Saturday, August 20, 2011

Capitalism's Final Triumph

If the stock markets are to be believed, the US and the European economies are on the verge of a double-dip, a second recession in three years, which will possibly, inescapably perhaps, lead into a long great depression, the second time in modern history. Whether or not that really happens, one thing is clear: If we thought the recession of 2008 would be a short-lived affair, it turned out to be far more persistent. With governments and central banks across the OECD countries frozen into a rudderless chaos, as against their initial strident response with big stimulus and matching rhetoric, we can only expect the worst now. And, if this happens, this will transform our societies completely and reshape history, remember the last great depression ended in a global war and ensuing detente lasting over six decades, and these days and weeks would go down in history when we brought this upon ourselves, through our collective senselessness.

The warning signs were all there. In 2008, we knew the banking system we had was not working. We knew that the bankers could blackmail any government as they are the keepers of joe public's purse. Bankers could get away with murder with a too big to fail argument, but at the bottom of it, there was this strange system where we entrusted our savings with the same institutions which, through their investment banking arms, gambled with it, and took a disproportionate amount out of it as their bonus. The governments of various countries talked vainly about breaking down the retail and investment banks, but could do little in the absence of coordinated global action: The banks simply threatened the big national governments that if they try to regulate them, they will simply decamp and leave. So, even at the time when the banks brought various national economies on their knees, the governments merely handed out a ransom to them to keep going.

Seen that way, modern banks, global and multi-functional, are possibly the most dysfunctional institution in history to have a role of the economic growth engine and social arbitrator of value. They are a strange cohort of very smart but deeply dysfunctional people who mixed up money for power and power for pleasure. They will beat the court of any medieval autocrat in their arrogance, and make the Borgias look like school-children in the intricacies of their conflict of interests. For all the talk of accountability of the governments, who have to go begging for votes every five years, banks have no answers to give: Their balance sheets are mostly opaque statements of value, of valuation done within a cozy community of bankers and credit rating agencies, all of whom may have gone to the same school and frequent the same clubs and bed the same women; the real value of their assets, in most cases, become only apparent after a number of years, when the executives who took the decisions at the time have mostly collected their bonuses and are long gone.

This strange practices, celebrated under the name of market capitalism, brought us our first recession. However, the governments talked endlessly and did nothing to change the system. In fact, they gave in to the bankers and stopped the stimulus. Most governments gave in, despite the experiences of the Great Depression of the 1930s, to the protectionist pressure coming from within their countries, upped the nationalist rhetoric, cracked down on immigration as if that was the cause of all trouble. Right wing governments took their place in various European countries, together driving Europe into a sort of closed door economy, intent on disenfranchising its most vulnerable citizens, the pensioners etc. Whatever stood for as the idea of modern state in Europe was attacked and liquidated - riots in Paris and London symbolized the early signs of the decline of the national states - and the politicians looked like puppets in the hands of bankers. In the United States, a similar trend, though presided over by a supposedly centrist president, gathered momentum: With elections due next year, a recession will almost certainly mean that a right wing takeover, protectionism, nationalist rhetoric etc, is far more likely than it was before.

So, we failed to learn the lessons and here we are, facing another long period of depression which will possibly reshape history. But this, I shall argue, the moment of capitalism's final triumph rather than its moment of demise, as some of the left-wing commentators are hoping for. The biggest challenge of capitalism is the democratic nation-state, which is anti-capitalistic as its primary legitimacy comes from the diffusion of political power, which is not aligned with the capitalist tendencies and aspirations of concentration of economic power, among the faithful, shall we say. In a perverse twist, the capitalism's greatest crisis looks like its moment of vindication, when the democratic nation state, a creation of modernism, looks desperately out of sorts, its political power curbed in the face of global capitalism. This is possibly the moment when market capitalism gets its greatest triumph, the win over the democratic nation state, which is disintegrating itself under the post-modern lack of faith in any grand narratives. Life without grand narratives, just living between different objects of pleasure, is exactly what the sort of Meta-Capitalism stands for. It seems, finally, its moment has come.


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