In the midst of a housing bubble, sub-prime mortgage crisis, an unpopular war, and the stock market steadily declining, it stands to reason that many Americans, nay, citizens of the world are worried about the future of the financial world. Our business world has been built on the "magic of the market" and "success of the fittest," which provided the booms throughout the century that shaped the contemporary market. However, in an article by Breitbart, Australian Prime Minister Kevin Rudd argues, the global economic crisis is a result of the "comprehensive failure of extreme capitalism."
Capitalism represents an economic system characterized by private or corporate ownership of capital goods; a system where things like prices, production, and distribution are determined by competition in a free market. Additional characteristics of capitalism are the inevitability of speculation and over-lending, which have landed us in this current crisis. The question stands: is modern-day capitalism on the decline, and will America be able to retain its status as a financial superpower if in fact drastic financial reforms are needed? An article in the New York Times explores both possibilities.
The current crisis is not new to America. In the late 1920s and early 1930s, Americans underwent a similar crisis as over-lending and speculation led to bankruptcy for many Americans and financial institutions, ushering in The Great Depression. During and after the Great Depression, the theory of laissez-faire - strongly promoting minimum state intervention in business was in tatters. Renowned economist John Maynard Keynes added fuel with his theory, which argued that Capitalism couldn't recover from periods of slowdowns in investment on its own. He called for "a somewhat comprehensive socialization of investment" and believed it to be necessary to end the depression. This essentially means increased state intervention in the form of tax cuts, increased government borrowing and spending during an economic downturn, to spur aggregate demand and bring the economy back on to the growth track.
Does this sound familiar? It's probably because this is exactly what the American government is doing right now, and it's not very capitalist at all. The US government, at the very beginning of the financial crisis, distributed tax refunds to consumers in an effort to boost domestic activity. The U.S. Federal Reserve brokered the takeover of Washington Mutual, Bear Stearns, Wachovia, Merrill Lynch, to name a few, and
injected $85 billion into AIG, in return for an 80% stake in the company.
These actions alone would put a smile on Marx's face. The US has for long been seen as the guardian and the father of capitalism. However, America is the primary country that gives maximum importance to social security and benefits like health, education, insurance, etc, therefore acting like a "quasi-socialist" country by distributing earnings from "capitalist" organizations in the country.
When we think of the "decline of capitalism," we equate it with the fall of the modern financial system, or the fall of the United States as a world superpower. What we fail to understand is that this very concept is what finances and fuels the excesses of modern society.
Capitalism in its purest form fell long before my generation read about it in textbooks. So, is there really any pure "capitalist" society in today's world? Or do we find it easier to brand "economic development" as "capitalism"?
Watch a related CNN video: