In the wake of the Great Recesssion, does capitalism have a future? Speakers at this morning’s opening session on Day 2 of the OECD Forum seem to think it does, however it might be “capitalism, but not as we know it”.
Both Anatole Kaletsky, an economics commentator at The Times newspaper, and Lord Robert Skidelsky, the British economic historian, have been arguing that we may now be entering a new phase of economic history – what Mr. Kaletsky calls Capitalism 4.0.
They argue that, in broad terms, Capitalism 1.0 began with Adam Smith and the rise of laisser-faire economics, when governments gave way to the power of markets. That began to reverse in the late 19th or early 20th centuries – depending on your point of view – with the rise of social democracy and greater power for governments.
In turn, that yielded to the era of what some have called free-market fundamentalism, characterised by the reforms led by the likes of Ronald Reagan and Margaret Thatcher. Now, once again, the market’s power is in doubt, but what comes next?
Mr. Kaletsky believes we’re entering a new period of pragmatism, when ideology will give way to a more “common sense” approach. He also says cash-strapped governments now face the challenge of having to do more but with fewer resources, which he believes will fuel some creative approaches.
Lord Skidelsky believes the new era may see less of an emphasis on wealth creation for the sake of it: He’s told the session that’s planning a new book on just this issue entitled, How Much Is Enough: The Economics Of A Good Life. “Wealth is a means to an end, not an end in itself,” according to Lord Skidelsky. “Beyond that, the quest for more and more becomes irrational.”
Indeed, the theme of the limits of current models of capitalism to satisfy human needs has cropped up repeatedly. Sharan Burrow, President of the International Trade Union Confederation, has argued that there needs to be a rebalancing, with more of the economic rewards going to regular workers. Avivah Wittenberg-Cox, CEO of 20-first, says we need a shift in values, with a bigger role for women in the economy and overall governance. “If Lehman Brothers had been Lehman Sisters would we be in this mess?” she has asked.
Governance is also on the mind of Adrian Blundell-Wignall, Deputy Director of the Financial and Enterprise Affairs section of the OECD. He’s worried that, even after the crisis we’ve been through, we’re still not doing enough to create banks with high internal walls between regular banking and more risky activities.
How big a crisis will it take, he wonders, before we get the changes in governance that we need? One other big theme worth noting is the view that capitalism may now be morphing into a number of regional varieties – American, Chinese and European were the most frequently cited. Anatole Kaletsky has warned that it’s essential that American capitalism keeps up with the other forms and doesn’t slip behind. In particular, he’s concerned about the implications for democracy if the mode of capitalism as practiced in more authoritarian states becomes dominant. Overall, a fascinating session.