The curious case of capitalism

'It's hard out here for a pimp' goes a very infectious Academy award winning rap lyric from an equally gritty and charming movie - Hustle & Flow - from a few years ago. It is about how the good times have fallen on the way side in the oldest profession known to mankind and how the days of easy money are a thing of the past. Replace the word 'pimp' with a 'capitalist' and every word of that profane lyric rings true with everybody on the street, Wall Street that is, to everyone in every plush board room. The kind of economic setup that was hailed by many as the true representation of free will and individual liberty has been taking quite a bad beating, not to mention an even worse p.r. since most of the past decade. The terms prosperity and wealth are no longer free floating terms that exist in their own individual worlds. They have been dragged into the real world with a lasso of personal responsibility and corporate regulation. Amid the howls of pure capitalists that the bedrock of capitalism is being broken up with the sledgehammer of socialism, and the seeds of collective spirit are being sown in the hallowed grounds of individualism, the question remains to be answered, in the ever-changing dynamic of global interaction, can any financial theory/form/practice remain in its truest and purest shape without getting mixed up with or influenced by other -isms lurking around? In other words is the capitalism of today ( as practiced by the US) the socialism of tomorrow, or the socialism of yesterday (China, Russia, Cuba) the capitalism of tomorrow? Who would have guessed in less than a couple of decades, China would become the capitalists haven and US would take its first baby steps towards socialism? All it took was the phenomenon of globalization to take root, and a jolt or two to global economies to shake up the foundations of capitalism. It is not just globalization, the population explosion or the financial sector implosion that caused the experts and otherwise to sit up and take notice of the tectonic shift that is reshaping the economic landscape.

Every -ism, on its face value, sounds genuine and seems to have been designed with all the good intentions at heart. And the statement can be applied to practically any theory proposed by man that intended to serve a greater good - from capitalism to communism, and yes, even from naxalism to terrorism. The Al-Qaeda mission statement most certainly would not read 'we hate people, let's kill them all'. It most probably would go along the lines of 'To protect the cause of the muslims and serve the will of Allah by resisting oppression and tyranny of any kind, even if it means self sacrifice'. Which, on its face value, sounds logical. After all, who would want a different culture dictating terms to his, in terms of his ways and means of living? But how they go about accomplishing it is a different matter altogether. Same is the case with naxalism, communism or any other humanism. Lofty ideals, but most of the times, lousy execution. This is not to say that capitalism is comparable or should even be mentioned in the same breath as terrorism, but the relevance is more to how ideas can never remain the same in the face of ever-changing variables in the equation. True, capitalism at its best reflects the human pursuit of freedom and happiness. If one were to work hard and smart, luck willing, he should be entitled to benefit from the fruits of his labor. There is not one contentious word in that statement. If I work hard, I reap the rewards. If I put the capital, take all the risk, I should stand to profit from it. Sounds valid and deserving. Then why this bad rap of late on a philosophy that is single-mindedly devoted to the creation of wealth and thereby sustained prosperity? There are 2 ways of attempting to answer that question - 1. from an individualistic sense 2. from an institutional stand point

1. Individual - in this scenario, capitalism makes perfect sense. Have a great idea for a longer lasting light bulb or a longer running car for the same amount of fuel? Great. Have the wherewithal to translate the idea into a workable solution? Perfect. Then technically, you should be rewarded for your ingenuity. The society should step out of your way, even clear all the obstacles in your path and should help you realize your dream, as it also gets benefited in the due process. It becomes a true win-win situation which several successful individual entrepreneurs would attest to, patting the society for allowing them what they did best and stepped in only when they need an extra hand. There is no argument here. The point of contention, however, is with institutional capitalism. I have a great idea for setting up a solar cell manufacturing plant in the current context of environmental consciousness. I approach my local state government, submit all the paperwork, show them how many jobs it is going to generate in the local economy and elaborate on my plans of further expansion in different parts of the state, should this unit take off as I planned. The government welcomes my idea and reciprocates my gesture of job generation for my state, by offering subsidies in my power consumption, selling me government land for far less than the market price and promising me tax holidays for the first few years. My unit takes off well, starts making profit for me and my investors, creates enough jobs to jump start a satellite economy around the area. The theory of non-interfering state works perfectly until here. It is only when the first signs of trouble surface - slowing down of the economy, or a better product surfacing somewhere else, or worse, a cheaper product of similar quality luring my customers away - that the original capitalist mission statement begs for a revision. The original theory states that any floundering business should be left alone to fail under its own weight. No exceptions. But since my business has served a community for a substantial period of time, raising the general standards of living for a generation or two, not to mention, an ancillary economy subsisting on my survival, should I be left alone without a helping hand from my government in my time of need, even if it means flouting the principal tenets of capitalism?

The reasons for my failure might not be of my making alone. My competitor might be making a similar product by manufacturing it where the costs are low, labor is cheap and the oversight on general standards are amiss, each of which is costing money at my current place. Since the playing field is not leveled between the two of us, with my competitor enjoying an unfair advantage over me, which the capitalism precept didn't accommodate for, does the government's intervention into the matter, either by means of levying extra duty on my competitor's product or by directly taking a stake in my company to provide me a steady stream of investment money to see me through my tough times, constitute a fundamental abandonment of the capitalist principles? The above scenario is what is currently happening with the economies - capitalist and socialist alike - the world over. The theories that held steadfast for a good 50 years found to be wanting amidst increasing globalization. If the basic tenet of capitalism is generation of profit for an invested capital, conventional wisdom dictates that a manufacturer should be allowed to make his product where the labor costs are low, regardless of the prevailing working conditions at the place of production. Consequently, China with its dirt cheap labor, and lax standards in working conditions would become the de-facto destination for manufacturing firms all over. But here is where capitalism fails to address the repercussions of such gross disparities in trans-continental trade practices. It always assumed that all things being equal, the players in the field would slug it out with invention, innovation and imagination to emerge on the top. It never came across the current situation that trade practices can be unfair and playing field to be seriously lopsided. Sure, I too can shift my unit to another labor rich, standards insensitive, dirt poor country and gain an upper hand over my competitor. But what becomes of the people, the economy and revenue to my state that went beyond its call of duty to accommodate me in the fair agreement, that I would keep my firm's root firmly entrenched in my place of domicile.

At the root of it all, the purpose of any -ism is to improve the current conditions in the promise of a better tomorrow. While capitalism does it in a top-down approach, wherein, the wealth generated by thriving businesses would trickle down into the society whereby everyone benefits, socialism takes a more bottoms-up approach, with a strong working class shaping a strong economy. What capitalism has created in the latter half of the last millennium is a voracious consumer class, whose appetite sustained solely on credit. In a bid to sustain everlasting profits, it wiped out an entire generation of working class by shifting out the hard labor jobs, that is very much needed for the sustenance of the economy, and replaced it with a couch potato consumer strata. But then, if there is no real wealth being generated within a system, where does it find the means to even consume? Enter the highly addictive world of borrowing. Easy money, by the way of credit cards for everyday people, and foreign credit for everyday government, has become the modus operandi of everyday life. What is interesting here is how both ends of the supply chain - production and consumption - are facilitated by the same creditors. China, which has become the sole manufacturer for the entire world, whets the credit appetite of capitalism by buying into the countries' future (Treasury bonds and securities). How far can this cycle of 'take credit and purchase from the same' perpetuate, is a nightmarish question that keeps the expert awake during the night.

At this current juncture, when global recession has put an end to the ever consuming disorder, the production cycles have taken a hit too unable to find buyers for its products. And the big question looms, who should take the initiative to kick start the stagnant economy and clear out the tightly coupled deadlocks? While the rules of capitalism cry hoarse that it is the ultimately the market forces that dictate and resolve its inherent inconsistencies, and not government intervention, it has been proved beyond doubt that the profit motive can only take the economy so far and that it can never a be-all-and-end-all magic elixir that can cure-all. So, when economies from the far east to out west are being defibrillated with trillions of dollars of government investment into massive infrastructure projects, the scale of which can never be undertaken by private enterprises, the equations of capitalism are being rewritten with the introduction of a constant (government investment, regulation and oversight) this time around, so as to even out the unruliness that might creep up in the future from unforeseen quarters. Call it capito-socialism or socio-capitalism, one thing is certain, the capitalism of yester years is gone forever.

5 comments:

baddi kottu chanti said...

గురూజీ...
మీరు బాగా రాస్తారు అని జనం అనుకుంటే విన్నాను ,కాని ఆ పెద్ద paragraphలు చూస్తుంటే ఇంటర్ లో ఇంగ్లీష్ పాఠం గుర్తోచి భయమేస్తోంది. తెలుగులోనో లేకపోతే 4-5 వాక్యాలు ఉండే paraలుగానో రాస్తే మాలాంటి 35 మార్కుల పామరులు కూడా చదువుకుని తెలుసుకుంటాం కదా

Anonymous said...

Babu.. rendu mukkallo poee dhanni .. nalugu pagelu rasi brain motham namilesavu kada..
motha chadhivaka.. em chadivano dhaninunchi em ardhamaindho kuda gurthuledhu.. hatsoff for ur creativity in acheaving this..

Anonymous said...

Hi I did not understand ur first point..
If the govt came forward to help u .. when u just had an idea.. and they are doing the same with other people.. and coz of that... u were left to fall under ur wait.. U shuld find a better idea to sustain ur business.. go for a newer technology.. offer better stuf than the competetors and once again if ur ideas are good then the govt will def. help u. Infact they shuld be more inclined towards u for rendering help coz adding 30% more is always better than starting a new one alltogeather for 130%.

Ramesh said...

Dude I think you are over genious. I also read your recent article about Magadheera in IDLEBRAIN. It doesnt make any sense. I agree you have a very good vocabulary but please try to put your thoughts in a very presentable way so everyone enjoy the essense of what you are conveying. Especially in websites like idlebrain. If it is youe personal blog its upto you.

Anonymous said...

neeku blog lu rayadam avasaram enti ra? nuvvu raase sodi antha chadavataniki janaalu vp laaga kanipistunnara. Adangi vadi laga intlo kurchoni paniki malini sodi raastunnavu neeku Maghadeera movie gurinchi comment chese arhate ledu. Kanuka extralu cheyaka musukoni kurcho