How should we interpret the remarkable declaration of the end-of-capitalism-as-we-know-it produced this week by by Martin Wolf, the chief economics commentator of the Financial Times?
It begins with a bang -- "Another ideological god has failed. The assumptions that ruled policy and politics over three decades suddenly look as outdated as revolutionary socialism" -- and continues in that vein for some 2000 words.
It is impossible at such a turning point to know where we are going. In the chaotic 1970s, few guessed that the next epoch would see the taming of inflation, the unleashing of capitalism and the death of communism. What will happen now depends on choices unmade and shocks unknown. Yet the combination of a financial collapse with a huge recession, if not something worse, will surely change the world. The legitimacy of the market will weaken. The credibility of the U.S. will be damaged. The authority of China will rise. Globalization itself may founder. This is a time of upheaval.
"The deepest, broadest and most dangerous financial crisis since the 1930s," writes Wolf, entails nothing less than a: "The proposition that sophisticated modern finance was able to transfer risk to those best able to manage it has failed"; b: the bankruptcy of the idea of "maximization of shareholder value as the way to guide business"" and c: "the legitimacy of the market process itself is damaged."
That's some strong stuff. Just the suggestion alone that perhaps a corporation's long term interests are not best served by catering to the short term financial interest of shareholders is a fairly stunning rebuke of capitalism as it has been practiced of late. At least one unrepentant market fundamentalist is unhappy about it. At Canada's Financial Post, editor and columnist Terence Corcoran greeted Wolf's broadside as follows:
The end of capitalism is near. Nay, it has arrived, officially proclaimed yesterday by the world's leading media panjandrum of economic doom. In a staggeringly glib, sensationalistic and over-the-top 2,000-word rantorama, Financial Times' economics columnist Martin Wolf yesterday launched what the Times calls its major new series, The Future of Capitalism.
Corcoran imaginatively titled his opinion piece "The Future of Big Government."
But here's what's so funny. Martin Wolf is preaching the gospel of gloom now for entirely understandable reasons. We happen to be experiencing a global economic catastrophe. But Wolf hasn't always been a "panjandrum of economic doom." His 2004 book, "Why Globalization Works" offers a pretty ringing defense of capitalism as it has been practiced over the past few decades. Until quite recently he was far more of a defender of deregulated markets than a doom-monger.
But what makes Wolf interesting is that he has allowed his views to be shaped by events, rather than attempted to force those events to fit into his preexisting box. Meanwhile Corcoran, like conservative Republicans in the United States, automatically labels any critique of manifest market failures as a manifesto for Big Government. They don't seem to have any room in their calcified mental frameworks for the conception that maybe, just maybe, capitalism can be improved -- that there is some usefuness to the concept of "well-regulated markets" that doesn't translate automatically into stereotyped "statism."