Thoughts And Trivia

Capitalism is the dominant dogma today. Socialism or communism have proved to be no match. Capitalism is not without weaknesses - cyclic stagnation-inflation and economic-meltdowns. But is there a better alternative?
At least in poor countries capitalism exploits the full potential of a minority elite class. Even in rich countries, upper and middle class are the only enthusiastic participants in the capitalistic and democratic game. This leaves out a very large poor populace which is indifferent to the polity.
If this large poor populace enthusiastically participates in capitalism - its weaknesses can be overcome. This can come about if we ensure that these people stand to gain in the economy. Can this be done by bringing prices down by playing on larger volumes?
Lets take an example. If price of an electronic equipment (TV or Digital Camera or a digicam) is kept at one-fourth of present day price, the volume would perhaps go up by 8 times. Can profit still be made at this price-volume combine. Perhaps it may also need toning down the astronomical levels of expenses on Salaries, Advertisements or celebrity endorsements. Perhaps standardization of sub-assemblies across the industry may be required. Perhaps the whole industry would have to integrate its supply-chain-management.
If this theory could be worked successfully, economy will be more stable because of large consumer base. It will have higher velocity of money (i.e. same Dollar will change large number (say 1,000,00) of hands productively = as good as one dollar doing the job of 1,000,000 dollars).
Imagine this getting applied to air-travel.
It can be done! This was proved in recent turn-around of Indian Railways. Where instead of increasing the prices in tandem with increasing input costs - a strategy of higher volumes at same price (or even discounts) was tried out successfully. Today Indian railways is poised for an exponential growth - although Economist had earlier written off the organization.
The spirit behind it was empathising with and focusing on large numbered poorer customers.
This is how capitalism was made to to stretch and meet socialism.
Its would be missing the point if this is viewed merely as a turn-around story. I think it is a seminal and paradigm shift.
A new "ism" has been created bridging the socialism and capitalism.

Posted by Girish Bhatnagar at Saturday, September 23, 2006