Monday, 1 February 2010

...but what kind of capitalism do we want?....

Slí Eile: Speaking, last week, at the World Economic Forum (WEF at Davos), French President Nicolas Sarkozy was in big picture mode discussing the future of globalisation, capitalism, humanity and other things in between. Refreshing to hear a senior political figure talking at this level even if the speaker would not be the number 1 fan of everyone using this site. The text of his speech can be downloaded here (or, if you prefer the more authentic version in French, here)
The punchline was the following:
Let us be clear about this: we're not asking ourselves what we will replace capitalism with, but what kind of capitalism we want.
[Not that many people would be asking themselves that question in Davos. However, others were saying, last week, that ‘another world is possible’ (however that might look) at the World Social Forum (see its Site there) – the first of which took place in Brazil in 2001 and has been held each year to coincide with the WEF (sort of like the TASC Economics Conference shadowing the Kenmare Economics Workshop and this website Progressive Economy shadowing Irish Economy if you get the drift…). The WSF is running Forums in various places around the globe (has anyone considered one for dear Ireland?)]

Back to Sarkozy ....

If Le Président is not asking how to replace capitalism he is asking how to reform it.
He said: ‘C’est une crise de la dénaturation du capitalisme’ – clumsily translated in the following way…

The crisis we are experiencing is not a crisis of capitalism. It is a crisis of the denaturing of capitalism – a crisis linked to loss of the values and references that have always been the foundation of capitalism. Capitalism has always been inseparable from a system of values, a conception of civilisation, an idea of mankind. Purely financial capitalism is a distortion, and we have seen the risks it involves for the world economy. But anti-capitalism is a dead end that is even worse. We can only save capitalism by rebuilding it, by restoring its moral dimension. I know that this expression will call forth many questions.

So, it is about saving capitalism and not replacing it. Rather, it is about ‘re-norming’ it – giving it a set of moral values to curb/regulate/channel the greed (some might say distribute it by creating a property-owning democracy….). A worthy sentiment and one that is probably shared by most (?) on the ‘left’ (please clarify) right now in Ireland and abroad. ‘Socialism’ got a very bad press in the 20th century for reasons that I consider entirely reasonable. Moreover people are more interested in peace, bread and land than in ideology (if the irony here is pardoned).
But, can capitalism be tamed and reformed in the interests of the ‘common good’ (whatever that constitutes) or that of the ‘working classes’ (which haven’t gone away)?

I reckon we will have to see. It is too early to say yet (what the full effects of the French Revolution were on Liberté, Égalité and Fraternité)
However, it is a fair question. Put it this way:

Would a good dose of positive corporate governance, tight banking regulation, high taxes on the wealthy, Scandinavian welfarism and plenty of fiscal stimulus when capitalism goes into bust mode ….. save, reform, rebuild ‘capitalism’ (please define)?
The debate has shifted from mid-20th century socialism versus capitalism to various capitalisms in competition with each other:
Market-led Neo-Liberal
Ireland - US, UK
Corporate - Japan, Korea ?
Social-Democratic - Nordic countries plus strong elements in some other continental countries (Austria? Germany? Netherlands?)
State-led - France, Germany (and China?)
These designations are, of course, over-simplistic. For example, Ireland’s acclaimed neo-liberal status needs to be qualified. Minimum wages, social partnership, the role of the semi-states, labour market restrictions etc were legacies of a significantly modified neo-liberal model. However, there is little doubt that Ireland took the neo-liberal path more and more with its high-point in the slashing of capital gains taxes and the unleashing of the property bubble in the 2001-2006 era. The price we paid for all that is well documented on this Site and elsewhere.
On a sobering conclusion, I suggest that:

* The room for policy manoeuvre is not that great these days where capital, labour and reputation are highly mobile internationally – anyway we are in a euro-club where different macro-economies have different priorities and some predominate
* There is the problem of the environment – ‘left’, ‘right’, ‘green’ have yet to solve this one and I suspect that any version of capitalism you like will not do the necessary
* Almost anything could happen, politically, socially and culturally in the next ten years – economic bounce back (ESRI hopefuls), ‘Japanese’ prolonged depression (hope not), jobless, joyless ‘growth’ while Ireland exports its young (and not so young)….And there is all the other unpredictables – wars, nationalism, natural disasters.

As for the ‘left’ – in Ireland at any rate - it has some ground to catch up.,,,
On the positive side……. There are huge possibilities going well beyond the old tribal and ideological boundaries. A positive in the situation is that support for Fianna Gael, here, has dropped to roughly 55%. Not that 45% is clamouring to ‘replace capitalism’ to use Sarkhozy’s term. Many in the 45% are tied into global markets by a 1,000 threads: personal debt, mortgages, precarious jobs, insecure DB pensions and so on. But, many people are desperate to see:

A fundamental break with the existing model of capitalism however that may be described or conceptualised
A clear, convincing and broad-based political leadership ‘from the ranks’ to bring this change about.
Any programme for change needs to:
Happen at a co-ordinated international level (our membership of the EU is a huge plus compared to the period before 1973)
Respect universal human rights, democracy and peace
In this sense, democratic socialism building on what is positive in the Scandinavian model (if there is one such model) but going beyond that can offer a ray of hope for the future. We have to start somewhere.
So, political economies need to be rethought morally from the ground up and M. Sarkozy is right even if he is thinking of this from the sky down, He asks ‘how can we return the economy to the service of mankind’?. (In the meantime, along with his government he is seeking to reduce the public sector deficit in France by reducing public spending as in a recent speech to the Assembly).

The term ‘invisible hand’ of the market has been ascribed to Adam Smith. However, the same Smith also wrote The Theory of Moral Sentiment. And speaking of moral sentiments, the Davos event was marked by a survey of public opinions on values (of 130,000 persons in 10 developed market economies using Facebook). See the results on pages 1-17. The results (Q8) show that over two thirds believed that the current global economic crisis is also a crisis of ethics and values. The full Report is in ‘Faith and the Global Agenda: Values for the Post-Crisis Economy

The Reports contains contributions by a wide range of religious persons. One contributor, Archbishop of Munich, Dr Reinhard Marx (no relation) uses the title ‘
Decisive Turning Point’ (P37). We’ll see.
‘Quel capitalisme voulons- nous?’ asked Sarkhozy. The wrong question I suggest. Rather we need a decentralised but global political economy that founded on and providing:
These terms are so well known that they scarcely have to be translated into any language. So, far none of the great ‘isms’ of the 20th Century have provided all three in abundance. The Nordic model was a beginning though.

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