Tikkun Magazine,  March/April 2009

THE CONTRARIAN

A Post-Capitalist World?

By George Vradenburg

Only a few years ago, with the fall of the Soviet Union and the Berlin Wall, it appeared that democratic capitalism was triumphant in the great ideological battle of the twentieth century between communism and capitalism. As Francis Fukuyama declared, it was the "end of history."

Yet, as we experience the first year of this century's Great Depression, governments in the United States and Great Britain are buying ownership stakes in their banks and other critical sectors. As President Sarkozy trumpeted, "Le laisser-faire, c'est fini." And Chinese Vice Premier Wang Qishan, with characteristic understatement, said, "The teachers now have some problems."

Is history beginning again? Is the ideology of democratic capitalism being challenged anew?

Democratic capitalism is under attack from domestic critics, like those writing in Tikkun, who believe that the system is driven by money and greed and produces immoral outcomes. Yet, in my Contrarian view, democratic capitalism allows individuals the greatest liberty to choose their life direction; it allows investors the power to allocate capital to the best ideas; and it allows buyers and sellers to make their selections based on price and quality (which includes ethical quality). Efforts to organize those choices by juries, by vague criteria of "social value," or by government or tribal fiat, either in a Jubilee Year or more generally, will prove to generate, not mitigate, inequality and injustice. The recent near collapse of the financial sector is persuasive evidence of the need for greater government oversight of the U.S. and global financial system, but it is not a basis for wholesale substitution of government for private choice.

Democratic capitalism is also being challenged on the world stage. The world's economic system is migrating from largely independent national systems driven by private investment and consumption decisions of industrialized nations to a fully integrated global economic system with a growing mix of government-owned sectors motivated by national political goals. The sources of capital and enterprise ownership in such a global economy are not just private in character. China has become the world's largest creditor; the sovereign wealth funds of the Middle East control enormous pools of investment capital; Russia uses its control of natural gas supply to increase its political control over Ukraine and Europe.

It is not clear whether private enterprises will be able to successfully compete with government-owned enterprises. If not, the United States may be compelled to take increasing ownership and control of key economic sectors in order to maintain our prosperity and economic independence.

Should we continue to seek to promote democratic capitalism in this new global order, and, if so, why?

Economic Considerations

Which organizing theory of global economics produces greater prosperity? I believe the answer is clear: a system of private capital and ownership generates higher rates of innovation, productivity, and better economic performance than government-managed systems. In recent history, the United States—with 5 percent of the global population and the dominant share of economic output—has been the envy of the world. China's recent increase in per capita wealth (created by opening its markets to private enterprise and private capital) reinforces that point. And, of course, other fast-growing countries like India and Brazil increasingly rely on private capital.

Social Considerations

Which approach produces a greater degree of individual freedom, economic opportunity, and social justice? A comparative examination of individual opportunity and economic equality in the United States, China, and Middle East would, I believe, lead one to conclude that the U.S. system is better at reflecting those values than government allocation of capital and enterprise ownership. Many criticize the degree of income and asset inequality in the United States, and appropriately so. Let them examine those measures (and freedom) in Saudi Arabia, Russia, or China.

Ecological Considerations

Will government-owned enterprises consume fewer natural resources and do less damage to the environment than private enterprise? There is no question that environmental damage due to "externalities" must be mitigated through regulation, as they are in the United States and Western Europe. But China's government-owned coal-fired power plants produce ecological damage, whether privately or publicly owned. It is more likely that clean-tech innovation will occur here than in a government-managed system.

In my estimation, the global system of government control and management will produce less global prosperity, individual freedom and social equity, and environmental innovation. We will debate, within the U.S./European context, how best to tweak the line between government regulation and private decision-making. That line will no doubt move in the coming years, but, contrary to the majority of economists writing in this magazine and to the editorial views of Tikkun, this Contrarian believes that we should not abandon our fundamental reliance on an economic system based on individual freedom and private capital.

George Vradenburg is publisher of Tikkun, and often disagrees with our editorial opinions.

Source Citation 

Vradenburg, George. 2009. A Post-Capitalist World? Tikkun 24(2): 8.