Over the last approximately 250 years, capitalism has developed into the world’s most dominant economic system. Countries with socialist or communist bents ultimately had to pull out of the race, and for good reason. In China, a so-called state capitalist system has since developed (i.e. the state acts like a capitalist enterprise, has a capitalist presence abroad and is experimenting with capitalist institutions within its own borders).
Capitalism, therefore, has undoubtedly proved itself to be successful. Nevertheless, there is a lot more that needs to be considered.
1. How is success defined?
If the goal of an economic system is to provide people with prosperity, then the market economy fails in a catastrophic way. Only 17% of the world’s population live in countries that can be said to have real prosperity (although poverty is omnipresent in them as well) and roughly a further 3% of the population in poor countries is doing well. Meanwhile 80% of the world’s population lives in poverty, of which more than 10% is starving! – that is 811 million people in 2020.
2. The negative outcomes of capitalism for 80% of people on the planet is undoubtedly closely connected to the prosperity of the fortunate 20%. The profiteers and winners of the free market economy can only exist if both people and resources are exploited. Both winners and losers are a logical consequence of capitalist management. Furthermore, of those 80% who do not enjoy any sort of prosperity are mostly found in Africa, large parts of Asia and South America. These regions have largely been made dependent on capitalist countries, where labour is bought at cheap to starvation wage rates; where there is a constant reclamation of new cultivation areas by industrialized countries and where exorbitant exploitation of mineral resources takes place.
3. One would expect then that this negative impact might somehow be counteracted, and capitalism will finally find its way into these poor regions of the world, and everything will eventually be fine. However, this expectation is either a misjudgement or perhaps just a fact that is simply being ignored. Because as already mentioned, this friction between nature and man is a necessary component of the system, as it is an iron-clad law of capitalism that money must make more money. The profits of competing companies are therefore the inexorable prerequisite for economic growth. These profits, in turn, can best be achieved if the costs of labour and natural resources are kept as low as possible.
Let me make it clear once again: economic growth is the prerequisite for maintaining the market economy. Conversely, without growth there can be no capitalism.
4. Does capitalism really have so little potential for change?
At the annual 2012 World Economic Forum (WEF) held in Davos, Switzerland, its co-founder Klaus Schwab stated:
“Capitalism in its current form is no longer the economic model that can solve global problems.”
The global problems that are referred to here are not only those the financial market brought upon itself at the time, but also those of unemployment, the income gap, the political gap, high social instability in many countries, a rapidly worsening global economic situation, sufficient water and food security challenges, extreme weather conditions and the failure of states to counteract climate change.
Whether and how Klaus Schwab imagined a form of capitalism that could address and resolve the problems mentioned above is unknown. However, the vision that the mere adjustment of a few key levers would improve things, has so far proved impossible.
Perhaps there is a lack of insight into the actual roots of success of the Western capitalist economic system, whereby its basic rules are either fully applied or the system as a whole is endangered. No nation can afford this risk, as is vividly demonstrated by the repeated and frantic government rescues of financial markets.
In the seven years since the WEF, neither capitalism or the associated problems have changed. In fact, the opposite has been the case! The Global Risk Report from 2021 is shocking, not to mention the WWF Living Planet Report and the Findings of the World Biodiversity Council.
Moreover, the latest reports on the distribution of wealth (Suisse Credit and Oxfam) stifle any hope that the inequality of distribution can be even rudimentarily shaken. On the contrary, global poverty has once again risen dramatically in the wake of the Corona pandemic, while at the same time the wealth of the richest has increased at an extent and speed that is historically unprecedented, according to Oxfam (Facts and Figures).
Consequently, there is the well-founded assumption that capitalism cannot straighten itself out. It is not able to ensure that there is prosperity, not even basic prosperity, for all. Rather, the opposite seems to be the case. The problems are aggravated every single day by overexploitation, by intensifying competition between companies and nations and not least, by the simultaneous abundance in production, a logical consequence of which is the exploitation and pollution of the environment.
So, it is obvious that it has become necessary to think about other possibilities.
This is exactly what Global Alternative wants.