The Premature Celebration of American Capitalism

We thought at the end of the Cold War that we had come to a watershed moment.  Francis Fukuyama wrote a book called The End of History.  We were essentially celebrating that this debate that had taken place over the past couple of hundred years that pitted one view, communism, that said leave it to the state versus another view, capitalism, which said leave it to the market, had been resolved and capitalism had won. And here in the United States, being the kind of national narcissists that we are, said “American capitalism has won.  It is our moment.”

But clearly our victory celebration was premature because essentially what we’ve seen over the course of the 20 years since the fall of communism is a new kind of rivalry emerge and that rivalry is between competing forms of capitalism.  

American capitalism has increasingly been deregulated, and has now been indicted by the consequences of the financial crisis. And it has been indicted by the fact that it doesn’t produce social mobility or job creation or growth or social equality in the ways that it did in the past. And it seems to be dominated by a political system, which is money-driven.

Meanwhile, as our growth has slowed and as we’ve faced the sort of slings and arrows associated with this particular crisis, other systems have done pretty well.  Capitalism with Chinese characteristics has been invented and refined and refined and refined again in our lifetime, and it’s still in its fairly early days. But it is adopting and it takes many forms even today within China.  

We have European capitalism and there is kind of one version in the south of Europe that is not doing very well. But in the north of Europe you’ve got a version that regularly puts the countries on the top of lists of quality of life, that regularly puts the countries simultaneously on the top of lists of fiscal responsibility, of the educational performance of students, but also has a much bigger role for government in it than our particular version of capitalism.  

You have countries like India and Brazil doing what I would call democratic development capitalism, big societies, democratic societies that have a strong social component to what they’re doing, and countries like Singapore or Israel or the UAE, what I would call small state entrepreneurial capitalism that have again another difference.

The interesting thing about this competition is that the United States is the outlier.  Not only are we the former leader, but we are the one that has the smallest role for government in the mix.  All the others say government plays a critical role in providing social safety nets and government plays a critical role in insuring competitiveness.

Some of those governments are also doing better economically and thus have greater influence than we’re likely to have going forward.  So if you look at this competition among capitalisms and you were going to bet on who is going to win the competition among capitalism if the US keeps going in the direction that it has been going — which seems unequal and seems unfair and isn’t working for the majority of the people while these other countries keep prospering well — you’ve got to come to the conclusion that as they prosper they are more likely to become more influential and that the next chapter in the history of the evolution of capitalism is going to be written someplace else.

In Their Own Words is recorded by experts in Big Think’s studio.

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