As I write this I am aware to be privileged to live in the Netherlands. Additionally I am aware how controversial this topic can be. In the Netherlands the matter of how the economy should be managed is something that divides many people. The economy either makes society happier or wealthier and both orientations have their advantages.
The economy is this context is the complex process in which markets, businesses, the labour force, production and trade add value. The added value is assumed to benefit society at large if well and fairly divided. “Well” and “fair” depend on what is acceptable in the given country and what is acceptable depends on the markets, the government and society in general.
In economics there are two main orientation towards economic thinking. You have capitalism versus socialism and both assume certain things about how markets and people behave. In the capitalism ideally the market is as free from (government) intervention as possible. In socialism the market is not free from government intervention. Even more, in a socialist economy the government controls and monitors certain aspects of the economy.
Capitalism places the emphasis on entrepreneurship, independence, individuality and ultimately personal gains. The successful entrepreneur has the right to increase his wealth, he or she owes society and the government little. In socialism the entrepreneur has less independence, less individual rights and has to share more of the personal gains. The entrepreneur owes part of the generated wealth to society and the government.
In the recent years, especially in the aftermath of the financial crisis a certain questions were often asked: “What kind of economy do we as a society want?” “Society is paying for the bail out of the financial sector and what is society getting in return?” Wealth does not make everybody happy, especially when the wealth available is not divided to everyone in society. Happiness is not always a matter of wealth either.
How a country’s economy makes its society happier or wealthier is not just a matter of socialism versus capitalism or political left versus political right. It is a matter of making clear choices regarding priorities. In a generally happy society people have enough. In a generally wealthy society people have more than enough and economic growth is vital.
This matter is complex and there are no simple answers. Simple terms though make it interesting food for thought…