Capitalism itself is not in crisis, but western capitalism is. This is a result of three strategic mistakes. The first was to regard capitalism as an ideological good, not as a pragmatic instrument to improve human welfare. Alan Greenspan was probably the greatest victim of this ideological conviction that markets always knew best. The second error was to forget the lessons that European capitalists learnt from the Marxist threat of the early 20th century. For capitalism to survive, all classes had to benefit from it.
The final error was to aggressively promote the virtues of capitalism to the third world without realising that it had to educate its own populations on the critical concept of “creative destruction”. Economics textbooks correctly pointed out that when the automobile was invented, the horse and buggy industry had to disappear. And when digital cameras emerged, Kodak film had to go. Yet, the masses were never told that they would have to learn new trades and skills as new competitors emerged from China and India.
For all its flaws, capitalism remains the best system to improve human welfare but it is also an inherently imperfect system. It requires careful government regulation and supervision. Asians never forgot this. The west did. Hence, the time may have come for Asians to reciprocate the generosity of the west in sharing capitalism with Asia. Western policymakers and thought leaders should be invited to visit the industrial complexes and service industries of Japan and Korea, Taiwan and China, Hong Kong and Singapore. There may be a few valuable lessons to be learnt here and there. Read more