Tuesday, 9 December 2008

Pesto: crisis could be more significant than collapse of communism

Blimey. Robert Peston has an opinion piece in The Times, repeated on his Beeb blog, where he indulges in a bit of crystal ball gazing. It's an interesting walk through what has happened, is happening and might happen. And it's got some significant throwaway lines -
Arguably the crisis will turn out to be more significant for us and other developed economies than the collapse of communism.

A New Capitalism is likely to emerge from the rubble, one which may well seem fairer and less alienating than the model of the past 30 years.

But for once, though the article is worth a read, I don't find myself agreeing with the broad conclusions, much as I would like to. For one, the collapse of communism really was the end for particular economic and political model that has not, Nepal excepted, shown any sign of re-emerging as a serious force. In contrast, capitalism is not really under threat, what we are witnessing (as Pesto says) is a rebalancing of the relationships within it. There will be a greater role for the state, there will be less faith in market solutions in some areas, but does anyone seriously (or anyone serious) expect us to tilt the balance back as far as it was during the post-war consensus, for example?

I'm not even convinced that we will necessarily enter an era of kinder, gentler, fairer capitalism, though I hope we will. If we were really going down this route I would expect much more and much deeper analysis of what work is valuable, how we analyse who actually does the important work (ie the relative contributions of management vs grunts), and how we reward people. It's nice to see that a few bankers have decided that they won't take bonuses this year, but does that really indicate anything other than peer pressure, and the desire not be attacked in the street? We will see a year or two of retraint on executive pay, and fund managers may decide they need to vote against management a bit more often. But unless we lock in some changes this will be but a temporary blip, and the trend of increasing inequality will reassert itself.

Whilst this may sound a bit negative, I'm just trying to keep a sense of proportion. I still think the current crisis presents a huge opportunity for change. But just because the crisis is big does not mean that it will kill off the types of ideas that helped to form it.

4 comments:

CharlieMcMenamin said...

I think your note of caution about the likely direction of change is very sensible. What is clearly absent from the debate is any widespread anti-capitalist (as opposed to anti-banker) sentiment: also missing is any real sense of what a non capitalist economy would look like, even in theory, now almost everyone rejects the centralised planning model of the old Eastern Bloc.

Peston has speculated that the banks will become like utilities, and leave all the high-falutin' speculative stuff to hedge funds. But govts - particularly our govt - can't easily bridge their medium term funding gaps unless they sell the banks back to the market at something close to pre-Crash prices. & that doesn't seem likely unless they allow the banks to eventually re-adopt their status quo ante business models, or something close to it. So I'd guess that's the medium to long term aim, not any epochal change.

Whether anything like this proves possible is, of course, another question.

Miller 2.0 said...

"Nepal excepted"

I think that a lot of what has taken place in South America also counts, but looks a lot better than Nepal in political terms. Maoists can never be good, even for socialists...

Charlie Marks said...

I beg to differ on "the collapse of communism". Not just because Cyprus has become the first EU country to have a Communist president... It's the victor's discourse. The restoration of capitalism - with privatisation and open markets - have been a disaster for most of those living in the formerly socialist economies of central and eastern Europe states.

Now that the model imposed upon much of the world is being discredited, there's room for hope.

Charlie, you note the absence of any widespread anti-capitalist sentiment in the debate. I hardly expect papers owned by billionaires to allow debates on a post-capitalist economy, but the internet might provide some open - and very direct - debate to go on. On a socialist economy, let me quote an old saying: "Walker, there is no path - you make the path by walking."

Please Miller, don't lets judge an ongoing process. Most of those "Maoists" are just desperate for their country to have some of the things we often take for granted - like public healthcare and education systems - there's no sign that multiparty democracy is about to be scrapped.

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