Economic systems

The Wealth of Nations was written at a time when Adam Smith realized the value of specialization, industrial revolution was just starting and he saw that productivity was proportional to the division of labor and repetition of work. Workers would be handed specific tasks which would serve as an overall cog in the production machine. This efficient distribution of labor would raise productivity which in turn would have a positive impact on worker incomes. Greater productivity, greater personal income and greater national GDP growth. When the industrial revolution started, workers would get assigned to shifts in factories, and would have limited rights of their own in terms of labor laws. Although per person efficiency was high, the communist Karl Marx saw that surplus was not being redistributed among all laborers, leading to worker exploitation. This was the basis of his work, Das Kapital. 

Marx not only gave to the world communism, but influenced countless other economic theories that are off shoots or branches of communism. I have tried to delve into Marx's prediction of the inevitable proletariat revolution but fail to see it taking place in the current political and economic climate. The working class as it existed in the hey days of the Industrial Revolution has transitioned into a international society that is driven by technological advances in automated industrial production. There is still a working class but the numbers are much more reduced. Experiments in communism have had varied results. If humans are guaranteed to share equally, then there won't be push for productivity, resulting in lower output and economic decline. An efficient system of incentivizing the population to work and increase productivity, and then free markets for efficient allocation of capital are few key drivers for economic growth. Higher purchasing power (demand) and higher generation of goods (supply) raise economic growth. Although capitalism addresses this efficiently, the problem is huge gap in wealth that is created between the lower and higher economic classes. To compare effectively let's look at what has worked and not worked in three different economic models that nations follow.

1) Capitalism: Free markets give currency to individual aspirations and hard work as key drivers of success. This economic philosophy leads to minimal government interference and maximum influence of markets to solve national and individual problems. If we look at areas such as education, defense and healthcare, in capitalist countries these might be overseen by governments,but these are very much driven by private enterprises. Capitalist systems lead to increase in productivity, but create a tremendous wealth gap, as wealth creation doesn't lead to wealth redistribution.

2) Socialism: Here there is a push to build state owned public enterprises that would build the industries required for productions of goods. Although the idea is to create shared wealth, this systems suffers from the problem of incentivisation. Since if there will be equitable distribution of wealth why would there be a reason for an individual to work hard as work and food are guaranteed. But the real breakthrough here is that everyone is guaranteed some basic human needs, such as healthcare and education..

3) Communism:  This is a radical version of socialism proposed by Karl Marx, where the means of production will be controlled by the people and where private wealth doesn't exist. This idealist economic model was never reached. The concepts was extended to a one party model that would control the means of production. It has more of the state owned dynamics of socialism, than the complete redistribution of wealth that communism proposes.

What we are seeing is that in current states it is not one economic model (in its pure form) that is employed but different concepts leveraged from different economic models. Healthcare and education, are seen to be better delivered in state delivered or controlled setups. The idea should be to incentivise increase in productivity through technological improvements and at the same time cover the poorer sections of the society for their basic needs, through a partial wealth redistribution. There is no perfect economic theory, as countries themselves try different models based needs of their people needs and their own political and ideological requirements.