Is Capitalism in Crisis?

Roughly two decades after Francis Fukuyama declared 'the end of history', capitalism is under the spotlight again. This time, though, it is far less triumphalist.  Today, ‘capitalism in crisis’ is making headlines in newspapers such as the Financial Times and The Guardian, as well as at the World Economic Forum in Davos. Increasingly, people are calling into question the ability and sustainability of the wealth-making potential and fairness of this system.

Questioning the promises of Capitalism is not new, as such, but the concerted criticism from both intellectuals and the public at large in the past decade is, indeed, a fundamental shift. Who would have predicted a few years ago that people such as “shock therapy” proponent and Colombia University professor, Jeffrey Sachs, would talk with such assertiveness about ‘capitalism’s…self-destruction’ as he did in a recent edition of the Financial Times? Capitalism has created unprecedented amounts of wealth globally but even this is being questioned, not only because society at large has not benefitted from it, but also because it is not “creative wealth”, as Jean-Pierre Lehmann, Director of the Evian Group, noted this week in his latest newsletter.

Is capitalism today an obsolete model? Klaus Schwab, Founder of the World Economic Forum, refers to the ‘old model capitalism’ and makes the case at WEF 2012 for replacing it with a ‘new model of talentism’. In its first edition this year, the Economist acknowledged the emergence of state-capitalism as a new model despite concerns about its long-term sustainability and its potential to distort global trade. For many emerging economies, the question is not whether the state can intervene in the market, but how active this intervention should be. Thus, it might not be an exaggeration when the Chinese claim to have ‘redesigned capitalism to make it work better’, as noted by the Economist. In fact, this discourse is simply recognizing existing realities and practices including the bail out in the US and EU.

What does ‘capitalism in crisis’ mean for Africa? As a late starter, Africa is learning from the examples and experiences of the countries that are going, or have gone through, the same experiences. It is consolidating its economic progress with the state playing a critical role.

Furthermore, what does this ‘crisis’ mean for global institutions such as the World Bank and IMF, who many believe have supported a neo-liberal agenda? Capitalism is in ‘crisis not because we are running out of innovations, or because markets are failing to inspire private actions,’ remarks Sachs, ‘but because we have lost sight of the operational failings of unfettered gluttony.’  Many would say the multi-lateral institutions governing capitalism for the past half-a-century have been slow to adjust to the changing global reality.

So, is this about ‘ending the crisis or ending capitalism’, as Samir Amin of the International Council of the World Social Forum and Chairman of the World Forum for Alternatives starkly puts the options? Many believe that ending the crisis is doable and necessary. But, as Lehmann warns, ‘capitalism’s survival will need reforms not only to institutions and policies but also to culture and mindsets.’