A few days before the annual gathering of business and political elites at the World Economic Forum at Davos, British prime minister David Cameron set out his vision of capitalism that is popular and responsible. At a time of acute crisis, Cameron put up a staunch defense of capitalism as he asserted that open markets and free enterprise were the best imaginable force for improving human wealth and happiness. He described them as the engine of progress to lift people out of poverty and give them opportunity. “When open markets work properly,” he said, “they create morality, because there is something for something.”
Can today’s capitalism be responsible? Can it be popular in the sense that people in great numbers embrace it and benefit in a fair way? Distinguished British Marxist historian Eric Hobsbawm does not think so. In a sharp critique, Hobsbawm made the point that capitalism as practiced in the last 40 years was all about growth and profit and not much else. The “trickle-down theory” associated with free enterprise and open markets has failed. We have again entered an era of mass unemployment, poverty, malnutrition and disease, and wars. The root cause of inequalities lies in the fact that the powerful in society have engineered systems that suck most of the wealth up rather than allow it to trickle down. Capitalism has become a distorted and twisted version of Adam Smith’s original idea.
Technological advances, particularly since the 1970s, have massively and rapidly altered the capitalist system in one crucial respect. As Hobsbawm suggested, computers and robots have created a large surplus of people around the globe. And capitalism, which is about growth, profit and speed of production, is unable and unwilling to deal with the surplus of humans.
Agriculture, automobile and shipbuilding industries once employed workers in their millions or more. Today, they employ a tiny proportion of the population. Feudalism, which preceded modern capitalism, and communism, which competed with it, engaged many more people. Communism failed because, despite all its idealism, it was conservative, nationalistic and coercive. The capitalist system suffers from the same type of orthodoxy today. It is polluted by narrow individualism and nationalism.
In Britain, with business closures and job cuts in the private and public sectors, three million unemployed and many more under-employed or simply staying home, Prime Minister David Cameron’s message to people is, “Don’t complain about welfare cuts, go and find work.” Profit-driven manufacturing practices and outsourcing have brought about a collapse of the job market. To tell vulnerable people to “go and find work” is a contradiction in itself. It is a serious dereliction of responsibility by politicians who are viewed by many to have contributed to the present crisis.
Once fertile landscapes of capitalism, the United States and Europe, are barren. The race for control of energy resources is increasingly desperate, affecting foes and friends alike. The new cold war around Iran and the Persian Gulf has escalated to a point where China, India and Russia, three main Eastern powers, are drawn into open confrontation with America and the European Union. The Eastern powers are refusing to obey the Western sanctions regime against Iran, driven by U.S. law and outside of the United Nations. Washington’s offer to compensate the Iranian supplies lost with extra crude from Saudi Arabia and other U.S. allies will inevitably give the United States more leverage on energy supplies to China and India. These countries find it unacceptable.
The world’s only superpower is no longer credible if it cannot force others to follow its writ. But that scenario is before us, because capitalism has become irrational and sick. It is looking to transfer the cost of securing its own interests to others who are not prepared to accept that cost. In a candid admission, the Chinese ambassador in Britain, Liu Xiaoming, said that his government had to think of nearly half of China’s 1.3 billion population living in the countryside, and more than 150 million people earning as little as a dollar a day.
Like China’s overall growth in percentage terms, India’s growth, too, is impressive. The proportion of Indians living below the poverty line has dropped from about 60 to 40 percent in two decades. But the story it tells is partial. The latest available World Bank data shows nearly half a billion Indians living below the international poverty line of 1.25 dollars per day, and their number is not falling. Half of the children are underweight and 45 percent under the age of three suffer from malnutrition.
Inequalities have worsened alarmingly while corporate predators like Wal-Mart make an aggressive push into China and India. The gap between India’s richest and poorest states is nearly three-and-a-half times. As a result of government policies, there have been dramatic rises in the prices of hybrid seeds and fertilizers. In a country where 60 percent of the population is directly or indirectly dependent on agriculture, more than 200,000 farmers in debt have committed suicide in the last 15 years. And the number continues to rise.
The India government’s recent move that would have given unprecedented access to mega retail houses like Wal-Mart to the middle-class market, amid widely feared consequences for small farmers and merchants, had to be put off, at least temporarily, following a huge national outcry.
In their anxiety to move India from the Soviet-style economic model to the U.S. model, and haste to transform the country into a superpower, successive governments in Delhi have been tempted to go to very significant lengths. But the capitalist model has become distorted and twisted. Having wreaked havoc at home, free-market capitalism seeks to penetrate societies where many more vulnerable people need greater protection. Only governments acting responsibly can provide that safeguard.