Through a squally shower on Dawson Street the other day, a sign that looked like it had been laminated in a plastic sandwich bag swung off a lamppost. “WHY MARX WAS RIGHT,” asserted the poster advertising a public meeting at Wynn’s Hotel.
To the 21st century generation living in a capitalist haze, the notion of anything other than the supreme Western model is nothing more than history. Capitalism, the free market and the reduction of trade barriers have been entrenched as the norm in the Western psyche: the dramatic fall of communism is the real life proof of capitalism’s superiority. However in a year that has seen world markets crash and widespread government intervention in national economies, the question must be asked: are we witnessing the fall of the free market economy?
This was the view of Nicholas Sarkozy who announced the death of the free market in a speech in Toulon in September: “Laissez-faire, c’est fini.” A typical French solution to a typical American problem. The global financial crisis has made the question of ideological orientation and economic structure as pertinent as it has been since the Cold War. Riding on the wave of the fall of communism, capitalism has had huge success in establishing superiority over other market models. However, with billion dollar bailouts by Western governments now the standard response, economics once again becomes both political and cultural. Ideologies and history are again catapulted into centre stage as people look for someone to blame for this financial crisis. As the champion of capitalism, America is the easy scapegoat – particularly while Bush remains in office. With the capitalist system crashing in front of our eyes, what does the future hold for the free market and its champions?
The day after Barack Obama was elected President of America, Israeli daily newspaper Haaretz printed its congratulations hoping that he would “rehabilitate the status of a superpower that remains unrivalled in its influence over the peace and welfare of all humanity”. The power and the influence of the US went hand in hand with the spread of capitalism in the 20th century. In the fight against communism, the US has championed countries such as South Korea who choose Coca-Cola over Kim Jong-Il. As with the establishment of any other economic model, capitalism was one marred by conflicting ideologies and violence. British political philosopher John Gray has described “the seeming triumph of global capitalism at the end of the twentieth century” as having followed “two world wars, the Cold War, and savage neo-colonial conflicts”.
With one superpower out of the way, the end of the 20th century was shaped by American world dominance. Capitalism, Pro-Americanism and globalization were concepts which, morphing into each other, dominated debates at the end of the last century. American economic power stemmed from the country’s huge domestic economy, its strong currency, its developed infrastructure and, ironically, its powerful financial markets. As a result, Starbucks infiltrated regional capitals worldwide and in 1990 the golden arches broke their worldwide opening day records when McDonald’s opened in Pushkin Square, Moscow. The importance and the power that the “land of the free and home of the brave” still has in the world was illustrated by the scale of international interest in the recent American election.
In a paper titled “The Realignment of Nations and the Rise of Regional Super States” Jagdish Sheth and Rajendra Sisodia describe the world as “in an unnatural unipolar state, with one superpower, the United States.” In such a world, they claim, “the rise of anti-American sentiments globally is inevitable.”
The terrorist attacks of 9/11 and the subsequent wars in Afghanistan and Iraq shook America’s foundations. Criticism of George Bush reached fever pitch and with the increasing power of the European Union, the drastic fall of the dollar and the booming Chinese Tiger economy, world order began to change.
However Russia’s widely publicized political and military resurgence, China’s meteoric rise to economic dominance and India’s transformation into an offshoring powerhouse may not be callous bids to dethrone America. It may just be evolutionary economics kicking in. The American dream became reality to millions as the last century saw Allied success in both World Wars and victory for the US in the subsequent Cold War. The beginning of the 21st century saw a different world image of the US as the sheen began to wear off the world’s only superpower. When President Bush addressed the nation in September to present a $700 billion dollar government bailout, it may have signalled the next shift in global economic tendencies. Does the financial crisis herald the end of America’s world dominance? Have we awoken from the American dream?
Instead of shaking a steady nation, the global financial crisis has served to highlight the cracks in the formerly unshakeable American economy, and the much-changed world order. It has taken an economic world crash to shake the cobwebs off of the seemingly obsolete concept of First World debt. The financial crisis didn’t just drop from the sky, and China has the loans to prove it.
Bono, Bob and Band Aid confronted the West with the staggering degree of Third World debt in the 1980s and ‘90s. The extensive borrowing of poorer countries from richer countries was top political priority and a Christmas number one hit. The flip-flop of world debt however hasn’t made the same headlines. The US currently borrows more than two-thirds of the combined excess savings of all the surplus countries in the world put together. “Feed the World” doesn’t seem to be blaring as frequently on radios this Christmas as the lines between rich and poor nations begin to blur. Countries such as China are financing the consumption of richer societies where savings rates have plummeted. In 2006 the US savings rate reached its lowest since 1933, at a negative level. In layman’s terms this means that Americans were not only spending their entire income, they were also borrowing or delving into savings to spend more.
The Chinese, on the other hand, currently have a savings rate of around 50%. It is no surprise that the US owes an estimated $1.4 trillion to China. With questions over how Western governments are funding massive bailouts, is the not-so-long-ago communist China paying for the mistakes made on Wall Street? Madeleine Bunting, writing in The Guardian, dramatically described the US current account deficit as being “funded by the sacrificed futures of millions across Asia”.
What does this change in world order mean for the politics of the 21st century? Hilary Clinton broached this topic with fear saying, “We are so dependent upon decisions made in other countries’ capitals.” However it is not just traditional superpowers that are reconsidering their political and economic stance, the ailing American economy throws up questions of policy and planning worldwide. A leading Chinese economist talked lately about how the US had been a model for China, adding however; “Now that it had created such a big mess of course we have to think twice.”
It is hard to believe that economic power could shift so dramatically in the last century that in two of three US Presidential debates Republican nominee John McCain used Ireland as an economic model, quoting the low corporate tax rate. Impoverished at the turn of the 20th century, it seems that Ireland – one Celtic Tiger later – is now considered more capitalist then the capitalists themselves. With newspapers reprinting images of queues to soup kitchens during the Great Depression, the once triumphant capitalist model is again in question as economics takes another evolutionary and geographical shift.
With the global economy in crisis, ongoing wars in the Middle East and the pendulum of power swinging in the balance, what does the 21st century hold for capitalism and its champions? Was the answer at Wynn’s Hotel? Was Marx right? Or as Western economies hope, is this recession merely a cyclical blip on the evolution of capitalism. By no means perfect, fostering world inequalities and cultural divides as it does, capitalism has, it must be pointed out, brought greater economic growth to a large portion of the world. As easy as it is to blame greedy Wall Street bankers when things go wrong, Europe must remember that it was that same capitalist system and the American machine which got it back on its feet with the Marshall Plan after World War Two. With the inauguration of a new president defined by a theme of hope and change on January 20th, the champions of capitalism have a chance to awake from the Bush years and try to re-establish that much-vaunted American dream. Capitalism isn’t dead – not yet.