CAPITALISM in CRISIS

Yes, capitalism is in crisis, though not the basic fundamental part of it , but the add ons. And yes , it needs to reform. Let me explain. I had the opportunity of working in a public sector [meaning run by Government] manufacturing undertaking in India for a considerable period of a dozen years plus. It never achieved its rated capacity of out put. Not because of lack of competence on the part of its mangers and engineers, who had been adequately trained in UK under the Colombo Plan. Indiscipline was rampant in the plant. The work ethic was weak, to say the least. Lunch breaks would extend considerably. Absenteeism was high. Sub standard Quality performance or absence of performance could not be corrected due to unions getting political encouragement and the local police coming to the aid of the management after the event. Full plant capacity utilization & Productivity were least of their concerns. Now this is not something unusual for a government run establishment. the only country in which the government programmes run after world war II have been successful, by & large, is Japan. In every other country and in democratic countries just as much in communist ones most government programmes since world war II have been disasters. If they achieved any results, they were often the very opposite of what they were enacted for. This goes for the frantic efforts in the Soviet Union since Khrushchevs days to improve farm production and farm productivity. When the Chinese, however, privatized their farms; production and productivity shot up almost overnight.
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The learning from this is evident, if we wish to learn. And firstly and most importantly it is that people work for self interest and not for collective interest and 2ndly that a government cannot successfully run programmes where

performance on the ground is required, where the resources must be used economically, where the productivity is of importance for wealth generation for the country. This primarily, to my mind, is due to the absence of fear of losing ones job and lack of result oriented working, where some one is held accountable for results and gets either rewarded for good results or gets penalized for poor performance.. An example are the huge money-losing and mismanaged companies owned by the Italian government today and run in part as businesses, in part to employ workers, in part as patronage for politicians and their friends. [1] The role of the government - There are functions which are clearly governmental , which no one but government can be allowed to perform, and which only government can perform. Among them is governmental monopoly on defense and arms. There is also the governmental function to maintain law and order and justice so that citizens can sleep peacefully at night and can walk the streets without fear something governments a century ago did a good deal better than most governments do today. There is a far more complicated and controversial government function : to maintain what we today call a level playing field. Government can set ground rules that are equally binding on every body. The Securities and Exchange Commission in the US is effective precisely because it is in every bodys interest to have clear rules which enable the honest, whether buyers or sellers of equities to do their business and which keeps out the crooks ( or at least make it a little hard for them).
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This part of Capitalism is good obviously as clear from above discussion. And in practice which means that the generation of wealth for the country, the production of goods and services, remains in private hands. Governments of any ideology just cannot do it. The opposition to this primarily emanates, as indicated above, from the loss of patronage to the politicians and their friends that we see every day even today in any country. One stone that is thrown by the patronage beneficiaries on this scheme of things is that the private enterprises indulge in corruption. Now that is true some do and some dont , like Tatas , infosys who chose to suffer significantly instead of yielding to the

demands of customs people. However, on balance I would place successful generation of wealth at a much higher pedestal than contribution to the existing malaise of corruption. And then, thanks to the Anna Hazare movement, some sort of Lokpal does seem to emerge sooner or later, and we can look, forward to corruption getting curbed. To my mind, there is another function, and not an easy one, that a government ought to perform and that is to regulate the working of private enterprises to see that the self interest of the entrepreneur does not degenerate into greed. If that happens, sooner or later the enterprise / the business would collapse causing damage to the society thru loss of jobs, loss of livelihood among the community. The latest example is the world crisis triggered by the so called sub-prime lending by the big banks in US and copied worldwide. This kind of reform is also clearly indicated in our Vedas, courtesy my friend Sobodh Kumar, which says that money earned not through hard work but by means such as gambling, brings ruin eventually. And that is what greedy subprime lending has landed, not only the greedy gambling bankers but the society world wide in a mess. Yes the reform thus needed in capitalism, apart from governments performing their role outlined above, is to banish gambling by institutions or individuals with deep pockets in terms of speculative trading in commodities like oil and many others, currencies etc. We have had more than one example of an individual rogue employee of well known banks gambling away the bank to ruin. In summation, the governments should focus on the functions that they alone can do and should do as referred to earlier, leaving the production of goods and services for the society and generating wealth for the society in private hands; but do regulate them so that the self-interest of entrepreneurs does not degenerate into greed and also prohibit speculation in commodities and currencies. There is yet another function that is for the governments alone. Let the wealth be generated by people privately in groups, alone or in corporations;

but in distribution of wealth the government has a positive role. How it should be done to make it effective, is another subject. * * * * *
V K Sharma / Jan 02, 2012

Bibliography : The New Realities by Peter Drucker - a 1989 publication