01 (Adapted from What now? by Paul Hofheinz)  02 Personal Comment: Prospects for Socialism








Some Cautionary Remarks on the Prospects of Global Capitalism


(Adapted from What now? by Paul Hofheinz)


Capitalism, or market socialism as it is called in China, has been quite successfully adapted by the Chinese society, and has apparently brought much progress and welfare to its citizens. In general capitalism has encouraged greater competition and entrepreneurship, which have motivated producers to increase their ability to supply the market with greater efficiency, productivity, and creativity (Li Guirong, Chief Executive of Tsing Tao Brewery Company, Qing Dan, China). As a result industries become more efficient with products which are better made (Tu Guanshao, Chairman of Shanghai Stock Exchange, China). In a more general sense any country which opens itself to the world and takes advantages of global capitalism will have greater opportunities for growth  (Dr. Domingo Cavallo, Architect of Argentina's economic reforms). This is because capitalism is a matter of giving a chance to people by creating a meritocracy and encouraging them to excel. Stock options and ownership, business and professional values and so on tend to instil an excitement of growing. When people are given a chance to be meaningful and be rewarded for their efforts they will respond favourably (Jack Welch, General Electric Corporation, Chief Executive, Fairfield, Connecticut). It is true that capitalism has been able to open doors of opportunities to people, families, and countries, and more importantly to enable them find the truth through the increasingly open media. People are now able to know how other people live, how governments function, and how their neighbours do things. In general to know the truth about the  world (Mark Mobius, Templeton Funds, Singapore).


Apparently capitalism has truly come along way.  After the great depression of the 1930's the free market seemed almost finished. A centralized economy did sometimes seem more effective, especially if one compare the rate of growth in the Soviet Union at that time with that of the industrial west.  This situation however gradually changed as the economic system became more complex. Attempt at decentralization was not enough to maintain the competitiveness of  a command economy.  Merely giving more authority to make decisions and manage money was not effective enough in the long run.  Responsibility alone without the incentive of private property was not enough (Sergey Khruschev, Professor of Russian History at Brown University, Providence, RI, USA).  Another factor which eventually won the battle for capitalism could have been technology, which developed in a much faster way in free-market countries compared to that of countries where controlled-economy was practised. No one would argue against the fact that tremendous changes in international market economy, in which free-market economics played an increasingly important role, has been caused in considerable way by technological innovation. Compared to the industrial revolution, which involved a relatively small part of the population and took a long time to materialize, in the recent years billions in emerging markets have become affected. The information-technology revolution, and the exploding growth of internet application, will involve many more people, in a much faster way, and with a much bigger impact (Percy Barnevik, Chairman of Investor AB, Stockholm, Sweden). In fact this has helped capitalism to ensure its success through its growing inclusiveness of the population at large. No longer are markets considered as the other side or the opposite side in relation to the people. They are increasingly viewed as having us, the aggregate savings of the industrial world. Corporate computer networks and the internet are in the process of causing a radical shift in the way work is organized. As far as people are concerned the walls separating companies from the market are becoming more porous (Daniel Yergin, Co-Author of The Commanding Heights: The Battle Between Government and the Market Place That is Remaking The  Modern World). Still why capitalism has finally triumphed is difficult to explain.  The actual advantage of the principle why the market economy works better than command or control systems did not seem conclusive in the 1950's. Is it technology?  Globalization?  Failure to inspire  people to continue  improvement in its application? (Paul Krugman, Professor of economics at the Massachusetts Institute of Technology).


However, as it may be evident from the experience in Hungary, the transformation from a more controlled economy to a market economy is not going to be immediate and can often be painful. Changing from a heavily bureaucratic mode of work to a more entrepreneurial one is a fundamental change of culture, namely from one that is based on seniority and bureaucracy to meritocracy (Jack Welch). In fact capitalism as it is currently perceived and practised in Russia is one that has been founded on a mistaken notion. The market economy operating there is one based on an expanding robbery of the economy rather than an expanding activity of production  (Sergey Kruschev). The market economy that has emerged there is hardly a free-market system, since it is more like a system where money grabbing, with a get rich quickly attitude, has become one of its dominant features.  It is a newly born market oriented society which needs to learn that freedom to do anything  also carries some responsibilities. Since a capitalist is not only a person who has lots of money, but a business leader and investor who thinks, acts, runs a business, and distributes his gains fairly and reasonably (Nikita Mikhalkov, Russian Film-maker). In order for the market economy to take roots people should mentally change their attitude towards risks, since any investments always carries its associated risks. The risk of loosing money is even more evident in the stock exchange. With the growth of the market economy the risks of bankruptcies and unemployment also tend to increase. These will require improvement in bankruptcy laws and safe-guard institutions, such as unemployment insurance system (Tu Guanshao).


Greater spirit of competition should be encouraged and developed (Li Guirong). Since people must always be prepared for the competitive challenges they will face. Unless capitalism, as a rational system, develops human capital large numbers of people will remain marginalized. Only if the people are educated and prepared to compete will there be any hope for the eradication of extreme poverty and inequality. Focus should therefore be given on education and training opportunities in order to increase the contribution of capitalism to world progress (Dr. Domingo Cavallo). In  a deeper sense the concept and image of capitalism as something which is grasping and selfish must be overcome. Capitalism has been associated in many places with corruption, dishonesty, and theft. Therefore there must be a renewed effort to link the values of enterprise, growth, ownership, responsibility, honesty, industriousness, and fairness among men with a market economic system.  It is clear that the long process is not yet complete. Lots of work must be done by the people themselves, i.e., investors, entrepreneurs, employees, and employers in an environment of shared goals (Mark Mobius). Such an appeal may even be extended towards large corporations which are influential in the global economy. There is also an opinion which suggests that the emerging global economy tends to bring many things which could be detrimental to consumer, environmental, and worker rights.  The role of big corporations in articulating the new General Agreement on Tariffs and Trade (GATT), and pushing for its world-wide acceptance, often tends to result in putting one country against another and driving down standards across the board. Such a behaviour on the part of the large corporations, in this new golden age of greed, will not last forever.  Any injustice pushed to the extreme will eventually generate a counter reaction. These large corporations should beware that they have been  successful not because of capitalism, but because of democracy. As a social-political system democracy has been able to give us broad public education, enforceability of contracts, and proper rule of law. Therefore as an open system it tends to favour good business and not to favour bad business. Capitalism, in a well functioning democracy, will create a society in which mere commercialism will not become its dominant dogma (Ralph Nader,  Consumer Activist, Washington DC, USA).


Another worry about the future prospects of capitalism is related to the issue of social behaviour.  It has been pointed out that too much focus on enhancing shareholder value may actually have some unpleasant social consequences. As the global shareholder becomes increasingly more demanding the pressure on companies and fund managers to be in the top ranking of performance will also increase.  As performance becomes more transparent and information  more accessible there may be no limit on how  far this demand for success will go (Daniel Yergin). Consequently, the internal logic of capitalism could eventually become the source of its own problems. A system built on selfishness can not inspire individual idealism and willingness to sacrifice out of the system.  No one may eventually be willing to die for a good cause. If that happens how could then mankind jointly manage this still dangerous world (Paul Krugman). On a more conceptual level the question may also be asked what would the absence of competition to capitalism result in. One could legitimately worry that the lack of competition, from an alternative system, to a system which thrives on competition, could be a disincentive to improve the system further. Apart from that if business success becomes the most important value, over and above other values such as art, personal integrity, friendship, and relationship, then much in life will be truly lost (Gabor Boyar,  CEO of Graphisoft, Budapest, Hungary). Being the only workable system it is now very hard for capitalism to have an inspirational sense of winning, since there are no longer any serious opponents. The future may therefore suffer since there are no more dreams and utopias, no matter how far-fetched they may be, to inspire the society (Erno Rubik, Hungarian  inventor of  the Rubik's Cube).


Even if capitalism could successfully satisfy all the concerns stated above, it could still be undermined by more serious challenges.  Rising trade tensions may pose the largest threat to global capitalism as the share of emerging markets of international trade in industrial products continue to grow. In 1970 the share of the emerging markets was 5% of international trade in industrial products. By the late 1990's it is already over 25% and is expected to reach around 50% or more within 15 to 20 years. Unless the industrialized countries move up the technology ladder and become a service society, thus effectively leaving their sunset industries and agriculture, the problem of trade imbalance will become more and more severe. If this situation leads to the adoption of protectionist measures by the industrialized nations then the system itself will be hurt (Percy  Barnevik). Furthermore it is fundamentally true that capitalism is still facing two big challenges, which nobody knows yet how to overcome. The first challenge is the systemic crisis which seems to be inherent in the system. Although a great depression of the 1930's is not now likely crises are still far too frequent and severe. Therefore a self-stabilizing global market economy does not yet exist.  The second challenge, which is more fundamental, lies in the absence of any self-regulating mechanism by which capitalism can take care of the loosers or the less successful ones. If  the so-called loosers, from whatever calling or profession, are not rewarded for their justified contribution to the system, and the society, there will be acute divisions between and within societies.  Growing income inequality could spoil and undermine the successes of capitalism.  Relations between nations, as well as sectors within  a society, could become divisive and fractious if the rising benefits of capitalism are not shared by the less advantageous and competitive ones (Lee Kuan Yew, Senior Minister, Singapore). Therefore, will public approval swing back away from free-markets?  It is possible, but only if capitalism fails in at least five things. Firstly, for the system to deliver the goods in terms of standard of living, employment, and gross domestic product. Secondly, for the system to maintain its social and political legitimacy by its transformation into a system that is fair, equitable, and just. Thirdly, for the system to interact creatively, constructively, and positively with every national and cultural identity. Fourthly, for the system to anticipate and overcome the potential for clash between the markets and environmental as well as social concerns. Fifthly, for the system to adjust the markets in the decade ahead to tremendous demographic shift towards an increasingly ageing  population (Daniel Yergin).



Personal Comment: Prospects for Socialism


Even with the continued success of capitalism, it is surprising that socialism still survives with a serious appeal to many people from different walks of life. In fact, many would  argue that even with its tremendous successes capitalism still lacks any deep-seated sense of idealism. Socialism, in whatever form and expression, is frequently offered as an answer to that deficiency, though perhaps not as a total replacement. Therefore, it is likely that socialism in the future may increasingly be regarded as a complement to capitalism, rather than its opponent. It may be possible that from then on people would tend to evaluate one market economy from another by the degree of its social mindedness. Only if capitalism can be transformed into a system that is accommodative and inclusive will it be considered truly successful. In any attempt to redefine, reposition, and reactualize socialism it should be remembered that socialism has always historically been flexible. As an ideology it is no more than a way of thinking which is based on a certain degree of idealism and consistent vision of a fair, equitable, and just society. Therefore, being pragmatic and realistic, any proponent of socialism would consider it as a system that propagates a multi-dimensional program of democratic-participation. In its modern form it is neither the communal socialism of the anarcho-syndicalists nor the scientific socialism of Marxism, although it may freely borrow from their historical concerns and considerations. In a nut-shell socialism will therefore be defined as a committed approach to diverse social problems, which include issues from a deep-seated desire for human rights, democracy, and social justice. Thus, socialism is a socio-political way of thinking, which should necessarily be contextual as well as empirical (29/10/1999).




[Ben Poetica] - [Karya Carita]



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