Transcript Will the Global Crisis Lead to a Capitalism With Human Face?

Will the Global Crisis
Lead to Capitalism
With a Human Face?
Ivars Brīvers
The Chairman of the Latvian Economic Association,
Professor of BA School of Business and Finance,
Riga, Latvia
SPEECH BY M. NICOLAS SARKOZY
PRESIDENT OF THE FRENCH REPUBLIC
40th World Economic Forum
Davos – Wednesday, January 27, 2010
This crisis is not just a global crisis. It is not
a crisis in globalisation. This crisis is a
crisis of globalisation.
By discarding all our responsibilities in the
marketplace, we have created an
economy which has ended up running
counter to the values on which it was
nominally based, and to its own
objectives.
Is the present crisis economical?
The three dimensions of sustainable development:
• Environment – the basis
• Economy – the tool
• Social – the target
(From Our Common Future; The Brundtland Commission, 1987)
Thus the present global crisis should be considered as:
• environmental crisis (in narrow sense ecological)
• economical crisis
• human crisis
in general – historical crisis
Ecological crisis
If the present growth trends in world population,
industrialization, pollution, food production and
resource depletion continue unchanged, the limits to
growth on this planet will be reached sometime within
the next 100 years. The most probable result will be
sudden and uncontrollable decline in both population
and industrial capacity.
(From Limits to Growth; Donella H. Meadows, Dennis L. Meadows, Jorgen
Randers and William W. Behrens, 1972)
•
•
•
resource depletion
environmental pollution and degradation of ecosystems
global warming
Human crisis
Moral crisis
• people are confused about the values of life – “added value” has
superseded real values
Institutional crisis
• the contradiction between individual preferences and social goals,
which cannot be solved without irrational elements, such as
Th.Veblen’s institutions
Educational crisis
• are the people in the XXI century better educated than in XIX
century?
• considering the higher education as non-elitist has lead to the loss
of real higher education
• the education has been subjugated to the market, it has lost its
moral aspects
Where we can see the end of the crisis?
Still a lot of economists give more attention to the financial
markets, considering that the signal about recovery will
come from there. This is curiously as even during the
Great Depression J.M.Keynes considered labour market,
not the stock market as the main indicator of the recovery.
Searching the way out of the present crisis only as a
financial crisis may lead to “recovery, not welfare”.
(Jose Antonio Cordero)
Finding the way out of the crisis only in one dimension –
economical, may lead to very harmful consequences –
one should remember the consequences of the Great
Depression.
We need to guard against destructive creation,
Jagdish Bhagwati, university professor at Columbia University,
The Financial Times, October 16, 2008
“In each case, the assumption was that
financial innovation was like nonfinancial innovation. When the
personal computer was invented, the
economy profited without upheaval.
The typewriter became obsolete – an
example of what Joseph Schumpeter
famously called “creative
destruction”. But with financial
innovation, the downside can be
lethal – it is “destructive creation”.
We have to work hard at defining the
downside scenarios.”
SPEECH BY M. NICOLAS SARKOZY
PRESIDENT OF THE FRENCH REPUBLIC
40th World Economic Forum
Davos – Wednesday, January 27, 2010
The question of innovative financing
is central. We cannot avoid the
debate on a tax on speculation.
Taxing the exorbitant profits of finance
to combat poverty: who cannot see
how such a decision – even if I am
well aware of the complexity of
implementing it – would contribute
to putting us on the path of a
moralisation of financial
capitalism?
If financial capitalism went so wrong,
it was, first and foremost, because
many banks were no longer doing
their job. Why take the risk of
lending to entrepreneurs when it is
so easy to earn money by
speculating on the markets?
SPEECH BY M. NICOLAS SARKOZY
PRESIDENT OF THE FRENCH REPUBLIC
40th World Economic Forum
Davos – Wednesday, January 27, 2010
…finance, free trade and competition are only
means, not ends. From the moment we
accepted the idea that the market was always
right and that no other opposing factors need be
taken into account, globalisation skidded out of
control.
Globalisation first took the form of globalisation of
savings. It gave rise to a world in which
everything was given to financial capital and
almost nothing to labour, in which the
entrepreneur gave way to the speculator, in
which those who lived on unearned income left
the workers far behind…
Latvia – Ponzi from the start
(D.Bezemer, M.Hudson, J.Sommers)
In Latvia the state power has grown together
with the speculative business, taking a full
control over the mass media, thus
manipulating with people’s consciousness.
Thus the democracy there is fictitious.
Political and economical power is in the hands
of cleptocracy, which make decisions,
according their narrow interests, ignoring the
survival of Latvian nation.
IMF as a charitable adviser
„Don’t rely on profuse inflow of foreign capital,
which will inflate your finance system or real
estate sector. This is a warning to many
Central and East European countries, that
rely too much on those two sectors.”
(Marek Belka, Director of European department
of IMF, March 30, 2009, reverse translation
from Latvian)
Economic crisis
The goal of economy in the XXth century – economic
growth has turned out to be false.
Economic growth in the developed countries does not
contribute the increase of real welfare. “While the rich got
richer, middle-class incomes in Western countries were
stagnant in real terms long before the recession.”
(Jackson, 2009)
Economic growth is unsustainable, as environmental
resources at an exponential rate are turned into rubbish,
and both of them are close to the limits.
Though economic growth is necessary, as the increasing
productivity and labour substitution by capital allows
producing the same amount of product with less labour.
Perhaps, this is the main contradiction of economics in the
XXI century, and solution of it will be the main problem of
economics.
Is it possible to achieve prosperity without growth?
Tim Jackson, “Prosperity Without Growth?”, 2009
Growth has been (until now) the default mechanism for
preventing collapse. In particular, market economies
have placed a high emphasis on labour productivity.
Continuous improvements in technology mean that
more output can be produced for any given input of
labour. But crucially this also means that fewer people
are needed to produce the same goods from one year
to the next.
As long as the economy expands fast enough to offset
labour productivity there isn’t a problem. But if the
economy doesn’t grow, there is a downward pressure
on employment. People lose their jobs. With less
money in the economy, output falls, public spending is
curtailed and the ability to service public debt is
diminished. A spiral of recession looms. Growth is
necessary within this system just to prevent collapse.
This evidence leads to an uncomfortable and deep-seated dilemma: growth may
be unsustainable, but ‘de-growth’ appears to be unstable. At first this looks
like an impossibility theorem for a lasting prosperity. But ignoring the
implications won’t make them go away. The failure to take the dilemma of
growth seriously may be the single biggest threat to sustainability that we face.
Oscar Wilde (from The Young King, 1891)
“Sir, knowest thou not that out of the luxury of the rich cometh
the life of the poor? By your pomp we are nurtured, and
your vices give us bread. To toil for a hard master is bitter,
but to have no master to toil for is more bitter still.”
John Stuart Mill (from Principles of Political Economy, 1848)
I confess I am not charmed with the ideal of life held out by those who
think that the normal state of human beings is that of struggling to get
on; that the trampling, crushing, elbowing, and treading on each
other's heels, which form the existing type of social life, are the most
desirable lot of human kind, or anything but the disagreeable
symptoms of one of the phases of industrial progress.
The best state for human nature is that in which, while no one is poor, no
one desires to be richer, nor has any reason to fear being thrust back,
by the efforts of others to push themselves forward.
It is only in the backward countries of the world that increased production
is still an important object: in those most advanced, what is
economically needed is a better distribution.
It is scarcely necessary to remark that a stationary condition of capital
and population implies no stationary state of human improvement.
There would be as much scope as ever for all kinds of mental culture,
and moral and social progress; as much room for improving the Art of
Living, and much more likelihood of its being improved, when minds
ceased to be engrossed by the art of getting on. Even the industrial
arts might be as earnestly and as successfully cultivated, with this
sole difference, that instead of serving no purpose but the increase of
wealth, industrial improvements would produce their legitimate effect,
that of abridging labour.
Herman E. Daly (from A Steady-State Economy, 2008)
Growth is more of the same stuff; development is the same amount of
better stuff (or at least different stuff). The economy must conform to
the rules of a steady state - seek qualitative development, but stop
aggregate quantitative growth. GDP increase conflates these two very
different things.
We have lived for 200 years in a growth economy. That makes it hard to
imagine what a steady-state economy (SSE) would be like, even
though for most of our history mankind has lived in an economy in
which annual growth was negligible. The growth economy is failing.
The quantitative expansion of the economic subsystem increases
environmental and social costs faster than production benefits, making
us poorer not richer, at least in high consumption countries. And even
new technology sometimes makes it worse. We do not bother to
separate costs from benefits in our national accounts. Instead we lump
them together as “activity” in the calculation of GDP.
How do we deal with poverty in the SSE? The simple answer is by
redistribution - by limits to the range of permissible inequality, by a
minimum income and a maximum income.
The institutional roots of criticism of the steady-state economy
“Institutions are habitual methods of carrying on the life process of the community.”
(Th.Veblen)
The ideas of steady-state economy, prosperity without growth,
and sustainable development in general usually meet a
negative attitude from most of politicians, bankers, and
even from common people. How to explain that these rather
obvious conclusions about limits to growth are treated with
resistance?
May be the explanation is in the fact, that the notion of
increase of personal wealth through competition has
institutional roots – people cannot give a rational
explanation to their belief, thus are defending it with the
same strength, as a zealot is defending his confession. If he
feels that he is losing in the discussion, the only let-out is to
give an ironic and none-serious spirit to the discussion.
SPEECH BY M. NICOLAS SARKOZY
PRESIDENT OF THE FRENCH REPUBLIC
40th World Economic Forum
Davos – Wednesday, January 27, 2010
We will not be able to change our set ways if we do
not change the way we measure and represent
things, our criteria. That is not an issue only for
the experts. It concerns us all.
Purely financial capitalism is a distortion, and
we have seen the risks it involves for the
world economy. But anti-capitalism is a dead
end that is even worse.
Either we change of our own accord, or change will
be imposed on us by economic, social and
political crises.
• Is there a solution for the dilemma of growth?
• Can one find the solution under capitalism (i.e.
private property of capital)?
• Can the financial markets exist in economy without
growth?
• Can the economy exist without financial markets?
• How can we return the economy to the service
of mankind? How can we act to ensure that the
economy no longer appears as an end itself, but
as a means to an end? (N.Sarkozy)
• Is it possible to create a capitalism with “human
face”?
I guess, that the answer is “no”.