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Capitalism is not ‘under threat’

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16.03.2019

The former governor of India’s central bank and renowned financial wizard, Raghuram Rajan, issued a grim warning on BBC Radio 4 in mid-March that capitalism was “under serious threat” as it had “stopped providing for the many. “The “many,” in turn, would “revolt against capitalism” if the status quo remained unchanged. And as history testifies, revolutions are rarely bloodless.

His premise is bewildering as it conflates capitalism, a system of organising the economy, with the duties of a state. Revolutions are routinely the product of poor governance and absent accountability, and not per se the pursuit of profit.Otherwise, the long-defunct Soviet Union would today be the beacon of socio-economic equality.

In their fascinating book “Why Nations Fail,'”authors James Robinson and Daron Acemoglu assert institutional capacity and inclusiveness create the social freedom necessary for entrepreneurs, the backbone of any economy, to flourish. Capitalism,hence,is a tool the state wields to further its socio-economic agenda.

This is not to suggest that economic imperialism using the levers of capitalism, as the US often stands accused of, does not exist. Or that capitalism has not created a culture of mass consumerism through advertising and entertainment that racks up huge debts in increasingly credit-based economies.

Yet capitalism, contrary to what Rajan believes,has never feigned altruism. There is no evidence to prove such, barring perhaps the nanny statemodel in Scandinavia that can only work with small populations and high racial homogeneity. Also, heavy government involvement in the private sector akin to Scandinavia is utterly antithetical to textbook........

© Daily Times