Column | Another capitalism is possible

capitalism no longer works to the benefit of all. There is a broad consensus on this reality. Every day there are new books by renowned economists and analysts,

Column | Another capitalism is possible

capitalism no longer works to the benefit of all. There is a broad consensus on this reality. Every day there are new books by renowned economists and analysts, as well as essays from well-known investors like Ray Dallio who, by defending the system of market economy, are critical to your operation. Rising inequality, new monopolies, and macrocephaly financial are three defining characteristics of the current economy, as I have analyzed, together with Xosé Carlos Arias, in The new skin of capitalism.

The poor functioning of capitalism is a real threat to the stability of the economy, to the social legitimacy of capitalism, and to the functioning of democracy. However, the progressives would make a mistake if they believed that the solution to this malfunction is the abolition of capitalism. Your task is to save him from self-destructive tendencies that have inoculated his supporters more radical, neo-liberals.

In my student there was a course on comparative economic systems. Today this matter is not studied in any school. In fact, most of the students, as well as the majority of teachers, would not know to explain in what consists the system of a market economy, beyond mention routinely supply and demand.

however, the interest in the economic systems back in today. Let me mention just one of the many recent books that address them. This is Capitalism, Alone Branko Milanovic, one of the best scholars of inequality. He warns that the survival of liberal democracies is not ensured due to that the objective of profit maximization for the shareholders and the lack of social progress have dissolved the glue morality that holds to open economies and to democracy.

Today it makes no sense to raise a confrontation between liberal capitalism and soviet socialism as took place in the late NINETEENTH century and early TWENTIETH century. But for some, it may be attractive to replace liberal capitalism, which no longer produces prosperity, inclusive, by the authoritarian capitalism chinese-type, it does show the capacity to produce social progress. Something of this temptation at the heart of the political debate american; for example, in the socialism of a radical Bernie Sanders, one of the democratic candidates best placed for the presidential elections of next year. Would be a mistake for progressives to target their efforts in this direction.

If you allow me a metaphor, the capitalism of today is like a car whose engine is still good, but the transmission does not distribute equally the power from the engine to the four wheels. In a similar way, the wealth produced by capitalism is not distributed well between its four main stakeholders: shareholders and top managers (dividends and wages), workers (wages), local communities (jobs) and State (taxes). To get back to a prosperity inclusive is not necessary to change the model of car, what you need to do is to adjust the engine and modify the transmission system. Translated into the language of economists, what you need to do is to improve not only the redistribution (taxes and social expenditures), but also the distribution (wages, employment and investment) and the pre-wholesale (education and training of workers, both before they enter the job market during their active life, so they have higher productivity and better wages).

The most recurrent that we see in the academic debate and political, in Spain and in other countries, are aimed at redistributing and reallocating. There is no doubt that act on them. But the problem with the capitalism we have in the poor distribution of income and wealth that is generated in the functioning of the economy, businesses and markets. The prosperity inclusive of the “Thirty Glorious” wine because the economy offered good jobs and decent wages that, although they failed to become rich, itself enabled us to build a middle-class life.

Today, the increase in poverty and inequality in Spain come from the high unemployment, bad jobs and the low wages. The policy of minimum wages, the labour policy balanced, the politics of competition in markets for goods and services, and the policy of investments in education, housing and infrastructures for public use are the essential means for social progress in XXI century.

The progressives should not direct their efforts to abolish capitalism, but to overcome it. For this you have to ensure that the distribution, redistribution, and reallocating work better. Another capitalism is possible.

Updated Date: 26 December 2019, 02:00

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