Social capitalism as a theory challenges the idea that socialism and capitalism are mutually exclusive. Social capitalism posits that a strong social support network for the poor enhances capital output. By decreasing poverty, capital market participation is enlarged.
Social capitalism divides the concept of economy into two tiers: A participatory group of society working functionally in an upper economy (Tier-One) and an underlying economy of dependent poor communities and criminal elements(Tier-Two). Tier-One generally comprises the upper and middle classes while Tier-Two represents many low wage workers, impoverished persons, mentally ill and criminals. Social capitalism posits that providing Tier-Two with the means to participate in the market would discourage Tier Two from completely dropping out of the system, hence, causing major disruptions to the market. A larger and more inclusive market is a more efficient and more stable market.
Social capitalism is not related to the idea of social capital as popularized by Robert Putnam and James Coleman.
For the social sciences and business, Social capitalism is seen as the ability for a company to have or create positive, healthy development. Either through crown corporations that give back to society or through positive message campaigns, like those done by the Canadian dairy association (labels campaign). Creating a positive feeling with a message about self worth, thereby creating a more positive society. People seeing advertising with a social capitalistic message links the product with the positive feelings they get from the advertising. For Aboriginal communities that are participating in business, social capitalism is a community owned business that employs community members and gives back directly to the community, building capacity and self worth. Typically capitalism as a business model is exploitation of the workers and the market, squeezing profits from an underpaid workforce and over charging the consumer. Social capitalism is the opposite, rather seeking to create a fair and balanced approach to business. In short Social Capitalism practiced is capitalism with a social conscience. The positive messages sent from business will only increase profits as consumer and investors see the actions and take it into account when purchasing goods from the company.
Under Social-capitalist theory, the primary distinction between the two tiers is not a poverty line. The distinction lies in an individuals independence from government controls. These controls may take the form of support or restraint by the government. Examples: If an individual is dependent on private or government support for basic needs like housing or food, that person falls in Tier-Two. If an individual is dependent on government restraint through the criminal justice system or mental health system, that person also falls in Tier-Two. All Tier-Two individuals are defined by an active and ongoing relationship with government controls. They are not independent/productive members of the population. As such they are an economic liability.
The two-tier approach directly contrasts with the traditional three-part economic model associated with capitalist economies: Upper class, middle class, and lower class. The importance of the distinction is that Social-capitalist theory holds that social programs are not needed or positive for the upper and middle classes. Social capitalism holds that universal social programs are harmful to economies because these large programs shrink capital markets. Many European economies built on the universal socialism model suffer from market interference across the economy. High taxation for universal social programs shrinks the overall capital market thereby shrinking the functional economy.
Social capitalism holds that the Tier-One Economy operates independently of the Tier-Two economy in many ways. It is possible and prevalent for great wealth to be accumulated in the upper tier regardless of the size of the lower tier or changes in the lower tier. However, stronger social programs aimed at shrinking the size of the lower tier lead to even greater wealth in the upper tier. A survey of gross domestic product of countries around the world easily shows that shrinking the lower tier results in exponential benefits to the upper tier.
One potent advantage of Social-capitalist theory is the clear real-world distinction between individuals who fall into the two tiers. Tier one individuals have steady incomes that allow them to function without private or government support. Tier two individuals cannot meet the prevailing standard of living and rely on private or government support. The largest portion of this group includes:
High-income criminals are a small group who do not fit neatly into the two-tier model. Few economic models have a clear place for these persons
By conceptualizing modern economies in two tiers, it is possible to see large-scale social support programs for the poor as an enhancing economic stability and growth. Some examples are provided below to help to provide a practical explanation of how this can work: 'This list is only illustrative of the many liabilities of the Tier-Two economy.'
Integrating these almost opposite systems:
First there is a need for the people to have the opportunity to do better in life if they work for it (capitalism), but it can not deprive some rights. So, needs like health, education, and safety have to be met regardless of race, income, or status (socialism).
By health it is meant: food, health care, shelter, clothes, etc.
By education it is meant: a full competitive education opportunity, from preschool to college, and even reeducation for the unemployed or underemployed.
And by safety it is meant: a fully functional safety system, with police, firefighters, fast first aid, severe punishment for abuse of power, and reformation for prisoners.
These three needs have to be available to all without exclusions, questions, or demands.
Everything else should be like the capitalist system, private business, private ownership, money markets, investment, work, etc.