The Continuing Crisis of Capitalism - How Bad Will It Get?

Leaders from Bill Gates to the Pope are worried about the “Crisis of Capitalism,” yet defenders of the American system that almost brought down the world economy are digging in. Recent threats to shut down the Federal government rather than pass any form of tax increase, for instance, have the effect of taking money from the poor to protect the rich, who already own the bulk of the nation’s wealth.

This “revolt of the rich against the poor” highlights how extremely conservative our free market ideology has become – ironically, at a time when markets are failing. The US is entering its third market crash in a decade, leaving many to wonder, how bad will it get?

The nation has long struggled with a tension between the values of free markets, limited government, and self-reliance that comprise Republican ideals versus the need for community, cooperation, and social welfare that inspire Democrats. While this was manageable when the country was growing, it has erupted into warfare now that the economy is stalled.

To put the statistics on income distribution in perspective, the gap between rich and poor is among the biggest in the world, and it is eerily reminiscent of the gap that preceded the Great Crash of 1929. Today’s Great Recession drags on largely because the public has little to spend, causing stagnant market demand. Apart from the moral problem this poses for a largely Christian nation that professes to be Democratic, it now threatens survival of the system.

We used to justify this on the grounds that Capitalism was more productive, but the sorry state of our healthcare, research, infrastructure, public schools, crime, and other indicators no longer supports that claim. What’s worse, the dot.com bust of 2001, the banking crisis of 2008, and now the crash of 2011 – three crashes in a decade – tell us something is seriously wrong.

Liberals are complicit in creating this mess, of course. The Democrats are also dug in, protecting social benefits and a massive Federal bureaucracy that no longer make sense in a changing world. President Bill Clinton had it right a decade ago: “The era of big government is over.” VP Al Gore was making progress “reinventing government” but lost the presidential election to George Bush. The rest is history.

Today’s crisis is a moment of truth. The old American Dream of rugged individualism and lavish lifestyles no longer works in a globalizing economy facing climate change, ecological overload, peak oil, financial instability, and other mounting threats. The last thing the world needs now is more self-interest and lavish consumption, nor does it need more government bureaucracy. Yet Americans are locked in destructive conflict between left and right to avoid sacrificing these sacred cows.

This fight is not only contentious, it is so bitter that all energies are focused on beating the other party rather than finding solutions. The differences are not really great because compromises are entirely possible. But a ferocious grip on outmoded beliefs drives conflict in a knowledge-based world that requires collaborative problem-solving.

More daunting still is the fear that even tax reform, revising Social Security and Medicare, and other heroic goals – if they could be achieved – may not be enough to revive the Nation. As a management professor who has studied organizations during a long career, it is painfully clear that our present forms of big business and big government are badly outdated for a complex new world.

President Obama should convene a conference inviting corporate CEOs, government officials, labor leaders, and ordinary citizens to engage in a national strategic planning process. It should also be carried online with wide participation to fully address these challenges, plan for a more difficult future, and redefine the American Dream. For starters, Obama should appoint Al Gore as “Czar of Reinventing Government” and GE’s CEO, Jeff Immelt, as “Czar of Reinventing Business.”

Absent some such breakthrough, we can only look forward to more economic gridlock and political stalemate as the crisis mounts. Will all this intransigence cause business failures and unemployment to reach levels of the Great Depression? Could the left and center mobilize a counter-revolt to challenge the rich? Is it possible that the country could embrace opportunities to unify left and right into a more creative American synthesis? Or will we simply accept decline and learn to live with less?

Interesting times, indeed

William E. Halal, PhD, is a professor at George Washington University, Washington, DC, and president of TechCast LLC (www.TechCast.org). His recent book is Technology’s Promise: Expert Knowledge on the Transformation of Business and Society (Palgrave Macmillan)