business current affairs economics politics

Capitalism is in crisis – now let’s ask the right questions

This week has tipped capitalism upside down and shaken it. In a matter of seven days things that looked solid and dependable have proven to be smoke on the wind. No matter how committed you are to the free markets, everyone has had to stop and take stock of what has just happened. That’s an opportunity not to be missed.

And we are taking that opportunity. The important thing now is to ask the right questions. A debate on the radio this morning pitted an economist from the Adam Smith Institute against socialist film director Ken Loach. The former claimed the current crisis represents a failure of government, and that the markets need less government meddling. The latter claimed it is a failure of the markets, and the government needs to more involved. This is a debate we need to get over – capitalism or socialism ceased to be a question decades ago.

In case you hadn’t noticed, capitalism has been re-invented behind our backs in China, India, Russia, as a powerful combination of free enterprise and government guidance.  As Gabor Steingart points out in The War for Wealth, we don’t even have a name for it yet. If we in the West persist in seeing government intervention and free markets as opposite philosophies, we will find ourselves left behind arguing dogma, while those with a more pragmatic stance get on with developing their economies. 

When the current system shows itself to be inadequate, everyone wants to push their own philosophy as the answer. But what if we back up and ask the deeper questions? Let’s not pre-suppose the answers. Let’s think beyond right and left, and get past those prejudices. It’s time to ask the more basic, more human questions:

  • How can we guarantee genuinely equal opportunity?
  • How can we provide a better standard of living for everyone? 
  • Can we think more holistically about wellbeing, and look beyond purely economic indicators?
  • How can we reduce inequality?
  • How can we raise more people out of poverty?

The key in all of this is economic justice – we need a system that does not make money for a privileged few at the risk of the many. The idea that a ‘rising tide raises all boats’ has proved false, as the gap between rich and poor has widened. Are we going to fix that? Or are we content to carry on, and risk resentment, class divides, and social instability? 

If the events of this week force us to ask these kinds of questions, then the uncertainty and the losses might be worth it in the long run. If we patch things up and carry on with the environmentally, socially, and economically unsustainable system we have, then we are to be pitied, and our eventual inevitable decline will be fully deserved. 

Phil links to an interesting collection of thoughts on the BBC site today, and I quote from a few here, as the debate gets underway:

This is a failure of a system where we relied on the markets and excluded government. And the markets failed. – Tony Benn 

The real tragedy would be if the official reaction to this crisis were ill thought, politically motivated, overbearing regulations. A freewheeling financial system is essential for future prosperity. – Jon Danielsson

As the greatest names on Wall Street crash to the ground, destroyed by their own arrogance and folly as well as by the most hostile financial environment in almost 80 years, we must ask: Why are we so amazed? We who were supposed to be such experts? And why did we not predict it? – Peter Jay

(the bemused bear at the top is stolen from the very talented illustrator Kevin Cornell)

1 comment

  1. The basic comments here I agree with.
    If anyone idealistically thinks Free Market Capitalism has a chance, on it’s own, they should read a book like Misha Glenny’s “McMafia”. As someone based in UK I’d say our greatest competitors (especially China) are not “free market” but State-run. A HUGE advantage in tough times… Some (NO names here!) are actually actively in league with criminal groups with a world-wide reach.
    Is their future the one we all want?
    If not … we need to start re-acting and not just waiting.

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