Upping the anti.
Books challenging capitalism are proving hugely popular, reflecting concern that the global economic system is simply failing to deliver. Is this a flash in the pan, or does it point to deeper discontentment? Lawrie Holmes investigatesWhen the Berlin Wall came down in 1989, a wave of euphoria engulfed the millions of people who had been on the wrong side of the Iron Curtain. Repressive communist regimes that had been endured in eastern Europe for almost half a century were revealed as bankrupt, both financially and morally.
Despite the triumph of capitalism, which was soon in full flow in post-Soviet Russia and Ending its own compromise with post-Mao communism in China, doubts have set in. Recently, a number of influential authors have questioned some of capitalism's fundamental principles. Last year Thomas Piketty struck a chord with Capital in the Twenty-First Century. The Parisian professor sought to debunk what he saw as the myths surrounding the free market's ability to generate and distribute wealth effectively. And last year Naomi Klein launched an attack on what she believes is the business world's determination to destroy the planet in This Changes Everything: Capitalism vs The Climate.
While both books are bestsellers, they don't seem to be addressing a clearly identifiable mass movement. In the US in the 1930s, for example, there was vast popular support for those prepared to stand up to the business interests and all-powerful financiers who were revealed to have profited from the first world war and to have played a part in the depression brought on by the Wall Street crash of 1929. But, as details of state-backed atrocities emerged from the Soviet Union, the lack of a credible competing ideology to capitalism eventually dissolved much cultural opposition.
Soon the commercial clout of America, embodied in Fordism (the system of mass production named after car magnate Henry Ford), started a period of prosperity in the US and western Europe, where the economic miracle of West Germany became a beacon of capitalist values. Throughout that time, the counter-cultural elements of society focused on protesting against commercial interests that were benefiting from conflicts such as the Vietnam war, but the improvement in living standards, fuelled by rampant consumerism, ensured that most people remained supportive of the capitalist system.
Nevertheless, a growing alliance of interests began to challenge the values of the western economic order, espoused by the International Monetary Fund and the World Bank. This alliance, devised in 1944 to regenerate the global economy after the second world war, was considered by some to be thrusting aggressive and inappropriate policies down the throats of impoverished developing nations. The Latin American crisis that started in the 1980s seemed to suck a lot of bankrupt countries into this vortex.
The anti-capitalist movement grew rapidly in the 1990s, venting its anger at the new world order, represented in its eyes by the World Trade Organization (WTO). The "Battle of Seattle", where thousands of demonstrators and police fought outside a WTO summit in 1999, was the campaign's high-water mark in terms of support. Its momentum was stalled by the jihadist attacks on the US two years later, which ushered in security measures that discouraged large-scale protests.
Intriguingly, the Asian financial crisis of 1997-98 and the Russian rouble collapse of 1998 did little to dampen widespread enthusiasm for capitalism. The Enron and WorldCom accounting scandals that followed the 2001 dot-com bust, when the equity markets plunged from historic highs, also failed to dent support for the market-based ideology. If anything, the markets' ability to bounce back in the ensuing years meant that few voices of dissent were heard.
Street politics
What arguably should have changed everything was the wave of bad debt and defaults that resulted in the global financial crisis of 2007-08. Just as the US sought to get through the crisis using extreme remedies--including quantitative easing --a second rupture exposed the fragility of the eurozone's economic model. Southern Europeans, who experienced a severe decline in living standards after the eurozone crisis felt most extremely in mass youth unemployment responded by mounting street demonstrations against austerity measures. Spain's Indignados movement, which spawned the left-wing political party Podemos, was perhaps the most vocal protest group. Greece has also been rocked by unrest and, as FM goes to press, an election is being held that is likely to see a backlash against anti-austerity policies.
Around the world--but especially in the US and the UK, whose economies have been recovering gradually--the Occupy movement has flourished intermittently. Occupy (not to be confused with its Hong Kong namesake, which briefly challenged Beijing's hegemony over the former British colony) has a strong philosophical angle. Anyone who ventured into the financial districts of New York and London after September 2011 could not miss the hastily assembled tented villages that were deliberately set up on the home turf of global finance. The Occupy demonstrators pushed for debate on how the global financial system had nearly collapsed and they also questioned the broader political system underpinning it. Despite reaching peak interest in late 2011, when organisers claimed to have set up protests in 951 cities in 82 countries, Occupy's energy ebbed after the camps were forcibly dismantled. But it has since claimed victories, such as lobbying successfully to persuade the city of Buffalo, in New York State, to move $45m out of an account with banking giant JP Morgan Chase and transfer that money into a smaller regional bank.
The movement can still inspire mass action. Last year, in two big demonstrations in London's Parliament Square, activists mobilised by political offshoots Occupy Democracy and Anonymous protested against austerity measures. The rallies drew large numbers, possibly attracted by the appearance of popular comedian Russell Brand, who had recently penned an anti-capitalist tract of his own. Inspired by Piketty's work, it was simply called Revolution.
'In step with the Zeitgeist'
What can be made of the vast popularity of Piketty and Klein? "It seems like at least some of their commercial success can be explained by being in step with the Zeitgeist," says Ansgar Wohlschlegel, senior lecturer in economics at Portsmouth Business School, who draws a distinction between Piketty's and Klein's books. "While Klein's is founded in political activism that has much in common with the anti-globalisation movement, Piketty's is based on economic research published in leading peer-reviewed academic journals."
Wohlschlegel observes that there is "widespread frustration with many features of contemporary economic policy. These include the massive deregulation of the financial sector, which contributed to the global financial crisis; excessive reliance on fiscal austerity in the aftermath of the crisis; and, generally, the special treatment that large multinational companies obtain by lobbying. None of these features is supported by economic research to be conducive to an economically efficient form of capitalism."
He continues: "The basic idea of a market economy is that high performance is rewarded, which necessarily implies some income inequalities. But, as long as these merit-based inequalities are not excessive, most people would not perceive them as unjust. It is the problem of unequal chances caused by a failed political implementation of capitalism that bothers people and creates the fertile soil for the anti-capitalist movement. In this sense, it would be socially beneficial if established parties were to react to that movement by regulating the market prudently, guided by economic research."
Sam Halvorsen, a lecturer at University College London, says that, although activists may draw on Piketty's work for inspiration, the thrust of debate is not limited to economics. He argues that the anti-capitalist movement in the UK is looking at broader political goals, following the lead of southern European peers. But he says that tensions will be created by the splintering of the UK movement into those committed to grass-roots policies and those wanting to align with the Green Party, which is expected to achieve its best result so far in this year's UK general election.
"Although these issues are not insurmountable, sceptics will argue that indulging in mainstream politics is akin to participating in a broken system," Halvorsen says.
He accepts that those now questioning the market-based and orthodox political systems live in a different era from the millions of impoverished Americans who voted overwhelmingly for Franklin D Roosevelt's new deal to stimulate economic recovery in the 1930s. This set in train a series of measures to curb capitalist interests--for example, the Glass-Steagall Banking Act of 1933, which prevented commercial banks from acting as investment banks. This was repealed by Bill Clinton's administration in 1999--a measure that many believe led to the 2007-08 financial crisis.
While many people are calling for unfettered capitalism to be brought to heel, there is also a view that broader assaults on the global economic system are flawed. Peter Oppenheimer, a former chief economist at Shell International Petroleum, supports greater controls on the financial industry, which he sees as too powerful, yet he is scathing about anti-capitalism.
"Protesters taking aim against globalisation don't have a strong line of argument, especially on climate change. Do you want to bankrupt oil companies? It doesn't add up to something constructive," he says.
Oppenheimer believes strongly--as does the World Bank Group's MD, Sri Mulyani Indrawati (see page 22)--that the free market system has brought millions of people out of poverty, especially in China. But he also acknowledges that few people have questioned that country's economic miracle. If China's GDP growth slows further and Russia's economic position grows more desperate, the arguments against their brands of capitalism may eventually be heard. At that point, dismay about the ability of the market-based system, in all its forms, to deliver sustainable results may resonate globally.
Illustration by Bill Butcher
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| Title Annotation: | economic aspects of financial market in Europe |
|---|---|
| Author: | Holmes, Lawrie |
| Publication: | Financial Management (UK) |
| Geographic Code: | 4E |
| Date: | Feb 1, 2015 |
| Words: | 1607 |
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