Issue No. 597
Opinion
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1 - 7 August 2002 Issue No. 597 Opinion |
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| Published in Cairo by AL-AHRAM established in 1875 | Recommend this page | ||
Capitalism's turn
After the downfall of communism, is it now capitalism's turn, asks Mohamed Sid-Ahmed
These days, America's powerful CEOs, once hailed as the driving force of the burgeoning US economy, are feeling awkward and depressed by the extensive media coverage of scandals involving a bevy of their high-profile colleagues. Public anger at the financial improprieties and excesses of business leaders have reached such a point that many now avoid appearing in public places altogether. Crisis after crisis has shaken some of the largest and best-known multinational corporations: Enron, the on- line brokerage firm, filed for bankruptcy last December after revealing that it had not reported losses of $22 billion; WorldCom Inc, the telecommunications giant, admitted two months ago that its balance sheet showed an allocation of $38 billion to investment projects which had never seen the light of day; Tico alleged last February that it had spent $8 billion on purchasing 700 companies which have no existence in any of its books. Xerox admitted last June to having inflated its expenses by $1.4 billion as a tax-evasion ploy.
Many American companies in the fields of electronics and pharmaceuticals are under investigation for accounting irregularities. The phenomenon is no longer only American but is now affecting important European companies such as the French media giant Vivendi Universal and the German industrial conglomerate Babcock Borsig. In Wall Street alone, $6,700 billion have evaporated during the last couple of weeks because of the sharp fall in the value of stocks.
It is inconceivable that these companies, with their dismal record of corporate fraud, embezzlement and mad speculation, should exemplify the state of contemporary capitalism. The real issue worrying Western capitals is whether the problem is a temporary glitch or a basic defect in the system, whether it is technical or structural. In other words, can it be resolved through a process of technical reforms or does it entail fundamental change?
The business community has much cause for concern. The average salary of a CEO is over one million dollars plus bonuses and options that could be worth several million more. At the same time, hundreds of thousands of employees are being laid off and some have had their life savings wiped out. This is hardly a recipe for social stability.
Once confined to the business community, the ripple effect of the scandal is now spreading to touch senior political figures. Halliburton, the oil-services company which was run by vice-president Dick Cheney from 1995 until 2000, is under investigation about accounting practices during his tenure. In just under five years at its helm, Cheney is believed to have made $45 million. There are also questions concerning George W Bush's past as a businessman before becoming governor of Texas and then US president.
A variety of reasons have been put forward to explain what is happening. Some have attributed the turbulence in the world economy to the wave of speculations that accompanied the emergence of revolutionary new accomplishments, notably in the fields of electronics and information technology. Others have attributed the crisis to the giant corporate mergers encouraged by globalisation, and on the rush to maximising profits by focusing on investments with quick returns, even if this entails heavy indebtedness in the medium term, at the expense of the "real" economy.
According to these interpretations, what is at fault are defects in the mechanisms of the stock market. All that is required to resolve the problem is greater transparency, unifying standards of accountability, reforming the international financial system, improving the performance and strengthening the responsibility and capacity of boards of directors in companies, which should include representatives of the workers and protect the interests of small investors.
These proposals, however, attribute the shortcomings not to structural flaws in the capitalist system, but to technical defects related to management. They ignore the fact that the new configuration of capitalism in the age of globalisation has brought with it many loopholes that need to be plugged without delay. This requires placing the issue in a wider context, especially that in recent years, and particularly since the failed attempt to launch the World Trade Organisation in Seattle in 1999, slogans calling for the downfall of capitalism have once again become popular. Throughout the Cold War the threat of mutual annihilation, due to the sophistication of weapons of mass destruction, overshadowed calls for all-out war between the superpowers. After the demise of the Soviet Union, Trotsky and his theory of "permanent revolution" re-acquired credibility. Anti-capitalist slogans reached a climax at the Porto Allegre mass rally held in Brazil a few weeks before 11 September events in the US.
In an article published in Le Monde recently, former French Foreign Minister Hubert Vidrine rightly pointed out that the historical turning point was not 11 September 2001, but the demise of the Soviet Union in 1991. One of the main questions raised by the collapse of one of the poles making up the bipolar world order affected the remaining pole, and, indeed, the features of bipolarity itself. Is the growing importance of terrorism at the global level nothing more than a transient phenomenon reflecting imbalances in the world system due to the absence of structures, mechanisms and institutions capable of deterring capitalism when it becomes too unbridled? Is there a way by which productive capitalism, with a positive role for human development, can be made distinct from capitalism based on unrestricted speculation, which can only backfire, sooner or later?
The theory of development was not intrinsic to Marxism but entered the Marxist lexicon because of certain specific traits of economic reality throughout the 20th century. Contrary to what Marx imagined, socialism did not first appear in developed capitalist countries (Germany, the US, England), but in countries marked by clear signs of backwardness (Russia and China). This raised the problem of a race between the two world poles: the capitalist pole, which rose out of the developed part of the world, and the socialist pole, which rose out of the underdeveloped. The socialist pole was faced with the need to "catch up" with the capitalist pole. In such a context, a comparison between capitalism and socialism could not be made solely on the basis of qualitative criteria (which of the two was less marked by the weakening effect of internal contradictions?), but had to take into account quantitative criteria (were the attempts of one pole to catch up with the other bridging the gap between them or were they, rather, widening it?). This introduced the notion of growth, more specifically, of development, that is, humanly guided growth.
It can therefore be said that the capitalism of the 20th century did not proceed along the course envisaged for it by the founders of socialist thinking, who believed it would develop and give rise to socialism as both its ultimate product and its negation. Instead, mankind has lived the extraordinary experience of coexistence between capitalism and socialism, between two blocs of states where the progressive bloc emerged in an environment of backwardness and the reactionary bloc in an environment of high-tech development. Thus capitalism did not lose its reactionary character with the collapse of socialism, while socialism's collapse deprived the latter of its progressive character. What is required is a synthesis of both in which it is the positive, not the negative, traits of each that prevail.
Capitalism's negative legacy is substantial: the drive to maximise profits; giving the short term priority over the long term; getting involved in speculative practices; restricting the role of the state; etc... So is socialism's: giving precedence to unelected apparachniks over elected bodies; excessive state intervention; transforming state bureaucracy into non-democratic, non-transparent practices, etc. But there is also a positive capitalist legacy, as represented in transparency, accountability through regularly repeated elections, etc, as well as a positive socialist legacy, as represented in equality, equal opportunities, reducing social disparities between classes, etc.
Is it possible to correct the course of history and overcome the confrontation between capitalism and socialism, not thanks to the victory of one pole over the other but thanks to the defeat of the negative features of both and the victory of the positive aspects of each? That is, through ensuring that capital serves man rather than the other way around and that property serves a social function rather than becoming an instrument for hegemony. Is it possible that the human aspiration to maximise profit be made to serve society and that the state become a catalyst in achieving that aim, instead of chaotic globalisation which serves neither the internationalism advocated by socialism nor capitalism's planetary domination? But more important than all: what is the social vehicle able to bring about such a change?
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