Column: Not a perfect system but the best we have

Written by Michael Walton | Michael Walton | Updated: Nov 3 2009, 04:48am hrs
Capitalism is evil. Thats the central message of Michael Moores latest documentary, Capitalism: A Love Story, now showing in the US. It is evil because it is a source of injustice and because it corrupts politics to further its ends.

In previous films, Moore has acquired celebrity through his peaceful guerrilla tactics of personal confrontation with corporate leaders, taking the side of working Americans against big corporations and their political allies, whilst appealing to traditional American values. He has attacked industrial lay-offs that destroyed his home town of Flint, Michigan, and the absurdities of the US health system. The fact that he is overweight, wears ill-fitting clothes and a baseball cap only increases his aura of grounded credibility.

In his latest film he takes on the whole capitalist system in its American manifestation. There is something genuinely compelling about it. There are the awful personal hardships of families evicted from their homes, after taking out mortgage loans that should never have been approved in a sensible financial system. There is the immoral absurdity of firms taking out life insurance policies on their employees, without the workers knowledge, and receiving large payouts when they die, whilst their families are left only with their grief. And there are vivid portrayals of the now-familiar craziness of Wall Street excess, supported by government bailouts to keep the system afloat. In characteristic stunts, Moore attempts citizen arrests of the heads of financial firms, only to be kept out of the gleaming buildings by the (usually good-humoured) guards.

Moores two big themes are the social injustice of capitalism, and the power of big corporations over political decision- making and the ideology of the times. There is compelling material on influenceon the extensive links between money and politics, and of the revolving door between Wall Street and government. After the crisis, Moore has common ground with many in the mainstream who are deeply concerned about the influence of big finance.

So is there hope Moore wants radical change. There is not, however, a coherent proposal. There are positive examples of a profitable cooperative bakery, of worker mobilisation to keep a factory open, and of community action to hold off an eviction of squatters in abandoned property. But these have the feeling of isolated instances. He says capitalism cant be regulated, that the alternative to capitalism is democracy. Yet this makes no sensesurely capitalism is about how to organise production, and democracy about how to organise polities

The questions raised are as relevant to India as they are for the US. The tradeoffs are, if anything, more acute. India needs extraordinary growth if deprivation is to be removed and prosperity attained for all. It is hard to impossible to imagine this without some form of capitalism. At the same time, India has exemplified some of the most burdensomeand at times corrupt forms of state regulation. Moores view that regulation is not the answer resonates. India is a democracy. That means that tolerance for actual or perceived injustice, for deprivation alongside extreme wealth, is limited. Marketsand capitalismhave to be embedded in acceptable social and human values, not the other way round.

And here I think Moores intuition on democracy is essentially right, even if his formulation of the need to replace capitalism with democracy seems incoherent. The issue is rather one of developing institutional designs that introduce real accountabilities into both capitalist and regulatory structures.

What does this mean in practice It goes beyond periodic elections. Political financein both its legal and illegal formsis a central example. This is especially the case when large capitalist firms have significant power over the state, whether they are too big to fail, or simply too influential, through money and connections. Cooperative forms of production and organisation have a role to playand warrant supportbut large corporations are needed for their efficiency and dynamism. This has to be managed. Competition through entry, through financial inclusion and through competition policy is an important part of the answer, but is not enough. Democratising markets also has profound implications for informationin areas ranging from policy on market-based trading of derivatives, to ensuring populations are fully informed of the effects of industrial production on their environment.

India needs capitalism for growth. But capitalism needs to be embedded in institutional structures that make both markets and the state genuinely democratic. How to do this is complex and hard, but it is both a possible and an essential task.

The author is at the Harvard Kennedy School, the Institute of Economic Change and the Centre for Policy Research