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What is the Future of Capitalism in the Age of Pandemic, Recession and Inequality?

Former Managing Director of Ahmedabad Stock Exchange
Feb 4, 2021 7:33 AM 3 min read
Editorial

Since the 2008 financial meltdown, capitalism has been subjected to an elevated level of scrutiny by many.

Now, the global pandemic has brought enhanced focus on the capitalist system. Millions of people are out of work and global growth has plummeted as economic activity grounded nearly to a halt for several months. Yet the stock markets remain at all-time highs and the bulls are over the moon. Central bank-sponsored liquidity flows and the low-to-zero-interest loans to prop up the economies and jobs are in fact boosting the stock markets. And the peaking stock markets seem to be mocking the misery of common people at large.

Increased demand is impacting food banks and feeding programmes all over the world, including in developed countries. Free ration and cooked food distributed by various agencies are calming the hungry stomachs of many people. In stark contrast, billionaires of all sorts are minting additional billions every day. The disjuncture between what is good for rich capitalists and what is good for society is starkly on display. What is good for human life is also starkly incongrous with calls to “reopen the economy” even as the virus remains uncontained.

It is clear enough that capitalism is currently beset by a number of structural weaknesses. Jobless growth has turned into job loss growth or growthless profits. It can be exciting to live in a capitalist society when there is a period of expansion occurring. When the economy decides that it is time to contract, then the recession can cause high levels of unemployment, more inequalities and a decline in the incomes and living standards of people at large. The trajectory of consumption-led industrialisation appears to be exhausted - there are fewer peasants to be converted to low-wage proletarians and there are fewer youth to be employed in factories. While digital economies, technology and automation are driving the wealth of capitalists sky high, the ordinary folks are at their wits' end with nothing to do and nothing to look forward to.

Capitalism does create wealth, but only for a few. A small group of families hold most of the wealth in any given economy and pass it on to their children to keep the value within the same group over multiple generations. Over time, this disadvantage causes the rich to get richer, while the poor continue to struggle to make ends meet. Even worse is crony capitalism. It leads to creation of a few private monopolies often propped up by state patronage and at the cost of state resources. Governments keep rescuing and boosting the big businesses through various tax sops, contracts and bailout funds. Small businesses and the informal sector, meanwhile, don’t receive such patronage, and individuals wouldn’t even get unemployment protection under the true lens of such crony capitalism.

 

What Awaits Us?

Italian social scientist and historian Francesco Boldizzoni in his book "Foretelling the End of Capitalism: Intellectual Misadventures Since Karl Marx", presents four kinds of predictions:

  1. There are theories of implosion, wherein capitalism collapses because of pressures that arise from the workings of its own logic.
  2. There are theories of exhaustion, which predict capitalism will “die of natural causes” - that it runs up against environmental limits or moral advances.
  3. There are theories of convergence, wherein capitalism and socialism become more and more alike, appearing as mirror images of modern rationality.
  4. Finally, there is “cultural involution”, wherein capitalism kills off the non-economic values that made it work in the first place.

The environmental problem, Boldizzoni notes, may represent a serious threat to human well-being, but it is not a threat to capitalism. After all, “capitalism has shown that it does not need clean air to thrive, but only air that is barely breathable.”

It is often capitalism’s defenders who laud its versatility and endurance. It can shrug off poverty, hunger, fires, floods, wars, pandemics, deaths of millions of people and the extinction of thousands of species. It will possibly even find new opportunities for accumulation of wealth in such miseries - the opportunities of rebuilding war torn countries,  producing medicines for epidemics, replanting the burnt-out forests and building low-cost houses for the poor in the slum lands.

The most successful economies in the world tend to be a mixture of different approaches, by combining the best concepts of welfare state with capitalist idealism. But how economic thinking will evolve in the post-pandemic world of abject inequalities and recession remains to be seen.

FIN.

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