Jan 27, 2012

Das Kapital, Via Davos

You know that times are not normal when even the luminaries of Davos are sounding like Che Guevara.

Al Jazeera reports that Klaus Schwab, founder of the World Economic Forum, has declared that “capitalism in its current form, has no place in the world around us.” AFP quotes David Rubenstein, managing director of the Carlyle Group, as saying, “I think we have three to four years in the West to improve the economic model that we have, and if we don’t do that soon I think we’ve lost the game.”

Whoa. This is surely a period of fundamental doubt, and we’ve talked about the future of capitalism before, even going so far as to ask if the system is broken. But perhaps it’s also wise to let Peter Drucker introduce a long view and a word of caution.

Drucker was no proselytizer for capitalism per se. “Whole dimensions of what it means to be a human being and treated as one are not incorporated into the economic calculus of capitalism,” Drucker noted in Managing in the Next Society. “For such a myopic system to dominate other aspects of life is not good for any society.”

Photo credit: Eric Magnuson

Still, as a young man in the Great Depression, Drucker had seen the end of capitalism before. [EXPAND More]

“That capitalism is doomed seems to be a commonplace, and it is correct—certainly as far as Europe is concerned,” Drucker wrote in The End of Economic Man, published in 1939. “However, the arguments usually put forth in support of this statement—namely, that capitalism has failed as an economic system—not only betray profound ignorance of the nature of this system, but are provably wrong.” In fact, capitalism had indisputably yielded “ever-increasing quantities of goods at ever-decreasing prices and with steadily shorter hours of labor.”

Drucker also liked to point out that innovators like Henry Ford, who aspired to have his workers enjoy middle-class lives, had temporarily managed to cool the ardor even of Communists. “Until 1929, as every meeting of the Third International affirmed, the Communists were completely convinced that Ford’s America had actually solved the basic problems of capitalism and had restored it to its ascendancy all the world over,” Drucker recounted in Men, Ideas, and Politics. “Not until the Great Depression were the Communist leaders able to revitalize their creed.”

Drucker saw many sins in capitalism and deplored things like excessive executive pay and the short-term orientation displayed by many who worship the market. But he tended not to speak in terms as dire as those of, well, the head of the Carlyle Group—if only because capitalism, for all its faults, hasn’t found an obvious successor. “To paraphrase words of Edmund Burke, it is not enough to prove a society to be less than perfect to justify its overthrow,” Drucker wrote in Concept of the Corporation.  “One must also prove that a new society or new institution is likely to do better.”

What do you think: If you could design a system to replace modern capitalism, what would it look like? What other models would you borrow from? [/EXPAND]

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