Sen on the future of capitalism

[Warspite]

Amartya Sen writes in the NYRB about where capitalism has to go after this crisis:

2008 was a year of crises. First, we had a food crisis, particularly threatening to poor consumers, especially in Africa. Along with that came a record increase in oil prices, threatening all oil-importing countries. Finally, rather suddenly in the fall, came the global economic downturn, and it is now gathering speed at a frightening rate. The year 2009 seems likely to offer a sharp intensification of the downturn, and many economists are anticipating a full-scale depression, perhaps even one as large as in the 1930s. While substantial fortunes have suffered steep declines, the people most affected are those who were already worst off.

The question that arises most forcefully now concerns the nature of capitalism and whether it needs to be changed. Some defenders of unfettered capitalism who resist change are convinced that capitalism is being blamed too much for short-term economic problems—problems they variously attribute to bad governance (for example by the Bush administration) and the bad behavior of some individuals (or what John McCain described during the presidential campaign as "the greed of Wall Street"). Others do, however, see truly serious defects in the existing economic arrangements and want to reform them, looking for an alternative approach that is increasingly being called "new capitalism."

The idea of old and new capitalism played an energizing part at a symposium called "New World, New Capitalism" held in Paris in January and hosted by the French president Nicolas Sarkozy and the former British prime minister Tony Blair, both of whom made eloquent presentations on the need for change. So did German Chancellor Angela Merkel, who talked about the old German idea of a "social market"—one restrained by a mixture of consensus-building policies—as a possible blueprint for new capitalism (though Germany has not done much better in the recent crisis than other market economies).

It's free to view so I won't paste the full thing. You can get it here:

http://www.nybooks.com/articles/22490

[Neil]

There was no food crisis.

[Valmy]

The question that arises most forcefully now concerns the nature of capitalism and whether it needs to be changed

Oh fuck not again.

[FunkMonk]

The question that arises most forcefully now concerns the nature of capitalism and whether it needs to be changed

Oh fuck not again.

It will be interesting to see what kind of "new system" will emerge from our current predicament. We live in interesting times.

[Evil Spock]

Never mind that Capitalism isn't at fault for the crisis of the moment. Dodgy mortgages and other bad lending \= Capitalism. The heroes of socialism and mixed economies see their chance at the brass ring and they are going to go for it.

[FunkMonk]

Never mind that Capitalism isn't at fault for the crisis of the moment. Dodgy mortgages and other bad lending \= Capitalism. The heroes of socialism and mixed economies see their chance at the brass ring and they are going to go for it.

This is true and quite sad.

[Fate]

Free market apologists are quite entertaining.

Oh no, that wasn't true capitalism.

[The Minsky Moment]

A shorter version of the Sen article was in today's FT - I can't believe sheilbh didn't post it already.   

The economic system the prevails today is quite different in many respects than the system that prevailed before 1930.  I don't know whether the changes that will be brought on by this crisis will be that extensive, but they will be significant and they will need to be.

[Warspite]

Never mind that Capitalism isn't at fault for the crisis of the moment. Dodgy mortgages and other bad lending \= Capitalism. The heroes of socialism and mixed economies see their chance at the brass ring and they are going to go for it.

Indeed, that is what Sen says, actually. capitalism develops when society is mature enough for norms of adherence to contract to be a given. It would not work if you had to constantly pursue debtors. But one of her points is that financial innovation has outstripped formal and informal institutional capacity by distancing risk.

[Martim Silva]

The economic system that is usually known as capitalism is prone to cyclical collapses. This one is just the result of decades and decades of the US government trying to contain what would be market corrections (the recessions of the 90s and early 2000s were very weak because of these efforts). As a result, we're now getting 30+ years of accumulated problems falling on our heads.

For the future? Despite grievous sufferning, the Anglo-saxon countries, like Britain, Canada, Australia, New Zealand and the USA [though I'm not sure the US can still be called that] will probably try to restart their economic model, just to get into another depression a few years down the line (after the authorities relax their oversight anew and a whole truckload of new financial errors [i.e. frauds] are made).

The other countries... will probably have had enough. The world isn't particularly fond of the anglo-saxon economic model (indeed, many nations even in the US sphere only followed it partially, like socialistic France and planned Japan), and it retained its clout only because the US economy was the worlds' strongest and seemed prosperous.

The second this changes and America is seen as a weak economy - the last remnants of this model will be purged from all across the globle faster than you can say "Wowza!"

[garbon]

omg my best bud just said negative things about my country.  i am : so conflicted.

[Oexmelin]

I don't know whether the changes that will be brought on by this crisis will be that extensive, but they will be significant and they will need to be.

I am told that's because you are a socialist.

[Neil]

For the future? Despite grievous sufferning, the Anglo-saxon countries, like Britain, Canada, Australia, New Zealand and the USA [though I'm not sure the US can still be called that] will probably try to restart their economic model, just to get into another depression a few years down the line (after the authorities relax their oversight anew and a whole truckload of new financial errors [i.e. frauds] are made).

Given that it's still the best system availible, we'll have to stick with it.  After all, there is no other system with even close to the stability of our own.

[I Killed Kenny]

The problem of the "toxic" assets is that people are stupid and try to live with money they don't have...

[Evil Spock]

For the future? Despite grievous sufferning, the Anglo-saxon countries, like Britain, Canada, Australia, New Zealand and the USA [though I'm not sure the US can still be called that] will probably try to restart their economic model, just to get into another depression a few years down the line (after the authorities relax their oversight anew and a whole truckload of new financial errors [i.e. frauds] are made).

Given that it's still the best system availible, we'll have to stick with it.  After all, there is no other system with even close to the stability of our own.

Not to mention the only one that follows objective laws of reality.