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Capitalism, socialism and democracy, once again

By Jean-Paul Fitoussi:


Some questions can only be answered by educated guess. The question at the centre of this round table pertains to this category. We should not be ashamed of this kind of limitation of our capacity to predict the future. We have no theory, no past experience on which to build a framework of what lies ahead. We have been in a few years surprised by the turn taken by events. None of us ex-ante has foreseen the financial crisis, although many of us ex-post are pretending having done so. It is true that a nonnegligible number of economists, among those who are here today, have underlined the risk inherent with unfettered markets; that many have expressed doubts about the sustainability of the situation. But still none has forecasted when and how the crisis would arise. Maybe this is less true of the European crisis, which has been in some important dimensions, announced long ago. The same is even truer as far as the political order is concerned. The revolution in the Arabic world took us by surprise, even those among us who were informed about the growing malaise in some of the countries concerned. I was one of them, but I have to confess that a few hours before Ben Ali left power, I was arguing that he would never do so as he had all the means of repression in his hands. I had the excuse of being an economist. But political scientists and even governments with their secret services did no better!

These two events were major events in history. To what Economic and Political order  future – climate change and what is happening more generally to the environment is also crucial events –, but I will focus on them as they hinge upon the two major  systems in which we will probably live for long: Capitalism and Democracy.

People all over the world are indeed demanding more environmental protection, more public goods, more education, more health care, more decent jobs, more economic security, more political participation, and more social capital. These are the key determinants of well-being. This is also where the growth reserves of the world lie.

One lesson of the crisis and of the revolution in the Arabic world is that neither  autocratic capitalism, nor market democracy did deliver those goods. In a nutshell, “market democracy” in the developed world was too much during a period twisted towards capitalism, and “capitalist autocracies” in the developing world were becoming too much at odds with the quest for equity by the people. One may even say that, whatever their differences, they had a disease in common, a too high degree of inequalities. That being said, we should not go too far in this commonality: democracy is the only institution capable of self reforming; autocracies are not and it is why, when they meet an obstacle, they usually break down.

The emerging economic and political order will depend heavily of our ability to repair the broken links between capitalism and democracy and to help the developing world in its quest for justice and freedom, in other words in its transition towards democracy, those people that have expressed with courage the desire to proceed along this route and those who can’t but still desire a better life.

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