Game over for Western capitalism

Sep 26, 2011

This article is part of a collection headlined Has Western capitalism failed? – was first published on the BBC News website.


The extreme form of capitalism which has permeated the world, particularly in the last 30-40 years, is in deep trouble and we are in denial.

It is important to understand that fundamental principles of capitalism – that human beings are rational and markets behave rationally, and that markets will assign prices – are flawed. It is also important to understand the roots of modern capitalism.

You could argue that slavery was the first attempt to under-price resources. When slavery came to an end there was colonisation, which was again an attempt by the capitalist model to use resources cheaply. With the end of colonies, we had the globalisation argument of economic growth and then the globalisation of finance.

When I speak about this in Europe, they say there has been 30 years of over-leverage, but I say they should multiply that by 10 and look at 300 years of essentially exploited growth.

What we need to recognise now is that the world is a very different place from what it was 100 years ago when we had one billion people. With a current population approaching seven billion, things will have to change.

A fundamental issue that the world will have to recognise, and which Western capitalism has conveniently ignored, is that the goods and services which companies and economies seem to thrive on are based on under-pricing resources and externalising costs.

That game is over and we need a fundamental restructuring – essentially about how people will live, and we need to move beyond simple notions about growth to more sophisticated, nuanced discussions about human progress.

That is not the same as suggesting that economic growth will be able to deliver i-toys and cars to everyone. This is not possible and that is where capitalism has essentially hit a wall and a very different conversation needs to take place.

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