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Capitalism and market economy need reforms
By Jean-Pierre Lehmann |
May 4, 2012, Friday
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LOOKING at the world in 2012, we see that it remains full of opportunities, even compared with only 10 or 20 years ago. Yet we are still in shock at the 2008 crisis - a financial crisis, but even more a systemic crisis and a crisis of confidence.
Global collaboration - increasingly an oxymoron - is wanting on key areas of trade, finance, poverty, disease, food, water, climate and geopolitics. The world appears like a volcano that may erupt at any moment.
The Financial Times began 2012 with a series titled "Capitalism in crisis." In an editorial, it wrote: "The resurgent capitalism that emerged in the 1980s, under the leadership of Ronald Reagan and Margaret Thatcher has proved not just unstable, but, in important respects, unjust."
Capitalism and the global market economy will survive only with radical reforms. Reforms are essential not only in institutions and policies, but also in culture and mindsets - the ways we conceive the planet as it is and the planet we want.
So, as I prepare to retire as director of The Evian Group @ IMD (and as chair of International Political Economy at IMD), I offer some initial "parting thoughts" on where things went wrong and on making them right in order to make the planet a place we would like to live in and would like our children and grandchildren to live in.
1. The pitfalls of complacency - the imperatives of sober realism.
It is untrue that the crisis was not foreseen. Of course it was not in its exact details. But note just one sentence from Joseph Stiglitz's 2002 publication, "Globalization and Its Discontents": "Today, the system of capitalism is at a crossroads just as it was during the Great Depression." In the years that preceded the crisis there was a pervasive sense of complacency both in government and business circles. This has proved costly.
2. Elites need to change.
Barring a number of exceptional individuals, the planet generally has been badly served by its elites. What is striking is the sheer degree of incompetence. In addition, they appear insensitive. The many demonstrations are not motivated by resentment against wealth per se, but how the wealth is obtained. We need new or reformed elites with greater competence, more responsibility, more sensitivity, more consciousness and much more humility.
3. Finance must be on tap and the real economy on top.
Recently it has been the reverse - finance has been on top and the real economy on tap. Unless finance is brought to heel, the crisis of capitalism will continue and probably lead to its demise. This is an imperative also for addressing the real cancer that is destroying societies worldwide: injustice.
4. The imperative of a concerted and successful fight against injustice.
The widespread sense of injustice reflects very high and generally growing levels of inequality - not only of income, but of opportunity, in education, health and environment. Attacking social injustice must be the responsibility of all, and especially of the elites. Mindsets and culture need radical change.
5. Restoring respect to public service and a sense of community.
At his inauguration in January 1961, President John F. Kennedy famously stated: "Ask not what your country can do for you - ask what you can do for your country." There was an underlying assumption of the dignity and obligation of public service.
Two decades later, at his inaugural ceremony, Ronald Reagan equally famously stated: "In this present crisis, government is not the solution to our problem; government is the problem." Since then and up to the global crisis there has been a tendency to venerate the market and denigrate government.
There has to be much more emphasis on public service and community. It's people who have advantages who bring these advantages to the disadvantaged who are the models we look for and who build the planet we want.
6. Bring back the humanities.
Another cause of the crisis of capitalism is the marginalization of the humanities in favor of more "practical" subjects, notably business studies, accounting, marketing, etc. The new/reformed elite must have a sound and profound intellectual base. To understand the human condition and fashion the planet we want, there should be far more study of history, geography, literature, art, music, philosophy, anthropology, religion, etc.
7. Generating the feast not the clash of civilizations.
The world is not adjusting well to the challenges of creating a global village. Western elites are for the most part very badly prepared for the global transformations.
Very few have more than superficial experience outside Western Europe and North America; hardly any speak Chinese or other Asian languages; and an infinitesimal few have studied in non-Western universities. This is another key aspect in which we need new or reformed elites; ones who know the planet well, not just one corner of it!
In creating the global village the importance of the humanities is crucial. There needs to be not only a basic knowledge of the sources of a society's culture and civilization, but also a "feel" for its current dynamics and aspirations.
This can be achieved through contemporary literature. The insights gained provide also the potential for that quintessential requirement for building the planet we want: empathy.
This last issue is the most important and the most relevant to the Evian/IMD agenda. A global business school needs to develop global cultural literacy, understanding and empathy. Though the Evian agenda has mainly focused on trade, it has also been very much based on the strong philosophical conviction that a global market cannot function without a robust global village.
Jean-Pierre Lehmann, professor and founding director, The Evian Group @ IMD, and senior fellow of the Fung Global Institute, Hong Kong. Professor Lehmann teaches in the Orchestrating Winning Performance and EMBA programs.
Global collaboration - increasingly an oxymoron - is wanting on key areas of trade, finance, poverty, disease, food, water, climate and geopolitics. The world appears like a volcano that may erupt at any moment.
The Financial Times began 2012 with a series titled "Capitalism in crisis." In an editorial, it wrote: "The resurgent capitalism that emerged in the 1980s, under the leadership of Ronald Reagan and Margaret Thatcher has proved not just unstable, but, in important respects, unjust."
Capitalism and the global market economy will survive only with radical reforms. Reforms are essential not only in institutions and policies, but also in culture and mindsets - the ways we conceive the planet as it is and the planet we want.
So, as I prepare to retire as director of The Evian Group @ IMD (and as chair of International Political Economy at IMD), I offer some initial "parting thoughts" on where things went wrong and on making them right in order to make the planet a place we would like to live in and would like our children and grandchildren to live in.
1. The pitfalls of complacency - the imperatives of sober realism.
It is untrue that the crisis was not foreseen. Of course it was not in its exact details. But note just one sentence from Joseph Stiglitz's 2002 publication, "Globalization and Its Discontents": "Today, the system of capitalism is at a crossroads just as it was during the Great Depression." In the years that preceded the crisis there was a pervasive sense of complacency both in government and business circles. This has proved costly.
2. Elites need to change.
Barring a number of exceptional individuals, the planet generally has been badly served by its elites. What is striking is the sheer degree of incompetence. In addition, they appear insensitive. The many demonstrations are not motivated by resentment against wealth per se, but how the wealth is obtained. We need new or reformed elites with greater competence, more responsibility, more sensitivity, more consciousness and much more humility.
3. Finance must be on tap and the real economy on top.
Recently it has been the reverse - finance has been on top and the real economy on tap. Unless finance is brought to heel, the crisis of capitalism will continue and probably lead to its demise. This is an imperative also for addressing the real cancer that is destroying societies worldwide: injustice.
4. The imperative of a concerted and successful fight against injustice.
The widespread sense of injustice reflects very high and generally growing levels of inequality - not only of income, but of opportunity, in education, health and environment. Attacking social injustice must be the responsibility of all, and especially of the elites. Mindsets and culture need radical change.
5. Restoring respect to public service and a sense of community.
At his inauguration in January 1961, President John F. Kennedy famously stated: "Ask not what your country can do for you - ask what you can do for your country." There was an underlying assumption of the dignity and obligation of public service.
Two decades later, at his inaugural ceremony, Ronald Reagan equally famously stated: "In this present crisis, government is not the solution to our problem; government is the problem." Since then and up to the global crisis there has been a tendency to venerate the market and denigrate government.
There has to be much more emphasis on public service and community. It's people who have advantages who bring these advantages to the disadvantaged who are the models we look for and who build the planet we want.
6. Bring back the humanities.
Another cause of the crisis of capitalism is the marginalization of the humanities in favor of more "practical" subjects, notably business studies, accounting, marketing, etc. The new/reformed elite must have a sound and profound intellectual base. To understand the human condition and fashion the planet we want, there should be far more study of history, geography, literature, art, music, philosophy, anthropology, religion, etc.
7. Generating the feast not the clash of civilizations.
The world is not adjusting well to the challenges of creating a global village. Western elites are for the most part very badly prepared for the global transformations.
Very few have more than superficial experience outside Western Europe and North America; hardly any speak Chinese or other Asian languages; and an infinitesimal few have studied in non-Western universities. This is another key aspect in which we need new or reformed elites; ones who know the planet well, not just one corner of it!
In creating the global village the importance of the humanities is crucial. There needs to be not only a basic knowledge of the sources of a society's culture and civilization, but also a "feel" for its current dynamics and aspirations.
This can be achieved through contemporary literature. The insights gained provide also the potential for that quintessential requirement for building the planet we want: empathy.
This last issue is the most important and the most relevant to the Evian/IMD agenda. A global business school needs to develop global cultural literacy, understanding and empathy. Though the Evian agenda has mainly focused on trade, it has also been very much based on the strong philosophical conviction that a global market cannot function without a robust global village.
Jean-Pierre Lehmann, professor and founding director, The Evian Group @ IMD, and senior fellow of the Fung Global Institute, Hong Kong. Professor Lehmann teaches in the Orchestrating Winning Performance and EMBA programs.
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