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ShareLast year this time round, it did not seem that the seizure that convulsed the US economy would ease so fast. But it has and no one, including the economists, is really in a position to explain why the recession can be said to have ended.
Is it because of the nearly trillion dollar bailout packages that presidents George W Bush and Barack Obama have given to the collapsing banks and auto majors in the country? Has the bailout money been used to set things right by the market recipients? What about the extravagant bonuses and salaries that are still being doled out to the dolts on Wall Street who had caused the catastrophe in the first place? There are no clear answers to any of these questions.
All that US Federal Reserve chairman Ben Bernanke is willing to say is that the recession has bottomed out but recovery is not yet in sight. Of course, Cassandras like Nobel laureate Paul Krugman continue to rail against the reckless and unreformed masters of the financial markets but to no avail.
The homilies delivered by Barack Obama, Manmohan Singh and Gordon Brown against greed and bewildering financial instruments sound rather empty because there are no signs that anything has been done to check the dissolute gamblers in the money markets.
There is no denying that markets are showing clear signs of recovery and therefore the onus on the troublemakers gets toned down. The emergency medication of bailouts has done its job. It would be some time before we get a detailed analysis of how the bailouts really worked. It is almost back to business as usual.
Nothing seems to have changed. Emerging markets like India and China, which have managed to clock respectable growth rates -- though much slowed down by the Western economic disturbance -- continue to look to the US and Europe for increasing their export earnings that will add to their foreign exchange reserves and for foreign direct investment inflows.
Even in its battered state, the US economy is still the largest in the world and the dollar, the undisputed global currency. Talk about finding an alternative to the dollar has just fallen by the wayside. And almost everyone wants the Americans and Europeans to go shopping again so that global trade is rejuvenated. It seems that end-2008 was just a bad dream and now that we are out of it we can forge ahead and look forward to good times again.
Quite possibly some intelligent economists and policymakers would work out counter-cyclical buffers -- that is, banks' healthy assets and instruments outweighing toxic ones -- so that the same kind of catastrophe does not strike with the same deadly effect, and one of them could be rewarded with a Nobel economics prize in the near future.
It is tempting and possible to argue that capitalism is good because it rises up every time it falls down, and that too with renewed vigour. So while enjoying the boom phases we should learn to endure bust periods. But that is not such a good option as it appears to be. There has to be a sustained critique of the working of capitalism from within the system.
Those who are opposed to it in doctrinal terms -- for example, the former communists, the present-day leftist liberals, and anarchists -- never offer incisive insights into the system. Every time there is a crisis, they are busy performing the funerary rites even as the system shows eerie signs of life and movement again.
What we actually need is a diagnosis of the disorder from within the capitalist system. And this can be done only by friends, and not opponents, of capitalism. This needs to be done because we have to make the markets work much better than they are doing now. An effective regulatory framework is only part of the answer. The more effective way is to check the monopolistic influence of any one player -- financial or industrial. Then it becomes possible to contain the contagion.
This is not to be achieved through anti-trust legislation. The solution is that there should be more players in the market and they should be competing with each other.
It is the many small players who can effectively counter the greedy tendencies of the few evil ones. Capitalism thrives because it is an open system. This can be ensured only through the participation of many people rather than few. We need more capitalists than ever before!
