Capitalism Beyond the Crisis

2008 was a year of crises. First, we had a food crisis, particularly threatening to poor consumers, especially in Africa. Along with that came a record increase in oil prices, threatening all oil-importing countries. Finally, rather suddenly in the fall, came the global economic downturn, and it is now gathering speed at a frightening rate. The year 2009 seems likely to offer a sharp intensification of the downturn, and many economists are anticipating a full-scale depression, perhaps even one as large as in the 1930s. While substantial fortunes have suffered steep declines, the people most affected are those who were already worst off.

The question that arises most forcefully now concerns the nature of capitalism and whether it needs to be changed. …

…Ideas about changing the organization of society in the long run are clearly needed, quite apart from strategies for dealing with an immediate crisis. I would separate out three questions from the many that can be raised. First, do we really need some kind of "new capitalism" rather than an economic system that is not monolithic, draws on a variety of institutions chosen pragmatically, and is based on social values that we can defend ethically? Should we search for a new capitalism or for a "new world"—to use the other term mentioned at the Paris meeting—that would take a different form? …

…The present economic crises do not, I would argue, call for a "new capitalism," but they do demand a new understanding of older ideas, such as those of Smith and, nearer our time, of Pigou, many of which have been sadly neglected. What is also needed is a clearheaded perception of how different institutions actually work, and of how a variety of organizations—from the market to the institutions of the state—can go beyond short-term solutions and contribute to producing a more decent economic world.