Capitalism

A Few Thoughts

Over the last 250 years capitalism or the market economy, has developed into the world’s dominant economic system. Countries with a socialist or communist stance ultimately had to abandon this approach. 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 experiments with capitalist institutions within its own borders).

So capitalism has undoubtedly proved a successful tool. But there is a lot more to be considered in this story.

1 How is success defined?

If the goal of an economic system is to provide people with prosperity, then the market economy fails to achieve a good balance. Only 17% of the world’s population live in countries that can be said to have real prosperity and roughly a further 3% of the population are doing well in poor countries;  meanwhile 70% of the world’s population lives in poverty and more than 10% is starving!

2. The negative outcomes of capitalism for 80% of people on the planet is undoubtedly closely connected to the prosperity of the lucky 20%. The profits of the free market economy can only be gained if both people and resources are fleeced. The winners are faced with the inevitable losers, which are a logical consequence of capitalist management. Further, the people in the 80% are mostly found in Africa, large parts of Asia and South America; regions which have largely been made dependent on capitalist countries, where labour is bought at illegal wage rates, where land is constantly taken over and cultivated and where the exorbitant exploitation of mineral resources takes place.

3. One would expect that this negative impact must be counteracted, that capitalism will finally find its way into poor regions of the world and that everything will then be fine. However, this expectation represents a misjudgement or perhaps a fact simply ignored, because as already mentioned, this wear and tear of nature and man is a necessary component of the system. For it is an iron law of capitalism that more money must be made from money. The profits of competing companies are therefore the inexorable prerequisite for economic growth. These profits, in turn, can only 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.”

Global problems referred to here are not only to those the financial market brought upon itself, but also those of unemployment, the income gap, the political gap, the social instability in many countries, the rapidly worsening global econoimc situation, challenges with sufficient water and food supply, 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 of capitalism, to follow one set of defined rules, has so far not been possible. It can be said that it has proved deceptive, as in terms of the vision for prosperity, nothing of this sort has happened.

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 hectic government rescues of financial markets.

In the seven years since the WEF, nothing has happened to capitalism to address the problems – in fact, on the contrary! The Global Risk Report from 2019 is shocking, as is the WWF Living Planet Report and the Findings of the World Biodiversity Council. The current reports on the distribution

of wealth (Suisse Credit and Oxfam) suffocate any hope that it will be possible to even only rudimentarily, shake out any unequal distribution (see also Dates and Facts’).

Consequently, there is the well-founded assumption that capitalism cannot be judged. 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 to think about other possibilities.

Nothing else demands a global alternative.