On the cusp of economic history
Is economic history about to change course? Among the chieftains of politics and industry gathering in Davos for the World Economic Forum on Wednesday, a consensus appears to be building that the capitalist system is in for one of those rare and tempestuous mutations that give rise to a new set of economic policies . . .
“The pendulum between market and state is swinging back,” Pascal Lamy, director general of the World Trade Organization, said by telephone before traveling to Davos. “The year 2008 is a crucial year that could end up setting the tone for some time to come. What we need is an ideological mutation without falling into the trap of protectionism.”
One such mutation in mainstream economic policy took place after the Depression of 1929, which led to a protectionist interlude and then gave rise to Keynesian demand-side policies and eventually the welfare state. Another took place following the oil price shocks in the 1970s, which refocused policy makers’ attention to supply-side measures and strengthened those pushing for privatization and free markets as the best way to stimulate growth.
When students of economics open their history books in 2030, they might read about 2008 as the year when the groundwork was laid for a re-regulation of certain markets, a more redistributive tax system and new forms of international policy coordination, economists say.
I don’t know, isn’t this just more of the classic cycles we’re supposed to expect from capitalism? But having said that, it would be unfair to claim that nothing has changed and that we’re stuck in a perpetual circle of death and reincarnation. Perhaps the roller coaster is a more apt metaphor – things go up and down, but they never go backwards. After all, the environment is in a more precarious position today and the emerging economies of China and India are far stronger than they have been in the recent past.
So, while no one can expect the abolition or even the gradual phasing-out of the capitalist nation-state system, perhaps we will see some encouraging moves towards allowing more people around the world the chance not to get gang-raped out of nowhere by economic policies they never agreed to. And perhaps some of these people might be more open-minded to an alternative to the current political-economic system? Hope springs eternal.
By the way, that picture of Davos just makes me even happier that I’m in Costa Rica right now. Man, it looks cold up there (although it’s snowing so it must be relatively warm, like only -5 Celsius).