Column

The mantra that captains of industry chant nowadays is that government must provide a stimulus package to revive the economy slipping into a recession. There is a sense of utter helplessness. The private sector just does not know what to do with a market crisis. When the going is good, the credit for success is claimed by the beaming self-made plutocrats. Not so when the weather turns foul. Then they cry — and it is always addressed to the state —for help. All they are willing to do is press the panic button: cut jobs, reduce and destroy inventories and, of course, avoid losses. These are indeed the tools of the survival-kit. A perfect example of Darwinian selfishness.

They argue that if these decisions of theirs have negative effects on the economy at large, then they cannot help it. What they do not seem to realise is that these actions of withdrawal further add to the macro-economic woes, and that the market will shrink so much that recovery becomes so much more painful.

Curiosity should force one to ask: Is it possible to design a market system that does not provide for a state which steps in to quell trouble? It is a legitimate question to ask, and the possible answers could provide clues for re-designing capitalism which is a little more resistant to meltdowns than before.

The esoteric community of mathematical economists seem to have models which factor in risks of failure, but not a systemic crash. Economists assume that problems in the system are local and that they can be fixed with a bit of tinkering. They do not envisage a situation when many local problems were to occur at the same time, gather momentum and turn into a destructive tidal wave. The 2008 meltdown in the United States is anexample of the cumulative effect of many local breakdowns.

It is political leaders — not all of them though — and people at large who are taken up by this big question of creating an efficient model of capitalism. French president Nicolas Sarkozy is keen to reinvent capitalism, though it is not clear if he has definite ideas. Perhaps what his statement implies is the urgency to save capitalism. Then we have the Chinese government declaring that spending is a patriotic duty. For the first time since 2001, the Chinese economic growth has slipped into single digits. It has clockednine per cent in 2008. Governments are grappling with the question of a better model of capitalism, however vague it may be.

It seems what has kept the market going is accidental inventions and innovations of maverick individuals. For example, the Internet became an extraordinary force in the 1990s for taking the market economy to a new high. It is not the result of a collective research and development (R &D) effort. The market players seized the opportunity and made their big bucks. When the inevitable dotcom bubble burst, they moved to another territory.

The behaviour pattern of the movers and shakers in the market then is not very different from the slash-and-burn cultivators of tribal and marginal societies who practice a kind of primitive agriculture. Present-day private sector leaders are primitive capitalists, who have not evolved ways of operating sustainable markets. The size of the market has increased, but there has not been a commensurate improvement in dealing with the bigger size. Complicated and dubious financial instruments as derivatives cannot be seen as a sign of an evolved capitalism.

The industry and business organisations should perhaps engage in the collective exercise of coming up with new ideas for an improved weather-proof market. They hate terms like social security meant for the workers. They would not want capitalism with a human face either. But they cannot object to an efficient model which is for their own benefit. Then theymust think beyond the primitive capitalism of the slash-and-burn kind.