IS CAPITALISM ON THE WANE

(ARTICLE FOR SUNDAY THE 19^TH OCTOBER 2008)

By Kazi Anwarul Masud (former Secretary and ambassador)

Developing countries, particularly the least developed among them, are often torn between the promises of a capitalist society in which it not a sin to be rich where people like Warren Buffet who had spent about $26 billion in the last eight months ( Buffet just bought $5 billion perpetual preferred stock of Goldman Sachs that has a dividend of 10% and is callable at any time at a 10% premium) are worshipped and the practical realities of everyday life full of want and desire that cannot be met. About a year back Nobel laureate Paul Krugman had said that the “fruits of the growth  had been remarkably small for most Americans” and though the people are materially better off than before they are no where near  the boundary of prosperity that they should have got   “   the  extent to which we are a more productive economy”. Why, one may ask, capitalism lost its way from Benjamin Franklin’s protestant ethics of hard work, ploughing back profits into business instead of spending it on sensual pleasure? Instead both the haves and the have-nots, in the name of individual freedom have started giving preference to consumption to production, sensual pleasure to the abandonment of  ethics preached by all religions of giving and sharing, of iniquitous living amongst the hungry and the unclad. Political theorist Benjamin Barber termed the new style of capitalism as “infantilisation”: money is made to satisfy infantile desires that in a orderly society( not meaning strictly regulated life style or even one practiced in the time of  Victorian morality)  would be seen as childish exuberance for extravagance. Barber’s criticism rests on his argument that while early capitalism encouraged virtues with the working men’s “robust motion of agency and spirited grittiness” while the decay that spells  later day capitalism suffers from a paradox—“the needy are without income and the well heeled are without needs”. The global economic meltdown from which we are yet to recover calls for, in the words of humanist Josie Appleton, “today’s capitalist culture presents ample possibilities for new kind of political theory and practice, for those curious enough to explore it”. It would be imprudent to dismiss Francis Fukuyama’s “end of history” because humankind have reached its final evolutionary journey in search of the best political system just because the Wall Street has crumbled due to the greed and lax supervision by those entrusted with public finance. But then who had joined the celebration of the wake of socialism to watch the body before it is buried should be worried that the Western world does not start to emulate The Copenhagen Consensus (Foreign Affairs-March/April 2008) in which “Denmark breaks through stale notion about inexorable tradeoff between equality and efficiency, as well as the conventional view shared by American left and the American right that social justice and free trade are incompatible”. Many like Paul Krugman are not convinced by the conservatives’ claim that assurance of equality of opportunity is enough and one should not be worried about inequality of outcome. But it has been found that students coming from high status households with low test scores get better opportunity of going to college than students from low status household with high test score. Such cases are dime a dozen in countries like Bangladesh where many bright students ply rickshaws ferrying passengers who were their classmates once upon a time. The concept of the culture of poverty suggests that the poor remain poor because of their adaptation to poverty. According to an analyst the people trapped in the culture of poverty have a strong feeling of marginality, helplessness, dependency, and the feeling of alienation within one’s own society. Closely associated with the concept of culture of poverty is cycle of poverty also known as “development trap” denoting low income, poor education, poor housing and poor health. Since these disadvantages work in a circular fashion it becomes difficult to break out of this cycle. US Presidential hopeful Barak Obama is an exception among many African-Americans in the US. But even in developed economies it has been found that in the US half of children born of low income parents become low income adults, four in ten in the UK and one third in Canada. It, therefore, becomes incumbent upon the government in countries like ours to exercise its influence to bring the children out of the poverty trap by making provision for skills required initially to meet the demands of the market and subsequently of the society at large. It is, however, easier said than done. Consequent upon the global meltdown the developed countries had to infuse billions of dollars into their economies to shore up confidence of the people in the banking institutions and in the leadership ability of their elected representatives. It may take a while for the credit crunch to go away. In the interim period middle and small business would be cagey to borrow (the banks may have more stringent lending conditions) and import less from foreign sources. This possible scenario would affect RMG and textile sectors in Bangladesh. If the housing sector, both in Bangladesh and in the Middle East, were to shrink then direct effect on remittance cannot be avoided. In such a situation the Danish example of “flexicurity” i.e. to reconcile job flexibility with employment, spending 50% of its GDP on public outlays and the world’s second highest tax rate after Sweden, one of the world’s most equal distribution of income,( the social compact arrived at after century of political conflict),  could be explored. One can argue that what is possible for a small developed country like Denmark cannot be replicated in Bangladesh. Paul Krugman reminds us of the deliberate compression that the wage differential during the World War II was the result of societal demand for a more equal society during the 30s and 40s. The “ethical” transformation  to “greed is good”   and the intrusion of large number of business people into politics and parliament led, certainly in Bangladesh, an indifference towards and marginalization of the great majority of the people and the promotion of business interest that these members represented. One hopes that the promised December elections would bring the curtain down on the inequity and corruption of the past.