The difficult revival of capitalism

Updated: Jun 27, 2019

Capitalism has been sullied by a globalization process that has not kept its promises. In fact, we haven’t even begun to deal with an ongoing crisis that is turning the 2008 shock into a mere symptom of a deeper, more persistent dysfunction. The revival of capitalism will be preceded by a positive populism based on civic engagement. But, for now, it must deal with a political leadership steeped in late-nineteenth-century ideology. The following is a short discussion on the topic with: economist and writer Jacques Attali, former Special Adviser to the President of the Republic, and Founder and first President of the European Bank for Reconstruction and Development; and prolific writer, novelist, philosopher and essayist, and former President of PEN International, John Ralston Saul.

by Gérard Bérubé

JA Capitalism is doing well – indeed, too well! The creation of wealth is positively flourishing. The problem is that this excess is not offset by an equally strong democracy or rule of law, thereby turning capitalism’s strength into its greatest weakness. Capitalism, or the market economy, is sustainable only as long as it is counterbalanced. Capitalism is global; the rule of law either operates at the national level or else is very weak. The problem, then, is not that capitalism is too strong, but that the forces that should oppose it are inadequate.

Another problematic area is the insufficient redistribution of this great wealth. We are failing current and future generations in this respect, failing the world’s fragile and vulnerable populations. And future generations are all the more vulnerable because they haven’t been born yet.

JRS The promises of globalization have not been fulfilled, and the conditions that would support a revived capitalism have not come about. In fact, the opposite is true. In recent years we have seen an ever-increasing number of mergers and acquisitions, as small companies are snapped up by large ones desperate for growth but devoid of ideas, thereby shutting out future generations. These companies – many of which are oligopolies and monopolies – are not creating wealth; they are playing with debt and contributing to the financialization of capitalism. This is the exact opposite of capitalism, and is the direct result of globalization. Many of today’s so-called capitalists are opposed to competition and in many cases form part of monopolies. In fact, what we see today is not capitalism, its mercantilism.

The crisis is now far behind us. Lessons? Scars?

JA Actually, the crisis is not so far ahead of us. We didn’t resolve the 2008 recession; we simply postponed it, by increasing public and private debt. I just wrote a book about how to protect ourselves from future crises. We will soon be dealing with eight critical situations: the financial, economic, social, environmental, political, geopolitical, technological and climate crisis. The first one to hit will certainly be the financial crisis. But all these crises could arrive at once. If that’s the case, we will have an extremely serious problem on our hands.

JRS The 2008 financial meltdown was merely the tip of a much bigger crisis. Our response closely mirrored the measures taken in the 1990s by the West to undermine African stability except that, post-2008, the target of our actions was ourselves.

In fact, we never emerged from the crisis that began in the early 1970s with the oil shock. In 1993, when I wrote Voltaire’s Bastards, I said that we were in a serious economic and financial crisis. Since then, all we have done is go around in circles and pretend the situation doesn’t exist, propelled by the same neoconservative thinking that prevailed several decades ago.

Even leftist governments are more concerned with speculation than they are with their own citizens. The decision to save the banks rather than helping those struggling with debt was a surprising one: the money was given to the very organizations that had caused the crisis – and they kept the money for themselves! If the financial aid had been used to assist mortgage-holders rather than bail out the banks, it would have cost less, strengthened the middle class and laid the groundwork for a faster recovery.

It’s surprising that a democracy would choose the banks over its own citizens.

How would you rate the urgency of the climate challenge?

JA The climate crisis is critical but still less urgent or imminent than the financial crisis. Nevertheless, they must be dealt with at the same time. The Positive Planet Foundation I represent stresses the importance of working for the benefit of future generations, of creating the conditions to deal with both the financial and the environmental crisis. Especially since they are not, in fact, mutually exclusive. The major investments we need to make in energy-saving measures will create growth and help pay off the debt.

The world is in the grip of populism, protectionism and the rise of the right, even as the scale of problems worldwide calls for a global approach and concerted actions. What should we make of this contradiction?

JA Global market, local democracy. Populism tells us that since democracy is local, the market must also be local, but that leads to protectionism, populism and closed borders. This is the challenge we are facing today. Are we moving towards a market that is once again becoming local, with widespread protectionism and national populism, or should we open our markets and accept the urgent need to establish a global rule of law?

JRS That’s a big part of the explanation. If an elected government in crisis decides to help promote speculation and you lose your home, then capitalism has been damaged by globalization. It has created monopolies that, by definition, are against change. We see it in the digital world, where real growth, real investments, are not being made. Wanting to change our system of production and energy consumption requires huge investments. These investments would create a great deal of growth. But, because capitalism has been so damaged by globalization, it has turned into an ultra-conservative system ... They are so afraid of change. It takes courage to question the time-honoured way of doing things and make radical changes. The current political discourse is so far removed from reality, rooted as it is in late-nineteenth-century ideology, refusing to take big risks or make big changes.

For half a century we’ve been acting as if there was no crisis. What’s surprising today is how the elite refuse to admit either victory or defeat, even though this ideology is a complete and utter failure. And by refusing to admit it, they are unable to change direction.

Does globalization still make sense?

JA It’s like I said: the market must be global and democracy local. We need the rule of law to become global. We advocate an inclusive economy that is socially and environmentally sustainable.

JRS Globalization has failed to deliver on its promises of greater competition and more democracy. The surge in international trade is huge; it has generated a lot of wealth and jobs. But growth has led to a concentration of wealth and greater inequality. As an ideology, globalization is dead – but that doesn’t mean that the same is true for internationalization. I believe we are moving towards regionalism, towards the emergence of large trading blocs.

What about the lack of political leadership?

JA I had the privilege of attending the G20 in Argentina. There is political leadership at the national level, but no global consensus on what to do. Leaders are preoccupied with internal issues.

JRS We are moving far too slowly and we spend too much time arguing over details. We absolutely must change direction … but we don’t do it. Think about the Paris Climate Agreement. It’s a step forwards not a step backwards, true, but it’s not enough. The populism we have right now is the negative kind that is based on manipulation, emotions and fear, rather than positive populism based on civic engagement. Democracy was created by populists you know, in the same way that populism was responsible for our openness to free trade which, originally, was based on a global ideal of generating widespread well-being.

Where should this visionary, unifying leadership come from?

JA From an awareness of today’s world issues. We talk about the importance of strong public opinion and citizen involvement, based on a reasonable degree of awareness. The Positive Planet Foundation’s General Assembly for Future Generations surveyed around 50,000 people in 50 countries on 20 proposals and gathered a common viewpoint that we submitted to G20 leaders – a perfect example of citizen involvement.

JRS Leadership will come; we just don’t know from where. Since the 1990s, even as far back as 1970, millions and millions of young people have chosen to stay away from politics and work for NGOs. They made a conscious decision to opt for influence over power, thereby leaving a huge void that was filled by people who were occasionally mediocre, or were influenced by monopolies, and that was a mistake. I have nothing against NGOs, but influence doesn’t stand a chance against power. And they left the actual power to their enemies, thereby further eroding their influence.

I believe this leadership will come from young people getting more involved in politics, from generations that demand real change, not just haggling over the latest issues. We have seen signs of this sort of progress recently, but they are small.

Is economic growth consistent with the new capitalism?

JA A slowdown is good for the environment but catastrophic for the poor. We advocate a positive economy and “patient capitalism”: the kind that works for the benefit of future generations, is not limited to immediate profitability, and addresses longer-term issues.

JRS We are obsessed with international trade. I am not against it, but instead of producing more, why not produce better, higher-quality products? Capitalism will always be with us, but its future form will be more interesting than what we have today. I believe it will combine a variety of different approaches (except for monopolies): it will still be based on the free market, but balanced by the public market.

Are you optimistic?

JRS We’ll get out of this mess somehow because we have to, but the big risk is the state of the environment. We’re moving far too slowly...

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