Find the right pathCapitalism is in crisis. It has never been so unanimously attacked with the backdrop of deepening income inequalities worldwide and an insecure global financial system, underscored by the Lehman Brothers meltdown and the credit crisis in Europe. The angry masses - 99 percent - have occupied Wall Street, the iconic symbol of capitalism. Has capitalism outlived its day? Looking back on the trajectory of capitalism over the last 500 years, it was a continuation of the crisis. It was a repetition of the boom-bust cycle. Despite numerous setbacks, it lasted in different forms. It evolved from merchant capitalism to industrial capitalism to modified capitalism to neo-liberalism.
Today’s catastrophe derives more from failure of policies rather than flaws of the capitalism system. The derivatives trade flourished and swarmed the global capital market over the last three decades virtually unchecked by financial authorities. Central bankers intoxicated with boom years tolerated loose interest rates, further inflating liquidity. Politicians, to win popular favor, spent beyond their means and stretched finances to dangerous levels. Advanced economies, unconcerned by the advance of emerging markets, kept up their debt-financed spending spree. Absolute faith in the market under the neo-liberalism spell watered down government interference. The mix of policy failures and the greedy nature of capitalists brought about today’s crisis.
Financial and business elites around the globe came to three main conclusions at the World Economic Forum in the Swiss ski resort of Davos this week. First, capitalism has bred inequalities in wealth and income, but there is no better alternative for now. Second, policy makers, financiers and capitalists all must contemplate their mistakes. Davos forum founder Klaus Schwab said “I’m a deep believer in free market .?.?. [but] we have sinned.” Third, capitalism must undergo major restructuring. The operation would place a heavier focus on distribution over growth.
Korea is battling with a common challenge. Economic fundamentals are relatively solid. But if income inequalities are left unattended, society could falter. Joblessness among the young could trigger social unrest. Political platforms are catering to the popular demand for welfare benefits. If negativity is underscored, the entire system could be challenged and necessitate redesign.
We must gather social consensus to build a new model.