Volume 3, Number 4
4 October 2005
E-Mail Newsletter of the Irish Republican Socialist Party
1) Capitalism and Socialism
CAPITALISM AND SOCIALISM
By Liam O'Ruairc
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:
http://hdr.undp.org/reports/view_reports.cfm?type=1. Based on those
reports (referred to by year, followed by page), what does our world
We live in a capitalist world. Capitalism is a very dynamic system
that produces a tremendous amount of wealth. Never has the world been
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
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
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)
A FAILING SYSTEM
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)
$1 A DAY
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.
But capitalism allows a tiny minority to accumulate a vast amount of
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
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,
PROFIT NOT NEED
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.
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.
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.
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
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)
CHINA AND INDIA
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.
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)
THE FORMER SOVIET BLOC
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.
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,
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.
WHY WE ARE SOCIALISTS
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.
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