Capitalism 3.0

Mark Thoma points to a new, improved version of Capitalism: "Capitalism 3.0":

Dani Rodrik says capitalism must be reinvented to build "a better balance between markets and their supporting institutions at the global level"

This is just an old version of Capitalism with some tweaks to the trimings. The fundamental problem of Capitalism is not addressed nor mentioned.

Dani Rodrik crows that:

Those who predict capitalism’s demise have to contend with one important historical fact: capitalism has an almost unlimited capacity to reinvent itself. Indeed, its malleability is the reason it has overcome periodic crises over the centuries and outlived critics from Karl Marx on. ...

Rodrik goes to write that increasing government intervention helped to stabilise the Capitalist system:

... The new balance that it established between state and market set the stage for an unprecedented period of social cohesion, stability and prosperity in the advanced economies that lasted until the mid-1970s.

This model became frayed from the 1980s on, and now appears to have broken down. The reason can be expressed in one word: globalization.

The postwar mixed economy was built for and operated at the level of nation-states, and required keeping the international economy at bay. ...

Here Rodrik forgets that the current manifestation of Globalisation is not the first one in history. The previous manifestation died at the start of World War I. That one was a more encompassing one in that direct military and political control was imposed by the imperial powers through their empires.

Following World War II, neo-colonialism became the norm in which local elites managed the process on behalf of foreign interests. This meant the system was not as efficient as before but more stable as it required less direct intervention.

However, the increasing confidence and power of these local elites has caused the imperial powers to revert to direct military and political control as seen in the cases of Serbia, Iraq, Chad, Panama, Chechyna, Tibet, Sierra Leone, Solomon Islands, etc.

Under Capitalism, the nation state exists as a protected market for the local Capitalists. Access to this market is of great interest to other Capitalists seeking to offset crises in their own markets.

Rodrik concludes that:

The lesson is not that capitalism is dead. It is that we need to reinvent it for a new century in which the forces of economic globalization are much more powerful than before. ... This means imagining a better balance between markets and their supporting institutions at the global level. Sometimes, this will require ... strengthening global governance. At other times, it will mean preventing markets from expanding beyond the reach of institutions that must remain national. The right approach will differ across country groupings and among issue areas.

Designing the next capitalism will not be easy. But we do have history on our side: capitalism’s saving grace is that it is almost infinitely malleable.

Once again, Rodrik hopes that, by having greater span of government control, the Capitalist crises can be contained. Rodrik wants a supra-national government to manage Capitalism for the Capitalists. In other words, the One World Government is being put forward as the salvation of the Capitalist system. This will not go down well with the petite Bourgeious who passionately believe that government is the cause of their problems.

The central problem of Capitalism is that profit both drives the system and causes it to collapse by reducing consumption. If goods cannot be consumed because of lack of money, then goods cannot be sold. Therefore, unsold goods represent unvalorised capital. Capital that cannot be valorised cannot be turned into profit. No expectation of profit means no investment in either machinery, raw materials, or labour. Thus, the amount of money available for the purchase of goods to be consumed is reduced. And so, the cycle continues.

I suppose Rodrik wants a Keynesian world government to keep consumption up during economic downturns. Government spending requires taxation. And taxation without representation has been the cause of a few revolutions.