The redesigning of global capitalism

Tuesday 21st October 2008

On Saturday, a meeting at Camp David in Maryland between President Bush, President Sarkozy and European Commission President, José Manuel Barroso turned from planning a summit on the financial crisis into a debate over the future of capitalism.

The changing form of capitalism has come under intense discussion in the last few weeks, following multi-billion dollar bailouts of global banks and increasing levels of government-intervention in the financial sector.

The use of taxpayer money to rescue banking institutions came under universal fire as economists, politicians, and the general public argued that the action went against everything capitalism stood for.

Critics poured scorn on “government-sponsored, upside-only capitalism” and said that the softening of fundamentals and confusion surrounding financial regulation were responsible for the current crisis. Headlines screamed of “saving capitalism from the capitalists” whilst world leaders struggled to defend their drastic decisions.

Now French President, Nicholas Sarkozy has proposed to “rebuild the foundation of capitalism” after claiming that hedge funds, tax havens and financial institutions going unsupervised and unregulated is the “sort of capitalism that is a betrayal of the sort of capitalism we believe in.”

Whilst EU leaders have put forward radical ideas of reforming rating agencies, creating new international financial supervisors and implementing tough regulation of hedge funds, President Bush has suggested a far lighter touch, appearing reluctant to “undermine the free market” and stating that “it is essential that we preserve the foundations of democratic capitalism.”

As Gordon Brown talks of global solutions and President Sarkozy conjures up social-liberal concepts of speaking “with one and the same voice, and building together a capitalism of the future,” American officials seem unmoved. Presidential candidate favourite, Barack Obama has disagreed with global measures, believing that “each country has to have its own tailored solutions, international goals don’t work.” At the same time, Bush administration officials are firm in their stance: “if we limit the global economic system to low-risk and low-reward investments, then that’s likely what we’ll get. You want risk-taking and occasional failures because that’s where you get the best innovation and leaps forward.”

Perhaps Bush’s aggressive new defence of capitalism has been provoked by mocking comments from socialist Venezuelan President, Hugo Chavez. “Bush is to the left of me now,” he said at a debate on the benefits of socialism last week, calling him “comrade.” In regard to Mr Bush buying stocks in American banks, after vehemently criticising Venezuelan nationalisations, Chavez stated: “I am convinced he has got no idea what’s going on.”

Bush has called world leaders to an emergency summit in the US by the end of the year to discuss reform of the global financial system. So is this the end of capitalism as we know it? Or will the disagreements between European and American leaders prove too great to resolve?

louise@medianett.co.uk