This is not capitalism anymore...

Each and everyone of us tend to take for granted some facts. For instance, in our western societies, "Progress" is considered as a basic law of nature. As argued in a previous post this is not true and mankind has already experienced centuries of what historian call "dark times" characterized by a steep regression followed by strictly no improvements or new achievements for centuries.

I have recently seen on TV the interview of a french economist named Daniel Cohen. In his new book titled "The prosperity of Vice, a worried introduction to economy" he is brilliantly explaining how our western culture has prevailed, why, and where we are heading to. In the interview he was stating something stunning : in the early 1900's a Papuan and a western blue collar were eating as much calories per day. The only difference is the Papuan was working 1 or 2 hours a days, just the time to hunt and cook, when the blue collar was working 8 to 10 hours in very hard conditions. What a progress... I am not saying the industrial revolution has not been a leap forward, but it is sometimes interesting to put the concept of "progress" in perspective. And to say the least the industrial revolution has been a very costly move forward.

We all have a limited rationality and it is very hard to encompass history (especially from an economic and social perspective) as a whole. As a human being our time frame is at best a life span.

Twenty years ago Communism collapsed. Capitalism and freedom have prevailed. Since then this economic system has dragged out from poverty millions of people. No question about this.
Does it mean we should not question the evolutions of the system? I don't think so.

Originally Capitalism is about entrepreneurship, about having an idea, developing it, succeeding or failing. It is about being proportionally rewarded for the risk taken. Capitalism is about rewarding risks.

Is it still the case today?
Francis Ford Coppola recently regretted the good old time in an interview arguing that back in the days Entertainment moguls certainly wanted to make money, but were also willing to take risks. Maybe because they knew that you must risk to profit...

When the financial institutions have created Securitization (the financial tool behind the Subprime crisis) were they aiming at rewarding risks? Of course not. In a nutshell the idea behind Securitization is to extract the credit risk from the banks' balance sheets. Banks wanted to enjoy the profits, not carrying the attached risks anymore. They did not want to make their job anymore.

Along the same line many sectors of the economy are facing a huge crisis of innovation. For instance pharmaceuticals companies are issuing pills such as Plavix when it has basically the same benefits as Aspirin (see here in french) but is sold 24 times higher... They are not innovating anymore so they overuse the make up of marketing and advertising to keep their profits high.

In many sectors there is not enough competition. In France the three mobile phone companies have been sentenced to a record penalty for cartel. But the situation is even worse in the US!! The country of capitalism, the country where competition is glorified... As a french I have always been shocked by the fares US consumers are paying and the fact that they pay for incoming calls. Sorry guys but in France you only pay for outgoing calls and no doubt if there was more competition US consumers would be way better off (and not only in Telecommunications, but also in banking services for instance)!

"Dirty business" is spreading in almost every sector of the economy :
In some industries it is about lying to the consumer (if not conning) => Pharmaceuticals, Telecommunications, Insurance, Banking...
In other ones it is about pressuring your own employees with terrible work conditions => Department Stores, Manufacturing Companies, Call Centers...
In others it is about bribing and destroying the environment => Agribusiness, Mining, Oil and Chemical Industries...

Companies are so big they can influence governments and policy making. If they are not big enough they group together to lobby...

And we are talking here about powerful free market economies. Countries who are supposed to have the capacity to regulate abuses.
Do you think a developing country can repress abuses when fighting a company who is earning more profits a year than its GDP... On this, Joseph Stiglitz, Nobel Prize in Economic Sciences, former economic adviser of Bill Clinton and former VP of the world bank, lists terrible examples of corporate misconducts in his books and interviews. Examples where we are not talking about economics anymore but just about basic ethic.

The current economic system is poor on innovation and competition, the financial sphere is risk averse and focused on the very short term, global giants have emerged and have reached the critical size to impose their views to policy makers.

Globalization has completely changed the game. Company have perfectly adapted to it. Countries and regulators have not. The goal of a company is to make profits, ok no problem about that, but when they are that big and that unregulated they begin to be a threat to democracy and humanity.

I am not anti-capitalist at all but I don't think this is capitalism anymore.