Runaway Capitalism, social justice and environmental sustainability

It was reported in the media recently that one of the wealthiest businessmen in India, Mr. Ambani has decided to spend one billion US dollars to build a 27 story residence in the heart of Mumbai overlooking the Arabian Sea!

We also hear similar stories about extravagant life styles of some of the other Indian businessmen. India is known to the world as a country characterized by unprecedented poverty concentrated in its largest cities and in the rural hinterland.

India probably has some of the largest shanty towns in the world where people live almost like animals, under appalling conditions.

Given such a situation, one might wonder how people who have accumulated unprecedented wealth within their own lifetime can be so insensitive to human misery around them and engage in such extravagant display of wealth stated Prof. S.T Hettige, University of Colombo.

India has long been a country characterized by extreme forms of inequality, its caste system being one of its obvious manifestations. Exposed to a liberal secular education, leaders like Nehru and Gandhi were determined to bring about radical change. Their ideas were firmly incorporated into the republican constitution that laid the foundation for independent India.

Their commitment to socialist ideas and centralized planning was no doubt a reflection of their disapproval of gross social inequalities that characterized the Indian society at the time.

It is the liberalization of the Indian economy in the early 1990’s that facilitated the rise of private capital in an unprecedented manner. The Indian sky that was dominated by the national carrier soon became too crowded with jets operated by a plethora of private airlines. Many Indian businessmen became millionaires and billionaires almost overnight.

Expensive cars, large luxury mansions, grand weddings, etc. became common place. People with money are not constrained to show off their wealth and engage in conspicuous consumption. This looks quite anomalous with the nature of early capitalism that thrived in Western Europe.

Max Weber was the other prominent theoretician, after Marx, to deal with capitalism as a social phenomenon. His extensive research and writings on the subject culminated in a theory that he felt could explain the rise of capitalism. Simply put, his argument was that capitalism thrived in societies where protestant ethics became the dominant ideological force.

According to Weber, early capitalists were constrained by protestant ethics that emphasized hard work and frugal living.

Historians have unearthed evidence to show that the wealthy in predominantly protestant countries like Netherlands were embarrassed by their riches and were careful not to display their wealth by resorting to conspicuous consumption and display. They in fact lived frugal and simple lives.

Some of these countries later embarked upon radical social reforms that effectively transferred wealth from the rich to the poor by way of comprehensive social investment programmes.

This was done by a social democratic state guided by a secular egalitarian ideology. This brings me to the next issue that appears in the title of the paper, namely, social justice.

For many conflict ridden countries in the world, peace continues to be an elusive dream. It has become a common practice today to rank countries according to a peace index. It is significant that the few most peaceful countries in the world are highly developed. These include Nordic countries, the Netherlands, Canada, New Zealand, Australia, Japan and Singapore.

On the other hand, the level of development does not necessary determine whether a country is just, peaceful or conflict-ridden. For instance, USA, one of the most developed countries in the world ranks low in terms of the peace index. In fact, the most critical factor seems to be the level of social inequality.

As is well known, in spite of high level of development measured in terms of per capita income, America displays a high level of income inequality devoid of major social welfare programmes.

What is common to all the countries that rank very high on the peace index is that they are all mature welfare states with a high level of social expenditure that helps narrow the gap between the rich and the poor.

A high level of welfare expenditure translated into comprehensive welfare measures creates sense of equality and social justice in mature welfare states. The consequent reduction in social unrest, crime and conflict often leads to a corresponding reduction in defence expenditure.

As is well known, defence expenditure in conflict- ridden state claims a major proportion of public expenditure, often leading to a substantial reduction in social welfare expenditure. Sri Lanka’s experience over the last three decades illustrates this point in no uncertain terms.

Defence expenditure today is much more than the entire allocation for social expenditure. Reduced social expenditure is bound to widen social disparities, leading heightened social tension, crime and violence.

This is what we experience in Sri Lanka today. Given such conditions, the general public demands greater protection, and this, in turn means, more expenditure on defence and internal security, less on social welfare.

The most recent wave of economic liberalization that has swept across the world has affected most countries, both developed as well as developing.

Unlike resource flows within a country, the movement of financial resources across the world cannot be easily regulated. Personal and corporate wealth can be transferred through market and other channels.

Governments, in particular, strong ones, attempt to intervene in some transactions to prevent change of ownership, but, such interventions do not seem to have a significant impact on market driven global resource flows.

Those who are operating in the global market place are often guided by their personal interests rather than concerns of their communities. Such a tendency has an adverse impact on welfare states that traditionally displayed a high degree of social solidarity and a sense of collective well-being.

Increasing market competition compels corporate entities to become more competitive and this often means cost cutting.

Moving into countries with low taxation and cheap labour is often the result. Many long established European welfare states have come under pressure to review their social protection programmes in order to face the challenge.

Expansion of capitalism into new territories like China and India, the two largest countries in the world, has intensified competition for natural resources like oil. The result has been an unprecedented rise in oil prices over the last two decades. Oil price has more than doubled after 1990.

Almost every powerful country is scrambling into areas with a high concentration of oil reserves such as Africa. Increasing oil revenues in African countries like Nigeria and Angola over the years have led to unprecedented corruption on the part of politicians and public officers there, while income inequality, poverty and conflict have become commonplace.

Oil starving, newly emerging capitalist countries like China do not seem to worry about such issues, provided they can secure guaranteed oil supplies to fuel their booming economies. Unconditional development aid is offered to governments in return for a steady supply of oil.

Those countries and organizations that advocate good governance and human rights often fade into the background and the familiar pattern of African development is more than likely to continue.

The newly emerging market economies in Asia and elsewhere operate within a global economy that reinforces certain patterns of production and consumption. Production of goods and services are increasingly shifted to countries where labour is cheap and regimes offer favourable conditions to investors.

Much of the goods produced are constantly exported to Western and other markets where wasteful mass consumption fuels their domestic economies.

On the other hand, increasing wealth in the new economies, no matter how unequally it is distributed, creates consumer demand for local produce as well as expensive goods and services produced in the developed West. It is against this background that environmental sustainability has become a big question everywhere.