The Future of Capitalism

The Future of Capitalism

https://www.foreignaffairs.com/press/2019-12-19/future-capitalism

December 19, 2019
 

After two and a half centuries of capitalism, “We’re still trying to figure out how to reap the upsides of markets while protecting ourselves from the downsides” writes Gideon Rose, editor of Foreign Affairs, in the introduction to the lead package, “The Future of Capitalism.” “The more the system seems to work only for those at the top, the more it will have trouble sust

The Clash of Capitalism

There are two capitalist camps battling for supremacy, argues leading economist Branko Milanovic: a liberal meritocratic one, led by the advanced industrial democracies, and a state-led political one, headed by China. “The endpoint of the two systems will be the same: the closing ranks of a privileged few and the reproduction of that elite indefinitely into the future.”

 

How Poverty Ends

Winners of this year’s Nobel Prize in economics Abhijit V. Banerjee and Esther Duflo argue that although the last few decades have been remarkably good for the world’s poor, the paths that lead to progress may not continue. “In a bid to preserve growth, many countries have interpreted the prescription to be business friendly as a license to enact all kinds of anti-poor, pro-rich policies, such as tax cuts for the rich and bailouts for corporations,” they write. “Asking the poor to tighten their belts in the hope that giveaways to the rich will eventually trickle down does nothing for growth and even less for the poor.”

 

The Starving State

“Today, multinationals shift close to 40 percent of their profits to low-tax countries around the world,” write Nobel Laureate Joseph E. Stiglitz, Roosevelt Institute’s Todd N. Tucker, and UC Berkeley’s Gabriel Zucman. “Among the superrich, dodging taxes is a competitive sport.” The authors argue that capitalism is in crisis due to a lack of revenue. “Allowing states to collect their fair share of revenue in the form of taxes will not usher in a dystopian era of oppressive government,” they write. “Instead, strengthening the state will return capitalism to a better path, toward a future in which markets function in the interests of the societies that produce them, and in which the benefits of economic activity will not be restricted to a vanishingly small elite.”

 

The Neoliberal Collapse

Stagnating incomes, concentrated wealth, and looming environmental catastrophe show that capitalism has reached its limits, claims Miatta Fahnbulleh, chief executive of New Economics Foundation. A new model would adapt “traditional socialist ideals to contemporary realities, empowering people and communities rather than the state” by giving them “a larger stake in the economy by establishing common ownership of public goods and essential infrastructure and by encouraging the cooperative and joint ownership of private, locally administered enterprises.”

 

The Neosocialist Delusion

Neosocialists “downplay poverty and fetishize equality, focus on wealth distribution rather than wealth creation, and seem to care as much about lowering those at the top as raising those at the bottom.” writes Jerry Z. Muller. “What is distinctive about their program is not its promises—anybody can produce impossible wish lists—but its threats.”

 

 

Also in this issue:

 

The New China Scare

“The nature of the challenge from China is different from and far more complex than what the new alarmism portrays,” writes Fareed Zakaria. By misunderstanding “the single most important foreign policy issue of the next several decades, the United States is setting itself up for an expensive failure.”

Chained to Globalization

“Policymakers cannot cling to fantasies of either decoupled isolation or benign integration,” write Henry Farrell and Abraham L. Newman. “Like it or not, the United States is bound to its competitors. Since it cannot break those bonds, it must learn to master them.”

 

How to Fix American Health Care

 “Despite spending almost twice as much as Australians, Canadians, Japanese, and many Europeans, Americans suffer from lower life expectancy, higher infant mortality rates, and a higher prevalence of heart disease, lung disease, and sexually transmitted infections,” writes William C. Hsiao. “When it comes to health care, Americans pay more and get less.” Although a single-payer system like the ones in Canada and Taiwan would solve many problems, a more politically realistic model for the United States might be a hybrid system similar to the one in Germany.

 

Adapt or Perish

Council on Foreign Relations’ (CFR) Alice Hill and Leonardo Martinez-Diaz of World Resources Institute argue that no matter what steps we take to mitigate climate change, some measure of it is here to stay. “The phenomenon has already affected the U.S. economy, U.S. national security, and human health,” they write. “The United States must build resilience and overhaul key systems, including those governing infrastructure, the use of climate data, and finance.”

 

Women Under Attack

“As women enter politics, they face a disproportionate number of attacks, many of which take on specifically gender-based forms,” write CFR’s Jamille Bigio and Rachel Vogelstein. “Governments, civil society organizations, and activists must work together to make it easier for women to participate in politics—and harder for others to block their rise.”

 

The Age of Great-Power Competition

“U.S. foreign policy is, by most accounts, in disarray,” note former Trump administration officials Elbridge A. Colby and A. Wess Mitchell. But in reality, they argue, the administration has made important progress in “recognizing that great-power competition warrants rebuilding U.S. foreign policy from the ground up, and it has based its formal strategy documents on that recognition. When future historians look back at the actions of the United States in the early twenty-first century, by far the most consequential story will be the way Washington refocused its attention on great-power competition.”

 

The Shoals of Ukraine

“Leaving the issues of Ukraine’s security and its place in the new international order unresolved for decades had the effect of turning the country into a dangerous arena,” write Harvard’s Serhii Plokhy and M. E. Sarotte of Johns Hopkins University. “It became a space where the interests of the great powers clashed and yet no conflicts were resolved. It also became a place where there was money to be made by outside consultants advising the locals on how best to outmaneuver their opponents.”

 

Unmerited

In a review of a new book on meritocracy, Nicholas Lemann, writes that “Rising inequality and the stalled progress of the middle class are the preoccupying problems of American society today, and most of the possible solutions offered by politicians, intellectuals, academics, and activists don’t involve meritocracy at all.”