Capitalism has been touted as a wonderful system which has boosted living standards across the world. It has lifted millions out of poverty, created more liberalised societies and championed freedom of choice for consumers. Westerners have benefited considerably from capitalism, taking for granted such comforts as a morning Starbucks, digital TV and an endless supply of food. People in advanced economies feel a right to property ownership and an intellectually-challenging career. Anything less in the West would be considered underprivileged.
Six years ago saw the onset of the financial crisis. Since then, it has become commonplace for Western middle classes to struggle to meet their expenses or keep their careers. The wave of misery created in the Great Recession saw living standards drop, unemployment levels rocket and the chances of becoming a homeowner all but disappear for most young people. There is a fundamental problem with capitalism that is not being addressed. In his book Capital in the Twenty-First Century Thomas Piketty described the rising inequality between the world’s wealthiest and everybody else. His argument has gained much traction, in part, because it appeals to those who feel hardest hit by the financial crisis. Piketty raised a valuable question, but it seems unlikely Westerners are truly concerned about income inequality on any grand scale. The Western world stands at the higher end of income inequality in a terrifyingly unequal world.
The fundamental problem with capitalism is that it is not sticking to its core ideology: that economies should rest entirely on the shoulders of private owners. In a truly capitalist world, private owners would pay for their poor decisions. What happened during the financial crisis exposed the hypocrisy of capitalism after it was saved by socialist ideals. Put plainly, governments agreed to use taxpayers’ money to pay for bankers’ mistakes. The state intervened in private businesses, which goes entirely against the value of capitalism. The sub-prime crisis in the US, and the ensuing property crashes across Ireland, Spain, Portugal and the UK were bad. The failure of the financial markets was terrible. However, the way the situation was handled will ultimately be the most disastrous fallout from the financial crisis.
National governments supported private bankers by providing bailouts. They set a dangerous precedent for future banking failures; that taxpayers will be there to pick up the bill. Regulation has been created to help put a stop to poor practices, but there are an abundance of arguments for and against red tape. On the one hand it is costly and bureaucratic, and often overseen by individuals too close to the industry to be truly impartial. On the other, it sends a message that the industry is under scrutiny. One could also argue it simply reroutes the ways in which fraudsters will defraud the system. Perhaps it’s a necessary superficial measure to restore confidence. It can be argued every which way.
Electorates are at a crossroads right now. The recent EU elections saw a rise in support for extremist parties as Western Europeans demanded a change of course from their leaders. Some say capitalism is not working, others merely point to other capitalist countries and ask whether everybody should be adopting their methods. For some, American capitalism is best. For others, British capitalism is best. Or how about the ideal systems of the Nordics? Probe any of those regions and one will quickly discover their systems are failing as dismally as everybody else’s. There is no perfect system and there never has been. The entire Western world is consumed by the same debates: immigration, nationalism, consumerism, health, unemployment, job creation, taxation.
Euroscepticism threatens the stability of the EU. When electorates voted in anti-EU politicians they sent a message to leaders that the Union is far from secure. But what do EU electorates think will happen if the EU falls apart? Many imagine their countries will regain national sovereignty. That immigration will be roadblocked. That welfare systems will be buoyant once again. That they can pick and choose how they do business with the rest of the world. But in recognising that economic success is reliant on global trade, they admit that good relations with other European countries are fundamental to their own prosperity. And of course, there is an argument that says Europeans would continue to cooperate with each other on trade deals outside of EU rigidity.
History demonstrates how quickly societies can change tack. The decisions made today shape the next decade. Capitalism in its current guise isn’t working, but it seems its current guise isn’t true capitalism. Perhaps capitalism would be less threatening to taxpayers if it didn’t trade off on socialist ideals where it matters most to the average consumer. Many will argue governments had no choice but to bailout the banks. The financial system would have come crashing down around us without their intervention. Still, the threat of that apocalyptic outcome remains, although it has been largely stymied by the promise of taxpayer backup. Either way, electorates suffer. Westerners should remember two important truths: that their average standards of living remain exceptionally higher than the developing world, and that every system has its evils. It is simply about deciding which evils are most preferable to live with.