The flaws in the eurozone, which as we have all been told with increasing frequency over the last few years, lie in its founding charter, and which are now coming home to roost, are causing some to speculate – yet again – that we are witnessing the last days of capitalism.
The argument for “old style capitalism” or at least the extreme form of it, being in its death throes has been put rather succinctly by Chandran Nair. The argument goes like this: capitalism has thrived for the last 300 years on a formula of externalizing costs and underpaying for resources, to the enrichment of the few and to the great disadvantage of the many. What is needed, the argument goes, is for all good folk and true to put their heads together and come up with an alternative. Whenever I hear this I recall one of the most powerful proverbs ever voiced, namely that the road to hell is paved with good intentions.
The path that emerges when one wipes out, that which one has in order to replace it with some visionary scheme, has already been blazed many times before. A few UK oriented instances would be the Thatcher “revolution”, wiping out the UK coal mining industry to get rid of the union problem, or aiding and abetting the destruction of Britain’s manufacturing sector, on the grounds that the future lies with bankers, accountants, lawyers and consultants (providing services to who, again?). For bleaker instances, you could look at the Stalinist attempt to transform Russian agricultural production by forcing peasant farmers into collectives, or Pol Pot’s murderous “visionary” regime.
The end result of the UK Thatcher inspired anti-manufacturing philosophy was summed up recently by the legendary financier Jim Rogers, who argued that with the UK financial services sector having gone smash in the crash, there’s not much left to invest in, so why bother with Britain? Proving him wrong is going to be a tough enough job with the capitalism we have…
It is not that one cannot make a very good case for change of one sort or another being hugely desirable, but rather that there is no clear path to get us from our present state to some desired state of Nirvana, which is startlingly different from the kinds of regulatory reforms that are already being worked on. We live in the world we have, not the one we might dream of having. The Occupy movements have been fantastically good at engaging the young and the idealistic in the idea that change is possible. They have been pretty poor, so far, in generating any coherent program. Yves Smith, the noted blogger, did it in a sentence in one of her recent blogs, where she said all that was needed was to regulate the financial sector much more closely, and to break the tight coupling between the regulators and those they regulate, including blocking off the revolving doors between the two.
As a point of fact, the corporate world has been and is, dealing with some very large changes, including continued pressure for enhanced corporate governance and pressure to focus on putting sustainability at the heart of the corporate effort. Doing that while continuing to generate profits, in a global economy characterized by huge volatility and political mismanagement on a grand scale, is a fairly heroic feat. Those calling for change would do well to bring themselves up to speed with the pressures for change already in the system, and with the massively detailed regulatory process now being articulated, rule by rule.
These “change processes” might not be everything that is required by someone wanting a “fairer world”. Indeed, the scope for the law of unintended consequences to run rampant, as a result of the change mechanisms already coming down the track at business, is huge.Nevertheless, regulatory changes are happening and as such they represent clear starting points for anyone genuinely interested in change. If you think they are rubbish and don’t go far enough, articulating what more is required, is the obvious next step. Staying fixated on phrases like “greedy bankers” won’t do the job, no matter how many city parks or squares are occupied… Of course, if what you really want is to see the system burn, then, hey, who needs thought?
Further reading on “fixing” capitalism
- Renewing Capitalism, by Matthew Bishop
- Why Organizations Need to be Regulated—Lessons from History, by Bridget Hutter
- The new sheriff in finance's global village, by Ian Fraser
Tags: capitalism , Chandran Nair , eurozone , financial crisis , Jim Rogers , Occupy movements , Occupy Wall Street , Yves Smith