The Hindu Business Line : Economic turbulence

Alan Greenspan, for long the Chairman of the US Federal Reserve, called his period the ‘years of turbulence.’ If that were so, ‘turmoil’ is far from adequate to describe the current calamities the US economy is experiencing. Among the debates that rage on the turmoil in the US financial market, questions crop up on the validity of ‘capitalism’.

Undoubtedly, there has been a collapse of the capitalist system. The story does not end here. When a British monarch passes away, the official announcement declares that ‘The King is dead. Long Live the King’. This just means that monarchy will continue. Parodying this, can one say ‘Capitalism is dead. Long live capitalism’?

Capitalism was a roaring ideology in the 18th and 19th centuries, however ugly its manifestations were — child labour, human slavery, and cruel, imperialist practices being some. No wonder a Karl Marx emerged. He blasted capitalism, which to him symbolised blatant exploitation, naked oppression, and cruel imperialist practices. The spread of his doctrines strengthened the ‘anti-laissez faire’ forces all over the world and culminated in Soviet Russia adopting ‘communism’ as the official ideology.

Capitalism to socialism

The downfall of capitalism was also hastened by its mutation. Since around 1930, socialism came to have tremendous attraction for people in Europe and even in England, which has always had a conservative bias in its approach to public policies. Some time later, flaws and pitfalls in the functioning of the Socialist pattern started coming to the fore. . The clash between the doubtful merits of capitalism and the uncertain efficacy of socialism led to a compromise ideology, combining the good points in both. This came to be known as ‘Mixed Economy.’

In the light of the above, it is interesting to understand the ‘roller-coaster’ pattern of the functioning of different economic systems. According to Hegel, the existing situation at a point of time is taken as a ‘thesis.’ In course of time, forces contrary to this emerge. These form the ‘antithesis.’ Then there comes about a conflict between the two, resulting in the emergence of a new paradigm synthesis.’ Over time, this synthesis itself becomes the starting point (thesis) for fresh developments in history, followed by ‘antithesis’.

Rise and fall of economic systems

‘Clashes’ between the two culminate in a new ‘synthesis.’ This sequence continues almost infinitely, animating historical processes. The rise and fall of both capitalism and socialism in the course of the 20th century proved the validity of the Hegelian interpretation of history substantially. Likewise, Arnold Toynbee’s analysis of ‘History’ of human societies also helps us to get an insight into the growth and decline of economic systems. After establishing that history is not static, he shows that the dynamism of progress consists of challenges posed to a society by various forces and the response of society in meeting them.

‘Reaganomics’ and ‘Thatcherism’ adopted in the US and England in the 1980s (no doubt, in good faith) now stand ridiculed in the context of the cataclysmic failures of the US financial markets. Critics of the bailout moves of the American Administration mockingly comment that the United States of America is getting converted into the United Socialist Republic of America! How true are the theories of Hegel and Toynbee! What the next transformation will be remains to be seen.

(The author is a Bangalore-based freelance writer. blfeedback@thehindu.co.in)