased life expectancy at birth from 35 years to 69. Today almost all children go to school and adult illiteracy, 80% in the 1950s has fallen to 19%. The incidence of poverty from widespread fell to 9% in the 1980s. Hunger has been totally eradicated. (1997, 49-50)

By contrast, in India, 53% of children under age four, 60 million, remain undernourished. Infant mortality is 74 per 1,000 live births, and there are each year 2.2 million infant deaths, most of them avoidable. Rural poverty is 39% and urban poverty 30%. Half the population is still illiterate. Life expectancy is 61, eight years less than China. (1997, 51-52)

In China, public spending on education is 2.3% of GDP while that on health is 2.1% of GDP. The outcomes for human development are clear. Literacy stands at 84%, infant mortality rates at 32 per 1,000 lives birth and under-five mortality rates at 40 per 1,000 live births. (2003, 73)

Proportional to population, China spends three times as much as India on health care. In India health spending stands at 1.3% of GDP. (central and state governments combined) Human development indicators remain much lower for India than for China. Literacy stands at 65%, infant mortality at 68 per 1,000 live births, and under five mortality rates at 96 per 1,000 live births. (2003, 73)

If India provided the same health care as China, every year 1.7 million children could be saved. (1998, 156-157 and 176-177)

In Cuba, there is one medical doctor for 170 people. In the rest of Latin America, the proportion is of one doctor for 613 people. Cuba spends per inhabitant twice as much on health care and education than the rest of Latin America. (2003, 255)

Cuba's per capita income is a small fraction of that of the USA, yet it has the same infant mortality rate and has kept HIV/AIDS under control. (2003, 87)

If the rest of Latin America invested as much as Cuba on health care, every year 400,000 Latin American children could be saved and 20,000 fewer women would die in pregnancy or child birth.

In Latin America, the ten per cent richest people earn 46 times what the poorest earn. In Cuba the proportion is five times. (2003, 283)

A quarter of Latin Americans have to survive on two dollars a day or less. In Cuba, less than two per cent do. (2003, 245)

Evidence shows that countries that abandoned the construction of socialism and adopted capitalism experienced a massive regression. Central and Eastern Europe and the CIS experienced the sharpest increase in poverty in the 1990s, the only other region with worsening trends in poverty is Sub-Saharan Africa. (2005, 21)

Ukraine fell 17 places and Russia 15 places while Tadjikistan fell 21 places. Russia fell 48 places in world life expectancy ranking from 1990 to 2003. (2005, 22) Life expectancy for men has fallen from 70 in 1990 to 59 today, lower than India. If this remains constant, 40 percent of 15 years old Russians will be dead before they reach 60. (2005, 26)

Between 2.5 to 3 million people died during the 1992-2001 period. "In the absence of war, famine or health epidemics, there is no recent historical precedent for the scale of the loss." (2005, 23)

Central and Eastern Europe and the CIS experienced a dramatic increase in poverty. The number of people on less than $2 a day there rose from 23 million in 1990 to 93 million in 2001, from 5% to 20%. (2005, 34)

In the countries of the former Soviet Union, transition brought with it one of the deepest recessions since the Great Depression of the 1930s, and in many case despite positive growth over the last few years, incomes are still lower than they were 15 years ago. (2005, 34)

Since 1990 real per capita incomes have fallen by more than 10% in Kyrgyzstan, Russia and Ukraine and by 40% in Georgia, Moldova and Tajikistan. In Russia, 10 percent of the population live on less than $2 a day and 25 percent live below the national subsistence level. (2005, 35)

These are the main reasons why we believe that capitalism, as a way of organizing society and the economy, fails and is not sustainable; and advocate socialism as a viable alternative and a better way of organizing the world.

Facts and figures as published by the United Nations Human Development reports.



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