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Capital issues

Following the outbreak of the global financial crisis in September the world of finance is facing a historic watershed. Is this the end of modern capitalism? What role will the market and the state play in the future? The European press undertakes a critical examination of the capitalist system.

The bankruptcy of the US investment bank Lehman Brothers in mid-September 2008 rocked the international finance system and profoundly shook people's faith in modern capitalism. The collapse of the major investment banks on Wall Street, plummeting share values on the world's stock exchanges and the bankruptcies of many banks in Europe mark a historic watershed. Given the dimensions of the financial crisis the European press has been discussing whether it is possible to speak of the end of capitalism.

A Filipino trader at the Philippine Stock Exchange in Manila, October 2008.

Photo: AP/Aaron Favila

In July 2008 the US economist Joseph Stiglitz wrote in the Financial Times Deutschland that the neo-liberal concept was doomed to failure. "The neo-liberal market fundamentalism was always a political doctrine conceived to serve certain interests. It was never supported by economic theory or by historical experience.” The Hungarian weekly Figyelő stated on 26 September that the international financial crisis had shaken the very foundations of Western capitalism and asked whether the crisis would "bury the system of Western-style capitalism under its weight and shift the balance of the global economy towards the Far East for good.”

The end of an era

The dimensions of the crisis moved many newspapers to speak of the end of an era. Lluís Bassets, deputy chief editor of the Spanish daily El País, for example, compared the end of Wall Street with the fall of the Berlin Wall in a blog on 24 September. "Now we are witnessing ... the collapse of the last victorious ideology. ... The motor which propelled the last era was greed.” On 16 October Justo Zambrano expressed the opinion in the Spanish daily El Mundo that, "After 30 glorious (and Keynsian) years of social democratic hegemony after the Second World War, there followed 30 further years in which the [world] stage was dominated in an equally imperialistic way - this time by neo-liberalism and neo-conservatism.” He added that the crisis of September 2008 may signal the end of this phase. The Dutch NRC Handelsblad also described the international financial crisis as historic on 26. September "because no one can maintain any longer that unlimited free trade automatically leads to a better world. And the old liberal fairy tale that the market always corrects itself has also been discredited. ... The late summer of 2008 will go down in history as the moment when the last political ideology of the 20th century experienced its demise.”

Can anything still be salvaged?

However, not all of the press joined in the obituary for capitalism. The French daily Le Figaro, for instance, asserted on 15 October that one should not jump to over-hasty conclusions. "Not only will capitalism not disappear, I am happy to say it will remain the dominant world economic system. And it will emerge from the crisis stronger than it was before – having shed several exaggerated practices which the market ultimately corrected.”

João Marques de Almeida, a member of the cabinet of EU Commission President José Manuel Barroso, said he could not understand the general criticism of capitalism, because the reasons for the financial crisis were still unclear. "To attack capitalism on account of the financial crisis is like attacking democracy because extremist parties have won seats in parliament. ... Capitalism is more than the economy. Without capitalism there can be no individual freedom, no political diversity and no successful societies,” de Almeida wrote on 29 September in the Portuguese business newspaper Diário Económico.

On 28 September the British weekly The Observer carried a highly analytical contribution by the political scientist John Gray: What is currently going on "marks the passing of only one type of capitalism – the peculiar and highly unstable variety that has existed in America over the last 20 years. This experiment in financial laissez-faire has imploded,” he wrote. The US capitalism critic Naomi Klein meanwhile was under no illusions about the future of capitalism. She was convinced that "nobody should believe the overblown claims that the market crisis signals the death of 'free market' ideology. ... During boom times, it's profitable to preach laissez faire, because an absentee government allows speculative bubbles to inflate. When those bubbles burst, the ideology becomes a hindrance and it goes dormant ... But rest assured: the ideology will come roaring back,” she wrote on 25 September in the Spanish daily La Vanguardia.

The return of the state

As a result of criticism of the neo-liberal credo of capitalism and in view of the huge state rescue packages intensive discussions began in the media about what role the state should play in the future. The theory of Keynesianism (named after the economist John Maynard Keynes), according to which only massive state intervention can overcome an economic crisis, is currently experiencing a Renaissance. Keynes was convinced that the world economic crisis of the 1930s had resulted from the inadequacies of laissez-faire capitalism. Yet in the late 1970s a form of neo-liberalism became prevalent in the United States and Britain characterized by deregulation and privatization introduced under President Ronald Reagan in the United States and by British Prime Minister Margaret Thatcher.

The Hungarian daily Népszabadság described the 700-billion-dollar rescue passage of the US government as a "socialist solution” on 24. September. And the British daily The Guardian wrote on 23 October of the state intervention package: "It is not Marx who has really been rehabilitated in short order, but John Maynard Keynes, out of dire necessity. ... The symbolic significance of this official return to Keynesianism shouldn't be underestimated.”

On 24 September Joachim-Fritz Vannahme asked on the website of the German weekly Die Zeit whether the end of Wall Street-style financial capitalism meant the return of the social market economy, of "Rhenish capitalism” with stronger state regulation of the market even at the international level. He added that because of the presence of new players like China, India, Russia and the oil monarchies in the Gulf and in Latin America it was certainly no longer simply a question of the American way versus the European way. And "even in the neo-liberal Bush years the United States managed to afford ... military expenditure to the tune of several hundred billion dollars, which benefited only 'private' industry at home. The state as a guarantor and an awarder of major contracts - that is a very Keynesian way of thinking and acting. And strictly speaking even a piece of socialism within US capitalism.”

The British weekly The Economist expressed concern on 16 October about the possible consequences of the nationalisation of British banks. The world should, however, also see the crisis as a chance, it said. "Now economic liberty is under attack and capitalism, the system which embodies it, is at bay. ... but all the signs are pointing in the same direction: a larger role for the state, and a smaller and more constrained private sector. ... Over the past century and a half capitalism has proved its worth for billions of people. ... Capitalism has always engendered crises, and always will. The world should use the latest one, devastating though it is, to learn how to manage it better.”

Andreas Bock

Andreas Bock, born in Kaufbeuren in 1978, works as editorial assitant for euro|topics. Before joining the editorial team he worked as a cultural manager for ...
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