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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.

Contents 1 A Bias in Media? 2 Social Capitalism Distinguished From Social Democracy and Pure Capitalism 3 Further Distinctions From Other Economic Models 4 Benefits of the Social-Capitalist Model 5 Social Capitalism applied 6 HOW 7 See also

A Bias in Media?

Due to historical conflicts between nations of each regime, some social-capitalists view the media as assuming that socialism and capitalism are naturally competing economic regimes.^{[citation needed]} The most pernicious effect of this assumption is the notion that social programs for the poor are impediments to capitalism.

Social Capitalism Distinguished From Social Democracy and Pure Capitalism

Most definitions of Social democracy question the full application of traditional capitalism. Social capitalism embraces the tenets of traditional capitalist theory. Social capitalism validates traditional capitalism as embodied by Adam Smith's "invisible hand" of the marketplace. The "invisible hand" should be trusted to find the greatest market efficiencies for all participants of the Tier-one economy. The distinction with pure capitalism is the assertion that individuals in the Tier-two economy will not respond to market demands because they are reliant on private or government supports.

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.

Further Distinctions From Other Economic Models

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.

Benefits of the Social-Capitalist Model

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:

• Poor families dependent on government housing and food stamps
• Children who depend on public and private educations to become participants in the marketplace
• Elderly persons who no longer earn wages necessary to meet the prevailing standard of living
• Low-income criminals who require police intervention.

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.'

1. Criminality resulting from poverty is a significant and under appreciated drag on the economy as a whole. Crime causes depreciated property values. Stores within a large perimeter of high-crime areas have reduced business. Fear within communities causes decreased consumption as consumers choose to stay at home rather than explore their local retailers. Leading economists estimate the crime causes a 1-3% reduction in U.S. gross domestic product. Social programs attacking crime at its roots in poverty, will result in increased economic output. Capitalism and get-tough policies linked to conservative capitalist theory have not resulted in significant reductions in the local or global crime rates.
2. High poverty communities cause higher government medical costs and higher medical insurance rates. High poverty communities have high rates of obesity, disease, and other afflictions. Because the poor have little access to basic care, impoverished communities use emergency medical care at disproportionately high rates. Medical complications tend to become more serious due to overall poor health in disadvantaged communities. These costs ultimately passed on in the form of higher insurance rates and higher taxes.
3. Children in high-poverty schools receive an unmarketable level of education. These children are essentially removed from the productive capital economy and become economic liabilities. By providing competitive educations to poor students the economy can trade a liability for an asset.

Social Capitalism applied

One model, described as People-Centered Economic Development [1], advocating the application of social capitalism [2] in place of the nonprofit paradigm was delivered to President Clinton's re-election committee in 1996 by honorary researcher Terry Hallman. In 1999 following the economic collapse in Russia, he travelled to Siberia to research and recommend a development initiative and microfinance bank in Tomsk [3] which was both proof of concept and precursor to the creation of the Russian Microfinance Center in 2002.

HOW

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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.

See also

• Social capital
• Social democracy
• Tragedy of the Commons