WITH the latest economic meltdown, crisis, or crunch that hit the U.S. that reverberates in the world’s economic capitals, there is a raging debate in the academe and in the world’s business board rooms on the question, has capitalism failed?
This is not an economic treatise or dissertation, to be usually accompanied by researches. This is only a simple commentary by a layman on the latest economic happening.
For simple understanding of the issue, let me first give you this simplistic definition.
Capitalism is an economic system where private capital is the engine that powers the economy, fed by the desire for private profit.
It is also called the market economy where the market is governed by the rules of supply and demand. It is this system that brought untold wealth to the world.
It is also known for its laissez faire doctrine which calls for government to have its hands off from private enterprises.
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Socialism, on the other hand, advocates for a classless society where property, production and distribution are in the hands of society or government.
This was the result of the French Revolution in the late 1700. It brought tremendous progress to the countries that adopted it as the monarchy, the Church, and the nobles whose powers were taken over by the people.
Then the Bolshevik Revolution in Russia in 1917 led by Vladimir Lenin adopted socialism but called it communism based on the writings of two German close associates, Karl Marx and Friedrich Engels, economists and political theorists.
Engels belonged to a wealthy German family but stayed in England managing the family’s businesses. They wrote the book “Das Kapital.” They said the important factor in the economy is labor.
Communism collapsed in 1991 with the break up of the Soviet Union, with USSR Prime Minister Mikhail Gorbachev introducing the policy of openness that he called “glasnost.”
Gorbachev said the problem of the country and the very weak economy was the absence of openness and transparency. The Russian Politburo at that time was shot through with high level corruption which Gorbachev wanted dismantled. He succeeded.
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Which is the best? Let people debate for hours, for days, even for weeks and months. Each will have points to argue. But, let it be clear, we are discussing economic theories and not the form of government. Like religions or modes of faith, each is always right.
The problem is not in the system but in the people who run it and who give it the direction.
In the case of the latest crisis in the U.S. the collapse of the Lehman Brothers and that insurance group was due to government failure to monitor and prevent the problem. Because it is, by principle, not supposed to intrude into the working of business.
And the problem with the giants is when they fall, they make a big bang whose sound is heard even from afar.
Can the world recover? Of course, yes. As it did in the Crash of 1929 because the U.S. government, as it is now, has plenty of money to resuscitate the economy.
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The U.S. economic crisis is nothing to us. We are already in a crisis. To our people especially, the crisis will be just a little inconvenience. We are used to it anyway.
So, as what world economists say, we can or not feel it as much as others do. The pain is less.
Our people are poor. The percentage of the unemployed is already increasing. A little addition will not matter much.
A farmer told me, he has learned to survive already and is happy that even rich people in rich countries are also affected by the crisis. There is a leveling effect, he said.
In the poorer countries, the problem is made more difficult by graft and corruption.
The fall of USSR was due to terrible corruption in the Politburo that the poor were forgotten. The economy suffered.
And so with many other poor countries.
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I was reading my latest issue of Time Magazine that featured Indonesia with the title “What’s Holding Indonesia Back?”
Time said Indonesia has “all the ingredients to succeed, a stable democracy, a wealth of natural resources, and a large consumer market” but something is still lacking. Government has not made Indonesia operate efficiently.
There is still corruption. Less than during Suharto’s term but under Suharto, Indonesia boomed. When Megawatti Sukarnoputri took over, she dismantled the dictatorship of Suharto but failed to prop up the economy. Indonesia needs a dictator.
Transparency International named Suharto the most corrupt of all leaders. He is No. 1 having allegedly stolen $5 to $10 billion and at No. 10 is Joseph Estrada having allegedly stolen $70 to $80 million, not counting the conviction.
Time is very upbeat with the new leader President Susilo Bambang Yudyohoyono or SBY. We were in Jakarta a few weeks ago and we noted this. SBY is a strong leader. We used to be second to the last corrupt country after Indonesia. Now Indonesia overtook us and we are at the last. Indonesia also does not have rice shortage.
by Amando Doronilla, of the Philippine Daily Inquirer
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