Economics

Le procès du capitalisme de l'économie de marché

Oct 12, 2017 Ngaire Woods

OXFORD – Le capitalisme de l'économie de marché comparaît en justice. Au Royaume-Uni, le leader du parti travailliste Jeremy Corbyn accusele néolibéralisme de causer l'augmentation du nombre de SDF, de jeter les enfants dans la pauvreté et de causer une chute des salaires en-deçà du niveau de subsistance. Pour la défense, le Premier ministre conservateur Theresa May cite l'immense potentiel d'une économie de marché innovante et ouverte. Des « procédures » similaires sont en cours dans le monde entier.

Il y a tout juste un quart de siècle, le débat sur les systèmes économiques (le socialisme géré par l'État ou la démocratie libérale et le capitalisme), paraissait avoir été réglé. Avec l'effondrement de l'Union soviétique, l'affaire était classée - du moins en apparence.

Depuis lors, l'essor économique de la Chine a démenti l'opinion selon laquelle une stratégie axée sur l'État échoue toujours. Par ailleurs, la crise financière a exposé les dangers de marchés réglementés de manière inadéquate. En 2017, quelques-unes des économies à plus forte croissance du monde (Éthiopie, Ouzbékistan, Népal, Inde, Tanzanie, Djibouti, Laos, Cambodge, Myanmar et Philippines), ont des économies non réglementées. Par ailleurs de nombreuses économies de marché souffrent de ralentissements de la croissance et d'une hausse rapide des inégalités.

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0 Comments on this paragraph, 26 Comments on this article

Nikhil Kumar Mar 26, 2018

It seems disingenuous to conflate the policies prescribed by May and Corbyn into one.
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Robert Tetlow Nov 11, 2017

The Soviets had a very fine armaments industry.

Which is to say that if you throw a high enough proportion of your resources into a particular objective, you can obtain 'good' results. That doesn't mean it is a proper allocation of resources.
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Robert Tetlow Nov 11, 2017

At the end of the Brown regime, government spending in the U.K. was 58 percent of GDP. French levels, if that perspective helps. Whatever (positive) message one might take from the Thatcher years had clearly been jettisoned.
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Robert Tetlow Nov 11, 2017

A decline in wages is what is supposed to happen when the economy incurs a recession; it's the reason why employment in the U.K. has been strong while on the continent it continues to lag. Yes, average living standard suffer, and that's unfortunate. And steps should be taken (and are being taken, as I understand) so that the financial sector doesn't leave us as vulnerable as it turned out we were in 2008. But lower real wages and stronger employment are surely a better outcome than what Greece, Spain and...well...pretty much every continental European economy other than Germany is going through
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Karl Smithe Oct 27, 2017

What does Free Market Capitalism have against mandatory accounting in the schools? When has an economist advocating for the Free Market proposed that? Everyone would understand the Depreciation of Durable Consumer Goods in that case. Oh yeah, economists do not talk about Demand Side Depreciation due to Planned Obsolescence!
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Hector Niehues-Jeuffroy Oct 24, 2017

This article is shoddy writing. Picking pitiful apologists for free-market capitalism and then demonstrating that their arguments are wrong is cheap shooting, not intellectual prowess. Similarly, arguing that a "new consensus" against capitalism is emerging based on electoral statements in the UK is wholly insufficient to underpin the bold claim that one has a "case against free-market capitalism". There are many good essays arguing against free-market capitalism - this isn't one.
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Mark McNamee Oct 21, 2017

YOY growth is pretty inadequate argument. They have nice comparable growth since their economies are so small primarily due to their political and economic systems. Meanwhile, growth rates in developed countries are much lower but from an incomparably higher base, representing a similarly incomparable better standard of living. China represents this as well as their growth is slowing much due to the fact that they are finally so large having gradually embraced more liberal economic policies
- Hector Niehues-Jeuffroy Oct 24, 2017
  
  Exactly. It is as if Woods had never heard about catch-up growth and economic convergence.
  - Robert Tetlow Nov 11, 2017
    
    There is nothing more energetic than a prisoner who has just been sprung from confinement.
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  - Robert Tetlow Nov 11, 2017
    
    She apparently is well aware of how to set up a straw man, however.
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Erik Van der Kooij Oct 21, 2017

Not any economic system is perfect. Given history, socialism seems not to be the road to make progress and to meet the broadest needs of the people, while capitalism served for decades may end by shelf life and vicious aspects,whereby societies flew out of the rails.

Nowadays, policy focuses more on sustainable development and cleaner production. But capitalism and societies should much more and better respect moral principles (Principles for Business, Principles for Governments, Principles for Ownership of Wealth, Principles of Responsible Globalization, Equator Principles, Code of Conducts, etc.).

Regarding the above, CAUX Round Table for Moral Capitalism (http://www.cauxroundtable.org/index.cfm) works to achieve a turnaround towards the right direction.

The article is aimed at the model in the Anglo-Saxon world. Europe also advocates an economic model of eco-social market economy, considered the economic format which the majority of nations in Europe follow.

If the world wants to achieve the SDGs by 2030, then the economic system and the form of government must also be sustainable.
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matthew.pollock Oct 20, 2017

It is a shame that this is what the economic debate has come to. The time has come that the majority of the electorate is now not old enough to remember the false hope of socialism - our economic forefathers would be rolling in their graves.

Cherry picking statistics to prove one's point is an exercise for the intellectually blunt.

This month is the anniversary of the Communist revolution. For a real summary of the legacy of this moment in history I recommend reading "the Black Book of Communism."
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G. A. Pakela Oct 19, 2017

The proper comparison between the Reagan/Thatcher policies is the decade immediately preceding when both countries struggled with ratcheting inflation, high unemployment and economic stagnation. The Reagan/Thatcher policies led to more stable economic growth with fewer recessions, decreasing unemployment and inflation. To be sure, the world in the meantime grew more competitive forcing the U.S. and the U.K. to up its game. The Keynesian demand management policies of the post-war era would not have worked, as they were shown to have failed in their culmination in the 1970s. The downside to allowing the market to work more efficiently is that there are financial busts like as recently experienced. Once more, one bust in over 30 years is better than the frequent recessions of the 1970s.
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daniele simoncini Oct 15, 2017

Do you want to forbid short term thinking? That's quite something
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Robert REYNOLDS Oct 15, 2017

Free market capitalism, by its very nature, will always produce the kinds of problems and negative outcomes outlined in this Project Syndicate article, as well as in myriad other sources.

These outcomes were entirely predictable from the outset following the implementation of this most brutal form of capitalism in the late 1970's and early 1980's. The last thing that this sort of 'capitalism on steroids' is designed to produce is a fair and equitable society. It is designed to allow the 'law of the jungle' to prevail in what remains of society. It inevitably results in a greater than usual transfer of wealth from the poor to the rich. We seem to have learnt nothing from the experience of the free-market laissez-faire approach that obtained in the times of Charles Dickens.

I am hoping to see this iniquitous and utterly nefarious system eventually replaced by a democratic and internationally inclined democratic socialist system.
- Richard Fletcher Oct 20, 2017
  
  Mr. REYNOLDS,
  What, pray tell, are these so-called democratic socialist systems of which you speak so highly? I sure hope you're not referring to Sweden, Finland, Denmark, all of which are quite capitalistic, believe it or not.
  - Robert REYNOLDS Nov 1, 2017
    
    I see no need to copy any other country in trying to find the pathway to democratic socialism. I am quite aware that the northern European countries are all "quite capitalistic" thanks Richard.
    
    Like Bernie Sanders and others I strongly feel that it is time to be looking for alternative economic models to replace this hideous abomination known as neo-liberalism.
    
    As Marx indicated, capitalism contains the seeds of its own destruction and I have a feeling that we are about to witness some unpleasant developments in the coming years.
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Barry Rosenfeld Oct 15, 2017

The US has had a relatively free market since the British mercantalistic constraints on the 13 Colonies ended. The peculiar increase in mortality and morbidity rates for white males (and females) since Clinton took office in 1992 might have more to do with Nafta and the admission of China to the WTO, both ow which have led to the loss of high paid manufacturing and related jobs and employment opportunities for people with ordinary educational and skill attainments. All that cherry picking concerning trends in mortality rates without any serious attempt to appraise them does nothing to explain the phenomenon.

One might also look at the total collapse of the Keynesian paradigm in the face of supply-side shocks in the mid to late 1970s that gave new life to and enabled anti-government ideologues attack ALL government as the source of economic distress and not the inability of government to formulate a new macroeconomic approach to deal with cost-push inflation. Indeed, when Ricard Nixon imposed wage and price controls this act created mayhem in the private sector as it constrained managers and "capitalists" from actions they otherwise would have taken. The "Reagan Revolution," with all of its nonsense, i.e., the Laffer Curve, wholesale deregulation, was nothing more than a counterattack by the business community on the New Deal in the US, and by the backers of the Conservative Party in the UK against public be damned actions of British unions.

The future might require a returning to Bentham's "greatest good for the greatest number" as the starting point for a new relationship between capital and other factors of production. Capitalist promotion of globalization, not surprisingly, has been to the detriment of workers in high wage countries, albeit to the benefit of labour in low-wage countries. This has resulted in the greatest redistribution in modern history, one against which the government - to - government foreign aid approach has been shown to be a failure of the first magnitude. However, the reallocation of capital resources to foreign countries that might be used for directly productive activities in the domestic economies of richer countries has eroded eroded productivity and employment growth in them. As a result, "labour" which tends to be culturally provincial, technically traditional, and locationally immobile has reacted as one might have expected.

The crossroads of history, at which point we appear to be, needs to be negotiated with much less ideological baggage and with a serious attempt to determine where is the desired endpoint before deciding on means and mechanisms.
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markets aurelius Oct 15, 2017

Prof. Woods, Prof. Admati's presentation at the Blavatnik School is a true public service that illuminates the root of the problem producing the profound distrust in markets:

https://www.bsg.ox.ac.uk/multimedia/video/why-financialised-corporate-governance-has-failed-us
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Steve Hurst Oct 13, 2017

Well to start with there is no such animal as a free market. All markets are regulated. Regulation is the job of Government and there has been failure in that. As for the size of government - that is only limited by tax revenues, no more and no less so at present the future is less. Specifically in the UK with housing the issue is not construction, it is land price. As building land price can be brought down by supply the only question is will and that is influenced by voters who own houses - or more correctly who hold houses owned by banks via mortgages - and the banks involved. I suggest you look at the negative equity issue and the likely at risk ledger at the banks. May's supposed housing initiative is a nonsense, ridiculous, it s few thousand houses. Guvnt has colluded in every possible measure to prop up housing prices, and continues to do so. This article reads like a rallying cry for Labour. Unfortunately however indigestible Torys are, Labour are even more excruciating and struggle to do basic arithmetic, QED. If Tory policy fails to attract youth then eventually their voting base ends up in the cemetery. At that point the Grim Reaper appears and says with a wave of the arm - one day all of this will be yours
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STEPHANE MARGOLIS Oct 13, 2017

Why Thatcher came to power? You answer by denouncing a decade of profligate and bloated government, carefully avoiding the word “Labor”, the party in charge during the last five years and that shared the same political agenda as of Corbyn now, and that ended up asking to be rescued by the IMF. Nevertheless, it’s true that for continental Europeans, the UK could qualify as a neoliberal country. That’s why, maybe, all the European youth who dares to move abroad was attracted to the UK like flies, before Brexit, not to mention refugees still coming to Calais, dreaming to share the misery of your neolibarism in pure altruism.
In the contrary of what the new-old left you’re representing here is trying to spray around with a certain talent for disinformation, there is no political system such as neoliberalism applied, in full, in continental Europe. State interventions are widely at work, at every level of the so-called free market economy, in Germany, France, Italy, Holland and even a growing illiberalism in former communist countries. Most of us, in western Europe, have minimum wages, unemployment fees, strong taxes and labor codes, and decent welfare organizations. However, it seems that the more protection there is, the more unhappiness there is too, e.g. France. Fear of losing subsides for those used to it, and the fear not to be able to improve living standards for others, due to the high financial pressure and blockages business and job policies are creating whatever you do.
We all must find the right balance between state regulations and the free market to unsure equity and freedom of action for all. It’s called life as usual. There are no magic recipes, even for Keynes, which was an anti-Marxist, btw. Advocating for a too strong state is dangerous, first because the state can’t do all and such limit could easily bring the people on the road of disillusion, as it did from 1974 to 1979 in the UK, and France now. And second, because the state will become an ogre consuming the majority of the resources for itself, again, e.g. France (57%), without any guaranty of success or/and more happiness.
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ferdinand van Dieten Oct 13, 2017

There is a issue with the implicit definition of freedom in this article. Freedom should mean: free from coercion by external forces, which leaves no roam for voluntary agreement. But here it is used as : absence of state power, no matter what private forces are dictating the market. That is a very political concept of free-market, in stead of the economic concept that relates to the mutual force of the market participants. The intentions of the article goes in another direction but unfortunately it is still formulated in the wordings of the politicised liberalism it wants to denounce.
- Steve Hurst Oct 13, 2017
  
  Quite
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MCOLOSI Oct 12, 2017

Perhaps what is being missed: without the so called Free Market (to me that means the RESPONSIBLE MARKET copyright), those Non Free Market Countries would have no affluent country to sell to..so they are being bailed out by USA and Others...same is true for China, at least for current time..without Western Countries, especially USA giving them a Free Market to sell their stuff, they would still be living in the 1950's
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David Punabantu Oct 12, 2017

Is the market free? That is the question. Adam Smith's market doctrine is based on supply and demand. The underlying axiom is country X produces good X and is bought by currency X belonging to country X. If country Y wanted good X it has to change its currency Y into currency X to buy good X. That is why a Euro cannot directly buy goods from the US until it is changed into a US dollar hence Exchange Rate. But for Africa, Latin America, Asia that is not the case as seen in the London Metal Exchange. Africa's, Latin America's, Asia's mineral wealth on the LME that handles most of the world's non ferrous metals only allows the US dollar, the Sterling pound, the Japanese Yen, the Euro to buy Africa's, Latin America's, Asia's mineral wealth adding that wealth to the US dollar and the LME accepted Currencies. In 2015 the Chinese reminibi was added to the list while African, Latin America, and Asian currencies minus China and Japan are banned in this so called age of free markets and trade liberalisation. Trade liberalisation and free markets for whom? Do such policies follow the tenets of the market doctrine or corrupt it? It adds Africa's, Latin America's, and Asia's wealth in value terms to the US dollar. Another issue is the IMF fixed cross rate system. The cross-rates appear day in and day out, in value terms, in many national currencies. This implies that national money markets have the same money market currency liquidity and trade volumes to produce the same cross rates as observed between Britain and the United State of America. On the February 16th 2017 the Indian Rupee traded at INR0.01495 per US$1, while the Sterling pound was at INR0.01199 per £1, giving a IMF cross rate of 1.24. The Japanese Yen on the same date stood at JPY¥0.008782 per US$1 and JPY¥0.007033 per £1 giving a cross rate of 1.24. The Canadian dollar also on the same day had CAD$0.76569 per US$1 and CAD$0.61420 per £1 to give 1.24 as it's IMF fixed cross rate. The Chinese Yuan against the US dollar stood at CNY¥0.145541 per US$1, and CNY¥0.116789 per £1, on the same day to give a IMF cross rate of 1.24. The Mexican Pesos, Brazilian Real, South African Rand, on the same day like all currencies across the world had 1.24 as the IMF cross rate fixed on the US dollar and Sterling pound.
The reality on the ground is that Zambia, Britain, Canada, India, Japan, China, Mexico nor the EU has the same level and volume of trade to give credibility to the IMF fixed cross-rates. In fact, the demand of the Euro or the Zambian Kwacha, Euro against the US dollar and the British Sterling pound and other African, Asian, Latin American currencies in relation to trade, within their money markets, gives exchange rates that are outside the IMF fixed cross-rate system. There is no competition here with IMF fixed cross rates. It must be noted that IMF MD Mr. M. Gutt at his Harvard University address on the 13th February 1948 noted that the indirect exchange rate of the US dollar to the Sterling pound was £1 per US$2.6 as US$1 equalled 600 Lire and £1 equalled 1,560 Lire, while the direct Sterling pound-US dollar rate stood at £1 per US$4. American found it cheaper buying British goods via Italy. The IMF ruled in favour of Britain as if Italy's money markets had the same inflows as London's money market. To create a free market free floating cross rates are needed were the value of a currency is determined through trade by settling export payments in the currency of which the exports originate. As for China's economic success, it is explained by former editor of the Financial Times Mr Crowther in his book "An outline of Money" in which he noted "“if a purchaser is someone who want D-marks in order to pay for German exports, the fact that he can get his marks cheap is equivalent to a reduction in the price of exports; it will stimulate sale in exactly the same way as an ordinary depreciation of the exchange rate” (Crowther (1951) p.260). It is China's cheapness of her exports that has stimulated US dollar inflows, while the IMF looks at currency depreciation to stimulate US dollar inflows.
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