Mar 3, 2010

Is capitalism about to die? - This is Money Blog

I've been carrying around this crumpled old scrap from the Daily Telegraph for a several weeks now - it's an extract from former World Bank chief Joseph Stiglitz’s new book, Freefall.

Admittedly, carrying around cut-outs of fading, coffee-cup-stained articles that look interesting has become something of a messy habit of mine.

But with good reason, I might add: these tit-bits, I feel, are worthy of sharing – and debating - with you, our wonderfully opinionated readers.

You see with this one, the influential American economist Stigilitz doesn't get ‘sidetracked’ by debacles such as the banking meltdown, various government debt piles or house-price-crashes, as the British media sometimes does. Instead, he penetrates right to the crux of an idea that''s shown signs of sprout among even the most Westernised economic thinkers: our current capitalist system is in dire need of change.

In an apt sort of way, his argument sees our system akin to the crumpled Telegraph parchment that’s lined my pockets these past weeks. It's been stretched. Roughed-up. Exposed for weakness. Unable to go back to the highly efficient, pristine condition of yesteryear (or last week in the case of the scrumpled paper).

In short, we need to start afresh.

The analogy just about fits, doesn’t it? Yet, what had me ogling so fastidiously the page - and then stuffing my pocket with it for later perusal - was the way Stiglitz clothed this argument.

The following sentence almost leapt off my desk, screaming and shouting. He says: 'A crisis that began in America soon turned global, as tens of millions lost their jobs worldwide – 20m in China alone – and tens of millions fell into poverty.’

Yeah. That’s it. At least he’s being honest. Blast those pesky Americans for causing us so much misery...

But hang on a second, it’s too easy to blame worldwide collapse on a touch of sub-prime mortgage madness in Southern Texas, isn’t it?

Well, yes it is. The disturbing reality is that our whole system’s broke – and Stiglitz agrees. Flea-infested capitalism is responsible for the crisis, not ordinary homeowners tithed into bankruptcy. Sticks of financial dynamite – the real cause of our meltdown – had been smuggled underground in all modern capitalist nations, not just Obamaland. The gunpowder just needed a match.

From here on in, Stiglitz tells an intriguing tale. He says: ‘The current crisis has uncovered fundamental flaws in the capitalist system.’

‘It’s not just a matter of flawed individuals or specific mistakes, nor is it a matter of fixing a few minor problems or tweaking a few policies.’

‘It is said that a near-death experience forces one to re-evaluate priorities and values. The global economy has just had a near-death experience. The crisis exposed not only flaws in the prevailing economic model but also flaws in our society. Too many people had taken advantage of others.’

‘We have gone far down an alternative path – creating a society in which materialism dominates moral commitment, in which the rapid growth that we have achieved is not sustainable environmentally or socially, in which we do not act together as a community to address our common needs, partly because rugged individualism and market fundamentalism have eroded any sense of community and have led to rampant exploitation of unwary and unprotected individuals and to an increasing social divide.’

All this is summarised neatly when he says: ‘clearly, the pursuit of self-interest - greed – did not lead to societal well-being’.

Right. And don’t we all know it.

But what hope for the future? He continues: ‘There is no going back to the world before the crisis. But the questions are, how deep and fundamental will the changes be? Will they even be in the right direction?’

‘We now have the opportunity to create a new financial system … that will create meaningful jobs, decent work for all those who want it, one in which the divide between the ‘haves’ and the ‘have-nots’ is narrowing, rather than widening; and most importantly of all, to create a new society in which each individual is able to fulfil his aspirations and live up to his potential, in which we have created citizens who live up to shared ideals and values, in which we have created a community that treats our planet with the respect that in the long run it will surely demand.’

I’ve already mentioned that I rescue these newspaper cuttings because they seem worthy of debate. And in my view, Stiglitz’s social critique absolutely demands it.

So what do you think? Is our current economic model to blame for our modern woes? And would radical change to it heal an increasingly broken, unequal society?

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