Anyone who has been reading international news media such as TIME magazine recently will have noticed that people seem to be very worried about capitalism, judging by article headings such as “How to fix capitalism”, “Is capitalism broken?”, “Let’s fix this mess”, “Capitalism under fire” and “Keeping Wall Street honest”.
In one of these – “Capitalism under fire” (TIME, February 6 2012) – five panellists debated capitalism’s future at the recent Davos meeting (or is it junket?) of the capitalist elites. To the question of whether “20th-century capitalism [is] failing 21st-century society”, the answers diverged in a predictable manner. Sharan Burrow, who represented the International Trade Union Confederation (surprisingly, at Davos!), responded by saying:
“Absolutely. We’ve lost our moral compass. We need to redesign the system. When you have the greatest inequity since just before the ‘30s Depression, this is bad news for capitalism. Seventeen of the richest countries in the world have gone backward on equality, and 210-million people are out of work. The market’s lost its capacity to soak up people who need to be employed.”
David Rubenstein (MD of the Carlyle Group) partly agreed with her:
“Economic disparity is bad in many parts of the world, and capitalism has not solved that problem … The question is, How do we deal with it? How do we eliminate the boom-and-bust cycle in capitalism, and how do we eliminate the economic disparity? Government is supposed to be the leader. The business community wants leadership from the government officials that we elect.”
But Ben Verwaayen (CEO, Alcatel-Lucent) claimed that “We need to talk about innovation and sustainability and reform, not just about corporations and greed”, with Raghuram Rajan (Professor of Finance, University of Chicago) agreeing that “There are deeper forces driving inequality than oversize corporations. Technology, competition, globalization and a need for innovation are all pushing for higher pay and higher levels of skills”.
Clearly, even among people in these positions of power and influence, there is no consensus about what needs to be done to revitalise the dominant economic system, on the one hand, and address the major source of discontent among the populace at large today, namely the chasm dividing the haves and the have-nots. Some of the people in the know seem to think that — at least in the developed North — capitalism is beyond redemption. In a recent interview (TIME, February 13), banker and author Loretta Napoleoni (“Maonomics”, “10 Years that Shook the World”) responds to the question of whether “Europe [can] still foster economic growth” with blunt “real-economics”:
“Absolutely not. We are in a post-capitalist society. Capitalism is a system that works if you are modernising, industrialising, as in China and Brazil. You need a new system. In order to do that, you need a leadership that is willing to reinvent the wheel.”
The implication of this straightforward assessment for South Africa is that we are in the same boat as China and Brazil — because there is still a lot of modernising to do here, there is scope for capitalism as she sees it, remembering that China’s “state-capitalism” seems to be getting more and more attractive to the ANC government.
In an article titled “How to save capitalism”, Michael Schumann (TIME, January 30) also spells out some painful reasons why, as the global economic crisis continues — which has been blamed on just about everything and everyone bar the flying spaghetti monster of the pastafarians (and even of that, I’m not too sure) — capitalism itself has now become the alleged culprit:
“It’s easy to see why. As jobs remain scarce and the welfare of middle-class American and European families has come under strain, capitalism, as it functions today, seems to have failed to do what it is supposed to do: provide economic opportunity and a better future for all. [Sound familiar? B.O.] We’re taught in school that capitalism is a meritocracy that awards the hardworking and talented. In the wake of the 2008 financial crisis, however, capitalism often appears to benefit only the connected and privileged. To many, Wall Street financiers remain unreformed and unrepentant; they’re still getting rich off [of] the same sort of risky shenanigans that caused the US economy to tank in the first place. Bankers evict families from their homes only to tear those homes down … Over the past three decades, as capitalism has become freer and more globalised, the rich have benefited enormously while the many have often been left with the crumbs. The gap between the rich and poor has been widening just about everywhere.”
Despite his realistic assessment of the economic situation in a capitalism-dominated world, however, Schumann goes on to sing the praises of precisely those features of capitalism, some of which also impressed Karl Marx in the 19th century, despite his unmitigated opposition to it, namely its capacity to eradicate poverty, to stimulate innovation and reform itself under difficult or adverse conditions.
In the same edition of TIME, David Rothkopf argues that “fixing capitalism means taking power back from business”: “A key part of fixing capitalism will be reconciling the large and growing imbalances between the public and private sector. National governments have, over the past several decades, seen the most basic pillars of their power erode.”
This resonates with the words of David Rubenstein, quoted earlier. Perhaps this process of curbing corporate power is already happening in the very belly of the beast of capitalism, namely Wall Street. In New York, US Attorney and Prosecutor, Preet Bharara, has already won 56 convictions out of 63 cases where Wall Street traders have been charged with offenses like insider trading and securities fraud — activities which, if unchecked, enrich the perpetrators beyond one’s wildest imaginings, and obstruct access to investing opportunities on the part of other investors. He has already seen several of these erstwhile paragons of capitalist success being imprisoned in the wake of his relentless investigations, and he has not lost a single case.
Perhaps this is what the world of high finance needs — someone (working with a team of dedicated staff) to remind them that greed sometimes (not often enough, yet, though) has a price to pay. And it is a reminder that the insatiable beast of capitalism CAN be reined in, if representatives of the state — in this case, its prosecuting arm — have the guts to take the bull by the horns.
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