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R Jagannathan
Capitalism has a shaky future in the new century. Now, don't get me wrong. I am not a closet Commie making millenial predictions after having lost touch with reality. Everyone knows that the closing years of the 20th century have seen more people added to the capitalist world than at any time since Adam Smith (Eastern Europe, Russia, China, and even semi-Socialist India). But to say that Communism failed to deliver is one thing; it is quite another to predict that capitalism will survive in its current form in the next millenium.
Despite being the sole surviving economic ideology of the 20th century, capitalism is likely to face a crisis in the early years of the next one. And the crisis I am talking about has nothing to do with what George Soros has to say on the subject. In fact, the world is already coming to grips with the reality of unstable crossborder financial flows, and most countries have put protective shields in place.
Capitalism will face its toughest challenge in the next century for twomain reasons. One is simple: nature prefers a balance. Just as the US, the world's sole superpower, is now beginning to face global resistance after bombing the daylights out of Yugoslavia, capitalism too, will, in due course, find a challenger. If it does not, capitalism itself will wither away.
The second reason is more specific: in the brave new world of convergent technologies, where knowledge will be the only basis of competitive advantage, I do not see survival-of-the-fittest capitalism having any great advantage as a system--though it has it merits. This is because unlike natural resources or other factors of production, knowledge cannot be "owned" by a capitalist or grow in an inegalitarian setup. And egalitarianism is precisely what Anglo-Saxon capitalism does not promote.
The reality is that income inequalities have sharpened in all capitalist countries, and the coming decades will only sharpen them further--leading to doubts about the long-term stability of western societies. According toLester Thurow, management thinker and economist at MIT, throughout the 1980s, the entire earnings gains of US non-supervisory workers went to the top 20 per cent, and two-thirds of these gains went to the top one per cent. He asks rhetorically: "How far can inequality rise before the system cracks?"
The answer should be available to us in the next 10 years, when the income skew accelerates across the globe with the expansion of global companies who pay extraordinary wages to an insignificant minority. My best guess is that in the next millenium, Anglo-Saxon capitalism will have to adapt and take ideas from extinct Communism to survive. Ideas like: from each according to his ability; to each according to his need.
To understand why, look at what is happening in the corporate world, which swears by knowledge-based industry. Most global CEOs today understand that competitive power and organisational learning comes from sharing information and knowledge, not by hoarding it. Where once the CEO was hero inorganisations, today it is teams that are delivering the competitive edge. But teams cannot deliver unless they are empowered and information is made available to them--the same information that was earlier available only to top management.
And once information and knowledge become available freely within companies, the old hierarchical systems within companies cannot survive. You cannot know as much as the CEO and still justify the huge earnings differentials between the top and bottom rungs of organisations. Gross inequalities of income militate against a truly egalitarian knowledge base--which is admittedly the ultimate source of competitive advantage.
What is true for companies is equally true for countries and economies. If countries are to improve their overall economic strength, they need to discover new ways to improve the knowledge base of their citizens. But capitalism is killing precisely these abilities of states.
In the past capitalism worked precisely because of a state's ability totransfer wealth from the rich to the poor through the mechanism of the welfare state or through progressive taxation and subsidies. Granted, states have been doing their jobs inefficiently, but if you don't want the state to do the job, you have to create an entity (or entities) that will. Anglo-Saxon capitalism does not yet have an answer to this dilemma.
It has demonstrated its ability to be the most efficient system for generating wealth; but unless the wealth generated can be redeployed for the greater good, such unequal wealth will ultimately be destroyed by the social tensions it promotes. That is the challenge capitalism will have to face upto now that it no longer has Communism as a foe.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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