Sunday, July 3, 2011

Reimagining Capitalism

The Nation, a US left wing monthly magazine asked an interesting question : if one had to reinvent American capitalism what should be changes  to make it less destructive and dominant, more focused on what people really need for fulfilling their lives? The question was put to a list of selected public thinkers, activists as well as influential people from business and finance.  The answers were a provocative sample of smart ideas as well as proposals to reform capitalism. But as W.Greiner, the Nation's editor (27 June) points out *, " the problem, of course, is that none of these ideas have any traction in regular politics. Both parties are locked in small-minded brawls, unable to think creatively or even to tell the truth about our historic economic crisis". 

The focus of many answers was on 'big government', not capitalism as such. The US political debate is imprisoned between Republicans who want less government and democrats who think that regulation will fix all problems. Despite a so-called recovery, the economic pathologies generated by unbound capitalism persist: falling wages and mass unemployment,  deepening inequality and the steady destruction of the broad middle class. The political system in the US and Europe alike does not have an answer for any of these.  W.Greiner notes : " at some point, it will become obvious that our economy will not truly recover until American capitalism is refashioned, stripped of its self-aggrandizing excesses and made to serve the interests of society rather than the other way around. As our commentators observe, this will require deep structural change, not simply new policies. Their essential approach is to reach into the guts of corporate capitalism and fix the wiring. That means changing both rules and operating values. It involves democratizing reforms that will compel business and finance to share decision-making and distribute rewards more fairly"

Among the proposals outlined for designing a new economy,  I'll focus on three main broad ideas.  The first one is to find an alternative to the profit maximizing corporate model and to declare their public mission as a primary goal above shareholder interests. This would require new corporate accountability vis-√†-vis citizens and an independent watchdog to supervise that corporations are fulfilling their goals. Furthermore, it implies employee ownership plans  to make corporations more responsible. 

The second one is not new- it consists of a tax to fight against financial speculation, which is known as the Tobin tax.  This would help to downsize Wall Street and other financial centres by discouraging reckless behaviour and raise funds for public use. Other related ideas include  " publicly owned state banks as a way to create the underpinnings of truly local economies across the country" and to protect pension savings  from wall Street.  Moreover,  investors who meet sustainability objectives should get  financial incentives. 

Third idea: how to give a decent job to everyone. There is no economic demand more urgent than putting people back to work.  This has worked in past times when the government created jobs through big federal programs and became an “employer of last resort” . This is a social emergency - billions of dollars can be deployed for sustaining wars in several parts of the world, so why not for creating jobs to build a cohesive society!

Can we reform capitalism in a moral sense?  The endless search for profit is incompatible with the pursuit of general interest and common good. If we just assume that capitalism is not based on profit maximization, then we are talking about a different system. In fact,  the 'Nation' is imagining something which does not resemble to  modern capitalism. Someone called it "inclusive capitalism"  but whatever it is called it implies a fundamental redistribution of power and resources, which requires in turn a stronger government that will put an end to maldistribution of wealth through its tax and spending programs. Government has to recover its economic levers that were abandoned in the era of deregulation which led to intolerable inequalities. Let's call it socialism of a new type. 
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