Happy New Year? You must be joking. 2009 will begin with a wail, and then get worse. Millions of people have already been put out of work, across the world, by this first truly globalised crisis of capitalism. Tens of millions more will be made jobless soon. Those of us lucky enough still to have work will feel poorer and less secure. To celebrate his Nobel Prize in economics, Paul Krugman promises us months of “economic hell”. Thank you, Paul, and a happy new year to you too.
Economic troubles will exacerbate political tensions. But rumours of the death of capitalism have been exaggerated. I don’t think 2009 will be to capitalism what 1989 was to communism. Maybe on 1 January 2010 I’ll have to eat these words. Prediction is a mug’s game. (In the Economist’s predictive almanac, The World in 2009, the editor has a brave and amusing little column titled “About 2008: Sorry”.) But as this year begins I don’t see any serious systemic competitor on the horizon—in the way there appeared to be in the days of Soviet communism before 1989. The Hugo Chavez model of socialism depends on capitalists buying his oil, and if you fancy the North Korean model you need to see a doctor.
Something will be very wrong, however, if the assumptions of the kind of free-market capitalism—sometimes called “neoliberal”—that has appeared triumphant since 1989 are not re-examined in this 20th anniversary year. First there’s the balance between state and market, public and private, the visible and invisible hand. Even before last September’s meltdown, Barack Obama was trying to nudge his compatriots towards the idea that government is not always a dirty word. Subsequent months have seen a dramatic shift towards a larger role for the state, usually in spasms of desperate governmental improvisation, sometimes (as in Gordon Brown’s London) ideologically legitimated as Keynesianism, sometimes (as in George Bush’s Washington) just plain, unvarnished Desperationism.
How much of that shift is temporary and how much will endure is something we won’t know by the end of this year. While most of the movement is towards strengthening the visible hand of government, it may not all go that way. A leading Chinese economic reformer recently argued to me that the Asian financial crisis of a decade ago had catalysed more market-oriented reform of the Chinese economy, and this one would do the same.
If he is right, one could even imagine a kind of global convergence on some version of a European-style social market economy, with the US and China approaching from different ends. But it’s important to stress the words “some version”. Even within Europe, there are large variations in the mix of state and market, and in the way that mix is organised. What works for one small northern country may not work for a large southern one. There’s no universal formula. What matters is what works for you.
A second rethink for 2009 concerns what is needed for sustainable, green, low-carbon growth, to avert the tipping-point in global warming. At issue is how much and what kind of growth. Again, Obama is trying to discover the chance of this crisis, orienting part of his Keynesian fiscal stimulus towards investment in alternative energy. Yet on balance, this seems likely to be a bad year for the fight against global warming.
Moving towards a sustainable, low-carbon economy requires both companies and governments to pay short-term costs for long-term benefits. When they have their backs to the wall they usually do the opposite. Probably the best we can hope for is that they will avoid the beggar-my-neighbour economic nationalism of the 1930s. To get them beyond that will require a deeper shift in the expectations of voters and shareholders. So long as we, the people, are guided in our personal financial and political choices by the lodestar of short to medium-term economic gain, we shouldn’t blame our leaders for trying to give us what we ask for.
So a third essential prise de conscience involves looking again at our personal lodestars. How much more in money and things do we need? Is enough as good as a feast? Could we manage with less? What really matters to you? What contributes most to your individual happiness?