One's personality is both a composition and reflection, but if I have to choose one of them, I will choose reflection as the "self" is more important to me than "me". One's composition may change, walking across the cultural landscapes and climbing the social ladder but one's self is tied to one's reflections. The fun part is that reflections are not bound to "Time-Space" barriers ( it is not time-space) and respective mental constructs, which have grown so thick over ages, that they had reduced the image of humans to Sisyphus, rolling different sizes of boulders on hills of different heights.… As the name of this Blog indicates, knols are my perspectives on topics of interests, sweet/bitter experiences or just doodling :)

Saturday, January 14, 2012

Can Capitalism survive without interventions?

After first signs of economic melt down in 2009, I wrote this knol... Is it still valid, I leave the judgment to you...


The economic downturn continues. Bailout planes are announced but still there is no cure. The hardliner capitalists who always speak of capability of market to heal and organize itself without intervention of government are silent on the subject. The bailout plans are crossing the national borders and the international powers are putting hands together to put more money into the IMF to use the global economic depression for deeper interventions in the poor countries of the world. Does really capitalism run on interventions? Before we go to answer the question, I put another question and that is, “Does capitalism needs interventions because it needs external sources of wealth and support to grow?

Intervention of slavery

To answer this question we have to use the logic of history. Feudalism was near to collapse due renaissance and massive trades through sea and oceans similarly expansions into new lands and other nations became possible due to bullets and steam engines. The new lands were the asking for wide cultivations and promising great profits. The new lands and the unequal trades with other nations were the sources of the first capitals and introductions of the capitalist system to replace the feudalism.

Hence the capitalism started with interventions of wealth coming from new lands and looting of the colonies. As there was not industrial revolution yet so the new lands required labor to be cultivated. There was not enough capital to hire labor for cultivations so the first capitalist started to abducting the black African and making them slaves for forced works on the fields. The massive abductions of the Black African were another intervention into newly established capitalist system.

Intervention of Industrialization:

The capital earned from new lands and slavery produced enough surpluses to be invested for producing goods. The investment of the surpluses led to industrial revolution. New factories also required labors so the poor people are hired by industrialists for massive productions. As the only purpose of these industries were profit and the work environment were new for workers, managers and owners so they led to revolt. It was this era and the experiences of this era that helped Carl Marx to develop his revolutionary ideas. The ideas of the Marx were first revolt against the capitalism.

We can understand that why the Marxism developed in the second phase of the interventionism. Because in first phases of the interventionism the slaves were unable to interact with their masters cultures and understand the political and economical cultures of their masters. On the other hand the white industrial laborers were the members of the same society and were familiar with the economical and political cultures of their society so the revolt began the socialism and capitalism were put forwarded as alternative systems to capitalism.

Intervention of assembly line production

The revolt of the labors and competitions among the industries were making the capitalism towards failure as depressions were common after a decade or two. The inventions of the assembly line production method which lower the costs of the productions and made it to produce massively and so to present cheap labors. New industries and mass productions along the falling prices of the commodities were led to an economic growth and sudden increase of the middle class. The increasing number of the middle class was the reason for stability of the society. The assembly line was a technological intervention into capitalism.

The great depression of the 1930’s were temporarily healed by war economy but the real solution to capitalism come by another technological interventions and that was automations of the assembly line productions. The assembly line automations and followed automations were the real technological interventions and it was strengthen by computerization.

The technological interventions proved that technological interventions are an essential part of the capitalism to survive. As the automations and computerizations of the industries were asking for more skilled labors and so the wages went high. New industries became costly as they required heavy investments. To keep paces of the capitalism intact and to save the capitalism from collapsing another intervention introduced into systems and it was called privatization.

Intervention of Privatization

Privatization was a step that capitalist governments introduced to inject the public properties, infrastructures, industries and businesses to capital market. Privatization was a real injection of public money into private businesses. It was good for rich countries like UK but it was a disastrous experience in poor countries like Pakistan where the feudalism has strong hold in politics and economics of the country. In rich countries like UK, the public money remained in country and attracted more businesses or simply leads to an economic boom but in poor countries like Pakistan the public money and businesses flew out of country.

Though privatization speeds up the rates of growth of the capital markets but as it is a trend of the capital market that it could only could be saved out of the economics collapse by regular interventions or injections after particular intervals so the markets required new interventions. This time the businesses required the cheap and skillful labors. China, India, Indonesia, Malaysia and like Asian countries had cheap and skillful labors so businesses shifted their business units in these areas. It resulted in shift of the technologies and labor markets and created an economical boom in India, China, and Malaysia and like countries.

Intervention of bailouts

The surpluses that have been accumulated during each intervention in market encourage new businesses like lending on profits by banks in areas like housing, transport, businesses, education, etc. Certainly these are the areas that people needs most and on urgent basis. The high level of demands in these areas caused the rapid growth of the lending businesses. As banks use the trust of the people rather than their actual reserves so the lending exceeds beyond the capacity of these banks. Soon the banks were not able to fulfill their responsibilities so the banks started to collapse.

This was the situation was different. It was not only markets but the houses, jobs, businesses, educations and health of the people that were at risk. The popular appraisal was not far if the governments were not quick to act. Here more problems were also making it serious. There were no competitive systems competing with capitalism to blame them for global economic crisis. There was only one system ruling the world unchallenging so all the economic down turns and collapses were due to defects in capitalist systems. Beside the rebellions forces like Russia, Iran, Venezuela and Cuba were using energy sectors to challenge the Imperialist West, so it was natural to look into sudden global recession as planned counter attacks on such forces. The countries that most suffered were the gulf Arabian countries whose economics were totally dependent on energy exports and direct foreign investments. The cities like Dubai which had become a global financial hub of the area were questioned about its models as genuine.
The government soon stepped in, intervened directly into capital markets by crushing their principles as non interventionism or free markets. The first phases of the bailouts failed so the next phases of heavy public money bailout planes are working in markets and we have to wait to see the outcomes.

The present interventions by the governments into markets had made one point very clear and that is free market is only workable if the government is always have reserve to come to its safety after each intervals there are no ending intervals.

No comments:

Post a Comment