Capitalism Beyond the Crisis

Capitalism Beyond the Crisis

The New York Review of Books
Volume 56, Number 5 · March 26, 2009

By Amartya Sen

Is capitalism in its current form dead? I made the crude argument in my article on tiras.ru (see earliest blog entry). That said, Nobel Prize-winning economist Amartya Sen argues in the NY Review of Books piece that capitalism's "usefulness may well be fairly exhausted" because, for all markets can accomplish, "nevertheless an economy can operate effectively only on the basis of trust among different parties," which recent deregulatory trends and "the rapid development of secondary markets involving derivatives" have allowed to lapse. TRUST me, baby. TRUST is the crux of the problem. In this sense America could heed the brutal experiences of the Eastern bloc/former USSR, where trust (in all institutions - state, economic, social) is nil. He adds: "The present economic crisis is partly generated by a huge overestimation of the wisdom of market processes" and is "many times magnified by a psychological collapse."

One of my favorite quotes has to do with corruption...

"Historically, capitalism did not emerge until new systems of law and economic practice protected property rights and made an economy based on ownership workable. Commercial exchange could not effectively take place until business morality made contractual behavior sustainable and inexpensive—not requiring constant suing of defaulting contractors, for example. Investment in productive businesses could not flourish until the higher rewards from corruption had been moderated. Profit-oriented capitalism has always drawn on support from other institutional values."

You could say that in this part of the world business morality is an oxymoron. Don't like what a partner or a competitor is doing? Just make the right payment and that person will end up getting massively screwed by whatever state or judicial apparatus you have hired. If that doesn't work, there's always the контрольный выстрел