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Social capitalism blends the free-market sensitivity of capitalism with the social welfare of socialism, using government involvement to raise the earning potential and living standards of the lowest economic strata. It seeks to increase both market participation and the potential for market profit, while protecting lower-level employees without unduly inhibiting business practice.
Social capitalism is an economic philosophy that blends the free-market sensitivity of capitalism with the social welfare of socialism. He fundamentally rejects the notion that a society should be socialist or capitalist, suggesting instead that a great deal of free-market benefit can be gained through government management of the macroeconomy. A relatively new concept gaining popularity in the 21st century, proponents of social capitalism suggest that a number of social capitalist systems already exist that serve as examples of the powerful potential embodied in this theory.
In traditional capitalism, most actions are dictated by the waxing and declining market. Governments should have as little market involvement as possible, in order to leave the freedom of entrepreneurs, investors and employees intact. In this model, profit is the motivating factor for work at all levels of society. The flip side of capitalism is that it can create a system in which some thrive and many survive, with an additional class of those unable to. Traditional capitalism tends to rely on the survival of the fittest and the wealthiest, whether that wealth or fitness is the result of natural talent or inherited position.
Socialism, on the other hand, promotes the inherent equality of all people, using strict government control to attempt to enforce fairness. In the view of Karl Marx, the father of communism, an ideal socialist society would give all people equal opportunities, equal wealth, and instill a sense of the common good above that of personal progress. Unfortunately, in practice this theory tends to create a system ripe for corruption, in which members of the government have massive control over all other citizens. Since socialism does not exist in a vacuum, it is also possible for private entrepreneurs to make personal fortunes in international or black market markets, exhausting the illusion of equal opportunity for all.
Social capitalism seeks to blend the best qualities of each system while toning down the disadvantages of both. Programs that meet a social capitalism standard include things like government control over wages and working hours; measures that protect lower-level employees without unduly inhibiting business practice. By using government involvement to raise the earning potential and living standards of the lowest economic strata, social capitalism actually seeks to increase both market participation and the potential for market profit.
In most theories of social capitalism, which are by no means in universal agreement with each other, government involvement is related proportionally to the economic position of the individual. Middle-income and wealthy individuals will feel the least effect of macroeconomic policies, as they are supported much more through capitalist market practice. Low-income individuals would have the advantage of government-run social programs, such as low-cost medical care programs or job training programs, since free-market capitalists are necessarily less concerned with their survival. By helping people in the lower economic strata, government following the principles of social capitalism hopes to propel these individuals to the upper level of society where they are able to survive in a free market economy.
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