Crony Capitalism and Comrade Communism

In 1992, Francis Fukayama wrote about the end of history and the last man. His thesis was that liberal democracies and free market capitalism finally proved to be superior to other economic systems like communism and socialism. The background in which his essay was written, was the Fall of the Iron Curtain in 1989, after President Gorbashev had conducted a policy of Glasnost and Perestroika in the moribund communist Soviet Union. Francis Fukayama could be considered the ultimate counterpart of another famous intellectual, Karl Marx, born 200 years ago in the town of Trier.

Francis Fukayama was not all wrong. In Europe, all countries have moved to some form of liberal democracy and free market capitalism, although not all problems are solved. China, which was originally a communist regime, has successfully introduced capitalist principles, but doesn’t embrace democracy yet. In fact, the current Chinese model is so successful, a Chinese man told me, that the people are anxious to embrace democracy.

On the other hand, Francis Fukayama could not be right either. One reason is cultural. We live in an age of postmodernism. Therefore, if someone claims to have found the ultimate economic and political system, he must be wrong. Postmodernism, born from the disappointments of the 20^th century, denies any of us the right to proclaim a superior system. A pessimistic postmodernism resides deeply in all intellectual thinking of our time. In a certain way, postmodernism proved its correctness by noting the American capitalism, the purest of all capitalist systems, has gone astray as well.

On the one hand, the USA suffered a lot from the major financial crises in the economy. On the other hand, now that its economy is slowly recovering, the country is paradoxically opting for a more protectionist policy. But there is much more reason to be concerned about capitalism. Capitalism often evolves in a direction of crony capitalism, with a lot of government involvement and with similar tendencies towards corruption as in the comrade communism, which was so well described in George Orwell’s Animal Farm. Capitalism also tends to graze all green pastures, leaving nothing but deserts behind. Capitalism is very bad at protecting general interests like the environment. But this can also be said from communism.

It seems like postmodernism may have some truth in it. All economic systems seem to bite themselves in the tail after a while and for all economic systems,  some form of ‘reset’ is required, usually preceded by social revolt. This is well described in Tomas Sedlacek’s book the Economics of Good and Evil. Other essays about economy  can be found by clicking the economy label below.

Picture: House where Karl Marx was born, exactly 200 years ago, in Trier, Germany.