The Future Of Capitalism
Ahmed Hany
October 15, 2008
Does the international financial crisis mean the end of capitalism? The answer is no. What has happened in the US means return of the governmental role to correct and tame it. It means a new era that does not confiscate people´s money and assets, but it considers the social security. Social security is not communism. In other words, it does not hold all productive tools and it does not confiscate institutions. Social security is not socialism as it is like the latter in nationalizing some assets but the government does that to save people´s money and to buy debts of institutions. At the same time, the government buys these nationalized assets with its market price without imposing unfair prices to take them by force. The government did not touch successful institution. Socialism nationalizes big institutions whether successful or not leaving weak and small private sector. Capitalism calls for selling public sector whether it is successful or not.
Then the third way between communism and capitalism is being formed now. When one think about what happened in the ex-Soviet Union and what is happening in the US and other parts of the world that one finds that both communists and capitalists breached their ideology. The top ranked communists took benefits in the form of money or services that were not accessible to people. They did not care about productivity. The nature of totalitarian regimes kills innovation. Now, the top managers took benefits and decisions that give them six figures salaries and services without thinking about shareholders and the development of the community.
President Sarkozy called for punishing managers of falling institutions. They are private organization. His words means that governments will not differentiate between private and public sector as both share in development and social security of the country. In the US, they will limit exit benefits of managers of failed corporations. The meeting of the big European countries, Britain, France, Germany and Italy, called for more roles of central banks to achieve tighter control on private banks.
The debate between Democrats and Republicans showed that Democrats are keen about taxpayers and that they should not pay for capitalists´ faults. Republicans still think that market forces are enough to correct the condition.
In economics, it is known that the role of the government is the macroeconomics and the role of the corporation and private sector is the microeconomics. In other words, the government is responsible about the governmental spending, national investment policies and taxes policies. These affect employment, productivity of the country and exports. The private institutions and corporations determine prices according to demand theory and market forces within the frame of the governmental rules and laws.
In capitalism, to have a fair market system the country should enforce laws that create transparency and prevent monopoly. At the same time, there should be consumers unions, workers unions, and a committee that gather workers, consumers and businessmen representatives. The law should give the workers the right to strike. Equal opportunity for all is necessary. A powerful taxing system that fairly acts in a transparent environment is also a prerequisite. A national committee for salary system determines the minimum wages. In socialism, an upper limit for salaries is also imposed through high taxes. In communism, the whole process is centrally planed. It is known that upper limit of income affects badly the innovation of the country.
The third way between socialism and capitalism that was theoretically discussed especially by the British Workers Party and other socialists after the fall of the Soviet Union is being boosted. It is based on social security. Until now, no one could transform the third way from hypothetical theories to a full ideology. Yet the US was forced to use the nationalization to correct market forces. It is more interesting that Bush´s ultraconservative administration behaved according to economic science by activating its macroeconomic role and not ideologically, because if the American economy is hit badly, the US collective power will be jeopardized. Previously this same administration neglected military strategic rules for the ideological sake and expanded the empire depending on the ability of its economy. This shows the importance of the collective power of the country over ideology.
It is clear that the financial crisis will change the strategic thinking globally. Some sort of dissolving ideologies and choices of a mixture of policies as a package will form strategies. In other words, the scientific strategists will take the role of ideologists. It is known that strategists put flexible strategies that could be changed to accommodate changing environments. Ideologists are dogmatic and changes take long time after harms affect the system as a whole.
How will the taming capitalism shape the world? The central banks will have more power over banking sectors. The governments will not differentiate between private money and public money as they both share in the development based on social security. Investments policies will be directed to some sectors through imposing VAT on non-essential goods that increase consumerism. The managers of the companies will be subjected to trials if they took decisions that badly affect shareholders. Their exit benefits may be limited according to their achievements. Their achievements will be monitored not only according to the revenues and profits but also according to other parameters that show the community benefits. Early tools will be devised to monitor banking sector, markets and corporations. It will be the right of the government to nationalize failed institutions, but according to fair rules. Privatizations will take other forms like transforming shares to workers by loans that will be paid as installments and hiring private management companies to run public sector companies as the US will do for the four nationalized institutions.
Globally, if the US went into recession while China could save its economy, the US would give concessions to the EU and Russia to save its entity as the global force. After all President Sarkozy predicted that after this crisis, the US will not be a monetary superpower. The four EU leaders called for international conference to put a new monetary system that depends upon many currencies. Their views meet the Russian views and they called for open dialogue with Russia. In a program in Russia Today TV the presenter asked two strategic analysts from Moscow and Washington about the future of the US-Russia relations. They both were in favor of partnership more than confrontation.
Then the third way between communism and capitalism is being formed now. When one think about what happened in the ex-Soviet Union and what is happening in the US and other parts of the world that one finds that both communists and capitalists breached their ideology. The top ranked communists took benefits in the form of money or services that were not accessible to people. They did not care about productivity. The nature of totalitarian regimes kills innovation. Now, the top managers took benefits and decisions that give them six figures salaries and services without thinking about shareholders and the development of the community.
President Sarkozy called for punishing managers of falling institutions. They are private organization. His words means that governments will not differentiate between private and public sector as both share in development and social security of the country. In the US, they will limit exit benefits of managers of failed corporations. The meeting of the big European countries, Britain, France, Germany and Italy, called for more roles of central banks to achieve tighter control on private banks.
The debate between Democrats and Republicans showed that Democrats are keen about taxpayers and that they should not pay for capitalists´ faults. Republicans still think that market forces are enough to correct the condition.
In economics, it is known that the role of the government is the macroeconomics and the role of the corporation and private sector is the microeconomics. In other words, the government is responsible about the governmental spending, national investment policies and taxes policies. These affect employment, productivity of the country and exports. The private institutions and corporations determine prices according to demand theory and market forces within the frame of the governmental rules and laws.
In capitalism, to have a fair market system the country should enforce laws that create transparency and prevent monopoly. At the same time, there should be consumers unions, workers unions, and a committee that gather workers, consumers and businessmen representatives. The law should give the workers the right to strike. Equal opportunity for all is necessary. A powerful taxing system that fairly acts in a transparent environment is also a prerequisite. A national committee for salary system determines the minimum wages. In socialism, an upper limit for salaries is also imposed through high taxes. In communism, the whole process is centrally planed. It is known that upper limit of income affects badly the innovation of the country.
The third way between socialism and capitalism that was theoretically discussed especially by the British Workers Party and other socialists after the fall of the Soviet Union is being boosted. It is based on social security. Until now, no one could transform the third way from hypothetical theories to a full ideology. Yet the US was forced to use the nationalization to correct market forces. It is more interesting that Bush´s ultraconservative administration behaved according to economic science by activating its macroeconomic role and not ideologically, because if the American economy is hit badly, the US collective power will be jeopardized. Previously this same administration neglected military strategic rules for the ideological sake and expanded the empire depending on the ability of its economy. This shows the importance of the collective power of the country over ideology.
It is clear that the financial crisis will change the strategic thinking globally. Some sort of dissolving ideologies and choices of a mixture of policies as a package will form strategies. In other words, the scientific strategists will take the role of ideologists. It is known that strategists put flexible strategies that could be changed to accommodate changing environments. Ideologists are dogmatic and changes take long time after harms affect the system as a whole.
How will the taming capitalism shape the world? The central banks will have more power over banking sectors. The governments will not differentiate between private money and public money as they both share in the development based on social security. Investments policies will be directed to some sectors through imposing VAT on non-essential goods that increase consumerism. The managers of the companies will be subjected to trials if they took decisions that badly affect shareholders. Their exit benefits may be limited according to their achievements. Their achievements will be monitored not only according to the revenues and profits but also according to other parameters that show the community benefits. Early tools will be devised to monitor banking sector, markets and corporations. It will be the right of the government to nationalize failed institutions, but according to fair rules. Privatizations will take other forms like transforming shares to workers by loans that will be paid as installments and hiring private management companies to run public sector companies as the US will do for the four nationalized institutions.
Globally, if the US went into recession while China could save its economy, the US would give concessions to the EU and Russia to save its entity as the global force. After all President Sarkozy predicted that after this crisis, the US will not be a monetary superpower. The four EU leaders called for international conference to put a new monetary system that depends upon many currencies. Their views meet the Russian views and they called for open dialogue with Russia. In a program in Russia Today TV the presenter asked two strategic analysts from Moscow and Washington about the future of the US-Russia relations. They both were in favor of partnership more than confrontation.
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