Interesting times call for interesting books. In Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis (2010) (and elsewhere) Anatole Kaletsky, Editor-at-Large of The Times, comes up with a thoughtful analysis of the past, present and future of global capitalism. Putting the events of the 2007-2009 economic crisis, epitomized by the fall of Lehmann Brothers, into a historical perspective, he writes:
“Capitalism is an adaptive system that evolves in response to a changing environment. Once we recognise that capitalism is not a static set of institutions, but an evolutionary system that reinvents itself through crises, we can see the events of 2007-09 in a new light: as the fourth systemic transformation of capitalism, comparable to the transformations that followed the inflationary crisis of the 1970s, the Great Depression of the 1930s, and the Napoleonic Wars of 1803–15. The emerging politico-economic system can therefore be described as Capitalism 4.0”.
Kalensky, moreover, reminds us that each of those distinct eras struck a different balance between the market and the state, between invisible hands and regulatory bodies. Capitalism 1.0, for example, conceived of politics and economics as seperate realms, whereas capitalism 2.0 (1930s – 1970s) can be characterized by a faith in big government and capitalism 3.0 (1970s – 2000s), inversely, by market fundamentalism.
“Such shifts in the boundary between economics and politics have been the defining feature of each successive version of the capitalism system. In classical 19th century capitalism, politics and economics were completely distinct spheres, with interactions between government and private enterprise largely confined to the raising of military revenues and protection of powerful vested interests. The second version of capitalism, from the 1930s onwards, was characterised by a distrust of markets and a faith in benign, omniscient government. The third phase, defined by the Thatcher-Reagan revolution, exactly reversed these prejudices– governments were distrusted and markets were always right.”
Of course, few would so far disagree with Kalensky’s observations. As they are based on received wisdom concerning the nature and development of capitalism. Yet Kalensky’s book is more than a must-read for those who are interested in the historical periodization of capitalism. More interestingly, Kalensky tries to come to terms with the outlines of capitalism to come, capitalism 4.0. Following his historical analysis, Kalensky logically deduces that ‘the clearest consequence of the crisis is a transformed relationship between public policy and markets. Can we, then, simply return to the Keynesian policies of (high) modernity? Can we rigidly continue our neoliberal politics of the postmodern era? Yes and no – to both questions. For by now, in the fourth phase of capitalism, ‘the world is beginning to recognise that governments and markets can both be catastrophically wrong’ and spectacularly beneficial:
Recognising the fallibility of both markets and political institutions may seem paralysing, but is, in fact, empowering. Imperfect knowledge implies a balanced collaboration between politics and economics, rather than an adversarial relationship, and creates scope for leadership, creativity and experimentation in both government and business. If the world is too complex and unpredictable for either markets or governments to be perfect mechanisms for achieving social objectives, then systems of checks and balances reflecting both private incentives and public interests will have to be devised.
Crucially, therefore, the new discourse on the relationship between public policy and private enterprise will be dominated by both-neither state activism and-nor market principles. For Kalensky argues that high modern tendencies to rely on Big Government will be held in check by a postmodern adherence to market principles, and neoliberal tendencies to blindly adhere to the invisible hand will be countered by an activist government. In the coming decades we will see if, and how, this rather metamodern discourse on the relationship between governments and markets will manifest itself. And, more importantly, if, and how, governments and markets are jointly capable of finding solutions for the severe, complex and highly-contested problems of our time. Meanwhile, we will keep you posted…