Current thoughts on Capitalism -August 1, 2012

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In one of its recent issues The Economist suggests that “most policymakers and economists believe that the rich Western economies have suffered a mechanical malfunction. With the right monetary, fiscal and regulatory tools, the growth machine will whirr into life. Others think the West’s true malaise is not mechanical but moral: a love of money, markets and material things.

Two recent books, “How Much is Enough” and “What Money Can’t Buy” are “well-argued versions” of the second view. Robert and Edward Sidelsky a father and son pair of British academics, state that in the rich world the modern economic problem is how to live well amid plenty, not how to survive amid scarcity. “Yet the West still chases slavishly after ever-higher gross domestic product, a purely material measure that takes no account of the blessings of nature or leisure”. Capitalism they note has “made possible vast improvements in material conditions”, but it also fuels human insatiability. One way it does this is by “increasingly ‘monetizing’ the economy”.

Michael Sandel a Harvard philosopher is “vexed” by monetization. In “What Money Can’t Buy” Sandel poses a single question: has the role of markets spread too far? He argues that it has and packs his book with a number of examples. “Some such as the sale of a poor man’s kidney for transplanting into a rich man’s body will make many people squirm. Others such as the sale of naming rights for sports stadiums may yield only a resigned shrug.” Sandel does not say precisely where he thinks the limit should be. That should be left, he hopes to public debate.

The Economist thinks that “How Much is Enough” is a good question. “Even if just now the West could do with more, not less, GDP, the pursuit of wealth for its own sake is folly. Anyone who sets store by Capitalism and markets will find both books uncomfortable reading. They should be read all the same.”

Following the financial debacle in the US of 2008 about which a considerable body of financial literature already has come into being and the global reverberations that the event engendered, it is not altogether surprising that Capitalism, the reigning economic philosophy in the West and most other countries, has come under increasing scrutiny. The prolonged travail in the European Union where the economies of the southern European countries are tottering, and where the future of the economic edifice erected in the EU over more than half a century is under considerable strain, has added to the immediacy of the debate. This is no bad thing because if Capitalism is to have a longer shelf life than its nemesis, Communism, it will have to be reset to cater to the urgent demands of the 21st century. The next report will focus on an analysis of how capitalism can be reset to gain greater public acceptance and confidence and continue to be regarded as the favored vehicle for global economic advancement.

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