Communism officially died in 1991 leaving the world to prosper under capitalism. But in 2008 capitalism became bedridden under the strain of US banks’ collapse that quickly infected the global system. Everyone has been pointing fingers at who’s to blame and capitalism’s spokesmen have become defensive saying it’s not the source of the problem.
In fact, they say, the United States Government International Monetary Fund-backed solution of trillions of state dollars injected to revive the system amounts to socialism. They have revived arguments about libertarianism and individual rights in defence of the dogma that governments should never intervene in the market disrupting Adam Smith’s “invisible hand” that makes everything perfect.
It’s either that philosophical capitalism is shadow boxing with disgraced Marxism or is resurrecting communism to give itself an antithesis for legitimacy and for being. Or maybe we’re living post-history: Religious thought ended with the writing of the Bible; political thought ended in the 19th century and theories of the free-market ended with Adam Smith. Everybody has a dogma.
One dogma is that markets behave according to the laws of nature and are obstructed by the intervention of governments. Prominent Jamaican accountant Dennis Chung in a commentary in the local Observer newspaper argues, “It was government intervention that put the spoke in the wheel of capitalism, eventually leading to the collapse of the markets.”
Chung, like may others places the distilled market culture, philosophical capitalism, as the source of human relations rather than the product of thousands of years of evolution of Western civilization which birthed it.
In the world of Chung and company we could argue that the market predated men when it was in its pristine state. But modern markets originated and thrive with the protection of the state and its laws. Markets in prehistory were as nomadic as the wandering families and tribes – literally here today and gone tomorrow. It must have been the growth of towns, cities and city states that gave markets permanence.
Markets existed in all embryonic civilizations – African, Asian, European and pre-Colombian American. Markets in themselves did not mean economies. It is a good guess that economies grew out of an agglomeration of interests between communities. Seaside dwellers trading fish for corn with land tillers would not have created the complexities seen in the dazzling lights of the New York Stock Exchange.
Even when the fishermen decided that they’d use sea shells as the stored value of exchange for their catch when the farmers were short of corn, there was still no need for computers other than fingers and toes to settle matters.
But when fishermen and farmers banded together to fend off encroaching warriors, new requirements were placed on the social relations. The mere trade in fish and corn could not bind embryonic society. At that stage there may well have been serious debate on how much fish and corn each soldier was entitled to as well as to his woman and children if he died fighting for the clan.
It is possible that if the clan were led by a holy man or a warrior chief who lay emphasis on the value of protection, the tithes or taxes would have gone to military families.
Even at this elemental stage, contending interests are determining that the fruits of production and trade are not conducted in a laissez faire environment but subject to the rules of the dominant or influential group.
Liberal democracy, individual freedom and the market
“…It was not the excesses of the market that caused the challenges in the market but rather the excesses of politics,” argues Chung and those who see the market’s magical natural hand as the sole arbiter of social relations within national boundaries.
“It is a plain historical fact that the treatment of man by man became conspicuously more humane side by side with the rise of capitalism,” wrote Prof. Donald B. Billings of Boise State University Department of Economics in a 1983 article, “The Moral Case for Competitive Capitalism” in the Foundation for Economic Education’s periodical “The Freeman”.
There is an implied causal relationship between the abolition of slavery and the rise of racial and gender equality. In Chung’s and Billings’s world, capitalism as we know it birthed morality and justice. However, if legal codes which emphasized morality and justice did not exist in non-capitalist societies there would be some credence to the implied contention.
If we ascribe historicity to the Bible and in particular look at the the Israelitish Ten Commandments, which, among other things, recognized individual property rights, delineated working hours and codified murder, adultery and other social and human rights issues, we see that modern notions of morality predated the contemporary free-market. Even before the Commandments we had Abraham buying land from the Hittites, far predating the medieval enlightenment in Europe.
It cannot be denied that the today’s global economy grew out of early modern times mercantilism, an early form of state-sponsored and protected capitalism: the sovereigns of Europe with the approval of the Roman Catholic church, arrogated the world to themselves and divvied it up with royal patents that even gave the Western hemisphere discoveries to Spain and Portugal.
Europeans were seeking routes to control the spice trade with Asia and the crowning result has been the arrival of American civilization that consummated the marriage of the ideas of religious and civil liberties and free markets.
“…The large-scale social goal of unregulated capitalism is to produce wealth, that is, to make the national economy wealthier and more affluent than it normally would be,” wrote Chung. In this scenario this “unregulated” natural thing is working consciously towards an end: making the national economy wealthy.
We live in class society not a capitalist one and this society is dominated by the capitalist class that sits atop the community of interests. In a class society organized along liberal democratic lines, people can freely group together to pursue their interests as political parties, interest groups, companies, cooperatives, unions (credit, trades etc). Government mediates between the disparate interests.
In a society dominated by capitalists the view that holds legal sway is that everyone must pay for what they want or do without. Everyone is deemed to be equal before the law and to have equal opportunities. It is survival for the fittest. There is choice but the choice of the quality of health care for example, like that of transportation is limited to affordability.
Laissez faire capitalism says all choices must be determined by the marketplace and making even some basic services such as health care available in a humane way is destructive of all freedoms, diluting our freedom of choice. What then is the aim of creating national wealth if it is solely to remain concentrated in the hands of the super acquisitive?
But we have wandered far from why working people buying houses in the USA, ended up homeless, jobless and saddling the blame for the collapse of not just their domestic economy but that of the entire world in train. These people, are to blame for the pyramid scheme that has come tumbling down and not the greedy who were paring the fat from every little sinew of their skeleton, the ones who sold the mortgages twenty times until no one knew exactly who owned what.
In the October 9 edition, Time magazine’s Peter Gumbel proposed the possibility of “a reexamination of the freewheeling, free-market practices — what the French like to call ‘Anglo-Saxon capitalism’ — that led to this crisis.”
Gumbel noted that French President Nicolas Sarkozy initiated that debate in a speech in Toulon on Sept. 25, where he said the crisis marked “the end of a world that was built on the fall of the Berlin Wall and the end of the Cold War — a big dream of liberty and prosperity.” With regards to capitalism, Sarkozy called for a “new balance” between the market and the state, pronouncing: “The idea that markets are always right was a mad idea.”
The world financial system built on World War II Bretton Woods Agreements was Keynesian influenced with its rules, institutions and procedures to regulate the international monetary system. While the Bretton Woods planners all favored a liberal system, one that relied primarily on the market with the minimum of barriers to the flow of private trade and capital, with the Great Depression and the war strong in their mind, they also agreed that the liberal international economic system required governmental intervention.
The notion had therefore been established of a socialized global economy to regulate trade and monetary matters which would somehow facilitate domestic freewheeling.
The Fund’s response to most national crises where countries’ expenditures have exceeded their income has typically been to prescribe a bitter dose of restrictions on government spending, privatization, freeing of exchange controls and widescale deregulation of the economy, supposedly as a stimulus to production and trade. For most developing countries this has meant widespread dislocation for the poor who lose educational, health and other public services.
For this global crisis the IMF, the USA and the governments of the European Union and other developed countries are to flood capital into the markets so as to consciously stimulate economic activity – spending and demand. Adam Smith’s “invisible hand” apparently does not work at the global macroeconomic level.
Michael S. Barr, a professor of law at the University of Michigan, and Gene Sperling, the national economic adviser to President Bill Clinton from 1997 to 2001, wrote in the October 18 edition of the New York Times, “for those who championed a hands-off approach to the supervision of finance, the economic meltdown should have prompted reflection on the value of common-sense regulation. Unfortunately, a growing chorus in conservative circles is trying to shift blame for the current crisis to the poor and the advocates for the poor.”
“Our leaders irrationally promoted home-buying, discouraged savings, and recklessly encouraged borrowing and lending, which together undermined our markets,” Peter Schiff, who was economic adviser for Ron Paul’s 2008 US presidential campaign, wrote in the Washington Post. So, the same people who are saying greed is what propels the market blames the government for encouraging acquisitiveness – a suggestion that the government, through regulation, should be the invisible hand encouraging equilibrium.
But it could just be that no one is to blame as we’re merely watching one philosophical spouse being subsumed by the other rather than an evolution to Marx’s withered state or the statelessness of radical free-marketers.