What goes wrong with capitalism?
BEIJING, Feb. 21 (Xinhuanet) - The whole western world is suffering
from a chilly winter as debt crisis, high unemployment have compelled
mass dissatisfaction to spread all over the countries.
What goes wrong with capitalism? It seems that politicians,
economists, bankers and corporate leaders in the western world all start
to reflect and search for an answer.
Capitalism under fire
Since the beginning of 2012, the flaws of capitalist system have been
under a fiercer fire of the international community against the backdrop
of faltering global economic recovery. Reflection on capitalism even
became a theme throughout the five-day World Economic Forum in Davos
last month, which brought together the world's political leaders and
business elites.
 In the meantime, discussions on capitalism have also made headlines
in western mainstream media, such as the Financial Times, Time Magazine,
and Business Week.
The Financial Times even launched an editorial series called
"Capitalism in Crisis," examining the future of capitalism, which would
have been impossible a few years ago. The widening gap between the rich
and the poor, high unemployment rates, the ongoing financial crisis and
a gloomy economic outlook in western countries have made more and more
people discontent with capitalism.
The most dramatic manifestation was probably the "Occupy Wall Street"
movement in the United States, where people took to the streets to vent
out their anger against the greed of bankers and social inequality. A
recent poll in the U.S. showed that only 50 percent of the surveyed
reacted positively to the word "capitalism", while 40 percent reacted
negatively, according to the Financial Post.
Capitalism, which was supposed to "provide economic opportunity and a
better future for all", only brought enormous benefits to the top tier
of the society and made the rich get richer and the poor poorer.
A report by the Institute for Policy Studies in the US found that
CEOs in large firms earned 325 times more than their employees in 2010,
while in the 1970s, CEOs' paychecks were 30 times more.
About two-thirds of Americans now feel "strong conflicts" between the
haves and have-nots. The debate over income equality and fairness of the
tax code in the US got fiercer when Republican presidential candidate
Mitt Romney released his tax returns in late January. Romney and his
wife made 27 million dollars in 2010 and paid tax at the rate of 13.9
percent, a rate typical for those who made about 80,000 dollars -- a
classic example of how tax code "confers advantages on the rich."
More than in the US, the Occupy movement soon spread to the European
continent plagued by the spiralling debt crisis, where the public
discontent also exploded.
Debt-ridden governments in the Eurozone had to adopt austerity
measures and cut social welfare spending -- logically to hurt the poor
the most. In Greece, extensive scuffles erupted as late as last week,
ahead of a crucial vote on the new debt deal reached with international
lenders to avoid a possible default next month.
Critics worriy that the harsh conditions attached to the debt deal,
including new cuts on salaries and wages and layoffs of tens of
thousands civil servants, may fuel the recession.
After the Greek cabinet approved on Saturday evening a final
supplementary austerity package, Greece has seen increased reaction by
labour unions and ordinary Greeks.
In fact, they get where they are led by capitalism, and for a way
out, German Chancellor Angela Merkel said at the Davos Forum that "it is
time for a rethink" among European policy-makers. And capitalist
economies in Asia are in no better shape, particularly in terms of the
gap between the rich and the poor.
Take India for instance. India recorded phenomenal economic growth
over the past two decades under the guidance of capitalism.
However, it has the largest number of malnourished children in the
world and an unbelievably large proportion of poor people as 100 richest
Indians hold assets equivalent to about 15 percent of the country's GDP,
according to the Financial Times.
Deep seated reasons
In face of the global economic crisis which has just entered its
fourth excruciating year, capitalism seems to have failed to do what it
is supposed to do: provide economic opportunity and a better future for
all. Just as the former US Vice President Al Gore said: "While we
believe that capitalism is fundamentally superior to any other system
for organizing economic activity, it is also clear that some of the ways
in which it is now practised do not incorporate sufficient regard for
its impact on people, society and the planet."
An article published on the Financial Times by notable academic
Kishore Mahbubani points to three strategic mistakes in capitalism's
crisis. The first is to regard capitalism as an ideological good, not as
a pragmatic instrument to improve human welfare, he said.
Capitalism needs essential regulations and supervisions in its
function. However, many western governments forget to play a certain
role. What makes matters worse in the west is that it spawned a huge new
financial services industry that added no real new value.
This huge industry was able to "capture" the regulators' duty to
control and supervise its activities.
The second strategic mistake is to forget that for capitalism to
survive all classes have to benefit from it.
If capitalism was a winner, the capitalists became rich and the
workers should also gain.
Over the past three decades, as capitalism has become freer and more
globalised, the rich have benefited enormously while the many have often
been left with the crumbs. Last but not the least, the West made the
mistake of not educating its populations on the critical concept of
"creative destruction."
Economics textbooks correctly point out that when the automobile was
invented, the horse and buggy industry had to disappear.
While the West promoted the virtues of capitalism to the third world,
including Asia, it forgot to tell its own masses that they would have to
learn new trades and skills as new competitors arriving from emerging
market. Capitalism can never stay static. If you are not moving, you are
at risk, the article stressed.
Antidote to capitalism
Soaring deficits, worsening European sovereign debt crisis and angry
protesters of Occupy movement around the world have forced officials and
experts to rethink the way out of deep trouble. Defending against
criticisms on deficient capitalist system, some entrepreneurs in the
west claimed that the crisis theory of capitalism is groundless.
"We're going through a tough period, but there is no other system
that has improved humanity," Bill Gates told the 2012 World Economic
Forum Annual Meeting, adding that the world is "better off" because of
capitalism. Meanwhile, others thought that reform of capitalism seems to
be imperative.
Capitalism survived and thrived because it kept on reforming, TIME
magazine's journalist Michael Schuman said.
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