The return of Socialism?

The Global Policy Institute: Home

I listened with great interest to the podcast form the Global Policy Institute where Prof Stefen Haseler talks about the book 'Meltdown - How the Masters of the Universe destroyed the West's Power and Prosperity'.

The interesting part I found was the analysis of the origin of the current crisis, which is seen as a financial crisis but in this book is positioned as ideological. The financial part of the crisis is, by now, fairly well identified:
1) Real incomes in the US where stagnating or decreasing in the last 20 years. Average Hourly Income, Average Real Wages where decreasing for the midle class
2) Consumption was growing though, to reach the level of 72% of GDP in 2007. The economic policy was clearly consumer driven
3) How can this differences be balanced: with mountains of debt.

The liberalization of capital markets and capital flows allowed for China's willingness to lend and Amercia's willingness to borrow to meet each other. Globalization allowed for lower cost centres, mainly in Asia to keep salaries down for midle class workers in US (and other places as well).

How could American citizens and the American State let go into such big debt? The response of the author is that, after the Fall of Comunism, the Liberal Democracy ideology was seemed to be the trimphant one. And America not only was the Superpower in financial terms, the reserve currency; it also adopted the Superpower view in Military actions, with the view of the Unipolar world and the Pentagon policy. 9/11 could only strengthen this position, when a deeply sceptical US public opinion, supported the wars initiated by the Administration. So, it is claimed, an ideological issue, the Liberal Democracy "End of History" type of thinking that allowed America to live beyond their means and to define policies to transform the world.

All this of course has collapsed in the last 18 months. And now the risk is that the nostalgics of the old communism bring the socialism susuration "we told you". This is what I read in the Financial Times: Communism: an alternative to capitalism once again?.

Because we are now seeing nationalised banks and a much tighter regulation in many places, there is a tendency to believe that what has failed is the Capitalist system and Socialism is going to save us. This is not correct. First, this traditional idelology approach is now not appropriate. Besides, no country would want to give away the increase in per capita GDP that free markets bring with them.

No. The conclusion from the author is more adequate in my view. For sure we are going to see, we are alrady seeing, a period of more state, more intervention, more regulation, more politics and a morale climate where fairness and social justice will take a primary role. We are also going to see, we are seeing, a move from the unipolar to the multipolar world, which reflects much better the reality of the world today (US represents 4% of population and 24% of GDP).