Capitalism Crisis in 21st Century

In the era of globalisation where world is witnessed as a global village, Capitalism is beyond what is seen and observed. World is questioning its sustainability and experts argue that it should be in a better position in the global marketplace, retaining an entrepreneurial culture and boundless human capital. The offenders are developing economies enduring state liaison overpromising and under-delivering.

No doubt there are hopes of innovation, sustainable growth and productivity gains but they are dominated by methodical inequalities, and economic-political instabilities. Many economists challenge this disenchantment with modern capitalism whose roots actually belong to Adam Smith’s master piece ‘An Enquiry into the nature and cause of Wealth of Nations.’ Modern-day Capitalism connotes that businesses should not be controlled at all. Weak trade has a fall while as strong trade has a rise and the general economic condition of the country in which trade takes place will be fortified. In contemporary times, literature is coming in warm like clusters profoundly studying the vices, virtues, and consequences of capitalism.

“Socialism for the rich and capitalism for the poor’’ is a classical political-economic argument proclaiming that, in forward-thinking capitalist societies, state policies promise that more resources flow to the rich than to the poor. Under such advanced capitalist societies, forward-thinking people are not correct to some extent the moment they tag modern capitalism as “socialism for the rich or capitalism for the poor."

There are many factors responsible for the bad health of capitalism in the present day times but the main factor is the role of government as a regulator rather than a facilitator to the market. Today’s state is not a necessary evil as was perceived in olden times. Now, we have welfare state performing not only necessary functions of law and order but optional cum welfare functions as well. History is witness to the fact that economic reforms of 1990’s could gear up growth only by changing the role of the government from regulator to facilitator to the market. According to Ruchir Sharma, a global investor and economic analyst, one of the root causes of the sickness of Capitalism is government interference and overexpansion of welfare state.

Currently, the Wagner law of government expenditure is in full blossom as the graph of government expenditure is increasing at an increasing rate in multidimensional manner. But, this behaviour of the government has shaken the very foundations of the economy thereby bringing macroeconomic instability and promoted bad interface between fiscal and monetary policy. The end product of this behaviour is socialised risk thereby meaning that sophisticated government assures many things including welfare for the poor, affluent bailouts, and the entitlements for the middle class.

Capitalism no doubt showcases Laissez-faire or free markets and when government interferes in the system, it results in a dysfunctional form of laissez-faire ideals. Accordingly, the trade-off between efficiency and economic welfare gets disturbed with a sharp declining trend in both parameters sinking everyone’s thirst and aggravating mass aggression. The more government stretched through its welfare role, the more deficiencies were established generating even more injuries. For maintaining a balance between state and markets, it is very important to offer a holistic state-market model taking account of the development of the state as well as the birth and development of market. So, it is very necessary to adjust state-market liaison.

When there is excessive government interference and welfare state over-expands, capitalism gets very wild. The spiralling and over-expansion of welfare state increases the gap between rich and poor. Furthermore, it worsens the already existing economic disparities by bizarrely encouraging the wealthy people through relief mechanisms. Neo-liberal school of economic thought is not wrong when they argue that market mechanism or market forces are damaged by lop-sided government engrossment. Accordingly, dead weight losses, misallocations, and inefficiencies are common elements. Cyclical fluctuations, depressions, and financial crunches assure that there is something wrong in the very structure of capitalism or there is presence of structural dysfunction of capitalism.

In crux, if we want to see what went wrong in capitalism, we need to overhaul the system. There is need for talking about its profound paradoxes, emphasizing the limitations of the reform in a capitalistic system that has its roots in socio-economic disparities. It is high time to provide a more deep-seated reconsideration of global economic structures so that we can cure basic economic systems in the world.

Dr. Binish Qadri, former Assistant Professor, Department of Economics, Cluster University, Srinagar, J&K.