Capitalism in Crisis

Lecture: Capitalism in Crisis: Causes and Consequences. Delivered at following three forums in Indonesia:
Indonesia’s Bank Indonesia’s Islamic Banking Research Forum, held at Padjajaran University, Bandung,
University of Indonesia, Jakarta
Ibn-e-Khaldun University, Bogor, 16th& 17th Dec, 2011.

Slides for the lecture with embedded audio can be downloaded from here:

[ppt with embedded audio ] [size: 42MB]

Summary of issues discussed in the lecture is given below:

Title of Talk: Capitalism in Crisis: Causes and Consequences

Author: Dr. Asad Zaman

Abstract: With recurring financial crises, massive inequalities, looming environmental disasters, it is clear that capitalism is undergoing a major crisis. However, what is the nature of this crisis, and how it can be resolved is not clear to most. The goal of this talk is to show that the crisis is an outcome of a century long experiment to make greed legitimate. This experiment has failed completely and has resulted in disastrous outcomes in nearly all fields of human endeavor. Most efforts to fix the problems currently under way cannot succeed because they do not go to the root of the problem.

Brief slide-by-slide outline of talk

1. Title Slide: The goal of the talk is to show that the root cause of the current crisis in economics is the legitimization of greed that occurred in gradual stages over the past few centuries.  For additional material on this theme, see “Greed is Good”
2. Documents the many fronts on which there is a crisis;  economic, social, environmental, etc.
3. Crisis results from the “great transformation” in Europe; the rejection of religion, and adoption of secular, rational world view.
4. How corruption of Church led to replacement of the Biblical maxim “Love of money is the root of all evil” by the Shavian “LACK of money is the root of all evil”
5. Historical details for transition from religious to secular thought.
6. Both FREEDOM and WEALTH are means to ends, NOT valuable for themselves. In a secular society, there could be no agreement on ENDS/GOALS, so it was agreed to allow all members the MEANS to pursue their own individual goals – this lead to Freedom and Wealth being prized values in a SECULAR society, where they were not before.
7. Simultaneously with transition to secular society, there was also a transition to a MARKET society, where economic transactions of purchase and sale became central to distribution of goods.
8. Redefine role of government – not as an organic unity pursuing common goals, but as an establishment to provide a level playing field for competing interests. Several arguments were invented to justify pursuit of wealth
9. 1^st argument says that fanatics (who pursue religion) cause a lot more harm than greedy traders (who pursue wealth). So given choice among two devils, prefer the latter – the pursuit of wealth.
10. 2nd Argument: Invisible Hand justifies selfishness. For details see “Failures of the Invisible Hand”
11. 3rd Argument by Max Weber: The Protestant Ethic is to work hard because money shows favor of God. A summary of the presentation of this argument by Tawney is given here.
12. 4th Argument by Keynes: Allow greed to work. This is a powerful force which will lead to accumulation of wealth. After wealth accumulates, we will achieve heavens on earth.
13. Friedman’s argument: Profits is the only business of business. See this page for many references to this debate. Relevant material on Corporate Social Responsibility
14. Summary of arguments in favor of greed. There were many (optimistically) expected good consequences from this legitimization of greed.
15. CONSEQUENCES differed dramatically from expectations. Greed has penetrated ALL institutions in the West. Led to corruption in public and private sector, and destruction of family & community.
16. MULTINATIONAL Business has caused death and destruction throughout the planet – Traders are worse than fanatics, killing many more.
17. Increasing Income Inequality, with rich getting richer – accumulation of wealth did not lead to prosperity for all.
18. No heaven on earth; huge wealth co-exists with massive and extreme poverty.
19. Wealth did not buy happiness, but led to Loneliness and family breakdown.
20. Pursuit of wealth led to corrosion of character, as predicted by traditional sources.
21. The legitimation of greed has triumphed in West, and is slowly overcoming Eastern traditions. We must fight against this trend in the East. Following arguments are needed for this battle
22. Money buys happiness is a short term illusion, like the kick from a drug.
23. Long run happiness depends on character traits not possession of goods.
24. It seems that the world is richer, as predicted by those who unleashed the forces of greed.
25. Reality: the world is poorer – environmental costs of growth are not measured.
26. Argument: Human beings are better off due to Capitalism, conveniences, technology etc.
27. COUNTER ARGUMENT : Human happiness depends on society, community, character, all badly damaged by capitalism.
28. Expand on the bullet points. Each point should be written up into a paragraph. Find references whereever possible.
29. Analysis – how can we get resources to fight back against these trends?
30. Need tradition, culture, religion to fight forces of secular modernity. Promote generosity, compassion, trust, building of communities.
31. Crucial fronts are family and character building.