By Asoka Seneviratne –
I have no doubts that the heading alone with make many cynics raise eye brows!! In many countries including a large section of Sri Lankan populace “capitalism” has been made to look like a dirty word. The left oriented parties including the JVP have branded capitalism as a bad word. The mother of Capitalism, USA has been made synonymous with capitalism and bears the brunt of accusations by the left oriented groups.
On this topic, I am not referring to the US government foreign policy, or the wars it has been involved in or arm sales etc. This article is purely meant to address the economic system broadly called Capitalism. World used to adopt two distinct economic philosophies; one called Communism based on theories written on book Das Kapital by German philosopher Karl Mar, and the one professed by Scottish philosopher Adam Smith which is commonly known as Capitalism.
The essence of Capitalism is greed. Greed for making money by selling goods and services in an open and completive market place. On the other hand, Communism professes that all good and services must be provided by the government only. This system was introduced into the then Soviet Union soon after 1917 Russian revolution by Vladimir Ulyanov, popularly known as Lenin. After Lenin’s demise, a dangerous dictator named Stalin went on rampage with this system ending in the murder of about 20 million Russians. This failed economic system hated by its people eventually came to an end with the collapse of Soviet Empire in 1991 spearheaded by then Russian President Gorbachev. It was the end of a dark period in world history where human beings were barred from making money doing business while all production activities were owned by the government. Thousands of people in the communist block gave their lives in order to end this unsustainable economic model.
Since then the almost the whole world embraced some form of Capitalism including Communist China. Capitalism is built on the inborn greed of humans to make money.
Now how does modern day Capitalism really work? What institutions play the biggest role in creating wealth of nations in Capitalism? It is the Stock Market (US term) or the Stock exchange, Capital Markets as used by various nations. This is a public place where companies or general public buy and sell shares of companies. As the demand for shares goes up in great profitable companies, their share price goes up and vice versa. Trading as this is commonly called has given rise to billion dollars companies across the world. Some companies like Apple, Google and Microsoft are worth over a trillion dollars or more.
In these economies, people and businesses are highly incentivized to invent and develop products that have a demand. A successful product can make a company so rich that they might want to take the company public into the stock market. The big bucks and millions of dollars are made there. Those million allow companies to expand and develop bigger and better products.
Thus the governments pick up taxes, people get jobs, technologies advance and broadly speaking countries get rich. Capitalism works.
Now here is the downside. With millions if not billions of $ wealth, these companies get politically powerful thereby influencing the legislature and the economic or even foreign policies. The United States is not insulated from this either and is a big problem. This can lead to the ugly side of capitalism of abuse, bribery etc. Like everything in life, Capitalism while being is the biggest engine of economic growth, can also can get ugly.
Hence the need for an effective and independent regulatory network and laws. One cannot over emphasize the need for this. The laws are mostly intended to create an even playing field for all companies while also ensuring the wealth created by companies are distributed through a wise tax system.
So why should kids in Sri Lanka learn about Capitalism, Stock market, trading etc.? Because it teaches them about the benefit of inventions and creations. It teaches them about company valuations, it teaches them about how to create wealth, expand tax base and build infrastructure. It teaches them what drives kids in rich nations to invent and build new products and services. It teaches them how rich countries have amassed massive wealth and remains rich, how their products dominate the world. It also teaches them
In other words, the rich capitalist nations offer massive financial incentives for inventions through their capital markets.
In my opinion, starting form Grade 10, every child no matter what discipline they lean at school, should have a dedicated period for this subject. It should be a priority and the same emphasis we give to science and math should be given to this subject. They should be taught how giant corporations were founded in small home garages and developed into giants. I have no doubt those who attend rich or private schools already have some understanding of this through their family or friends. But not that village school kid. The bright ones of these schools who may well may be smart potential future inventor or a businessman should not be deprived of this most crucial knowledge base.
The teaching should not be confined to text books and exams. They should be demonstrated using modern techniques examples of how capital markets function, how venture capitalists finance start-ups that grown into giant corporation and science , technology and medicine have all made vast advances thanks to these capital markets. World has benefitted from this system but it still needs perfection!
Finally thousands of bright young men and women have migrated to the West and started Start-ups that were great successes that prove that talent and ingenuity is not confined to the West alone. Dozens of bright young men and women form the poorer countries have ended up leading some of the largest companies in the west too.
So it is incumbent of our governments to equip our kids with the right kind of knowledge to succeed in the business world. After all without business, there would not be economies, jobs or wealth creation.