State of global capitalism in 2014: The narrative

By Pankaj Mishra • Bloomberg

The past 12 months have been bewildering, at least for those who assumed after 1989 that the world could look forward to a future of unequaled prosperity. Protests, often led by middle classes, erupted or intensified not only in economically damaged countries such as Greece, Spain and Thailand; they rattled relatively competent stewards of globalized economies in Chile, Brazil and Turkey.

Slowing growth in India and China, the poster countries of globalization, fueled creeping authoritarianism and different, but equally anachronistic, Maoist revivals. Toward the end of the year, the president of the richest country in the world called economic inequality "the defining challenge of our time" and the pope, denouncing a "deified" free market, emerged as the most prominent critic of contemporary capitalism.

The signs are unambiguous. Almost 25 years after the intellectual and political collapse of communism, another — and by far grander — narrative of promised progress is unraveling: that of liberal capitalism.

The real rivalry in the Cold War was between these two economic systems. Of course, the Soviet Union, with its sclerotic bureaucracy, proved incapable of delivering the goods. But the revolutionary fantasy of remaking the world did not die with communism. Since 1989, journalists and editorial writers, politicians and businesspeople in the West have shared a simple faith: that liberal capitalism, now unopposed, would spread around and enrich the world.

Although more intellectually respectable, this vision reflected the same quasi-religious faith in predestination that communism did. In December 2001, recalling the mood of the decade after the end of the Cold War, the author Don DeLillo described how "the dramatic climb of the Dow and the speed of the Internet summoned us all to live permanently in the future, in the utopian glow of cyber-capital."

All that was needed, even for countries arriving very late to the modern world, was the same cocktail that seemed to have worked for the West: minimal governments, free markets, and the hard work and ingenuity of self-motivated individuals.

But there was always a problem with this idea of progress directed by the invisible hand of free markets: It could only be persuasive so long as growth was on an upward trajectory and appeared to be spreading its benefits widely.

For large, populous countries such as India and China, it was always going to be difficult to realize an ideal of national wealth and power that had its origins in the successful Western colonization of vast lands and appropriation of resources in the 19th century. Many among their freshly politicized populations have discovered that self-regulating markets and the trickle-down effect are about as likely to produce widespread prosperity as socialistic central planning.

Across the developing world, "masses of people," as Pope Francis put it, "find themselves excluded and marginalized: without work, without possibilities, without any means of escape." But suspicion of post-Cold War ideologies has also grown exponentially in the countries of their origin, as jobs move to remote lands and the middle class finds itself squeezed and unrepresented by politicians.

The free-market ideology of individualism doesn't look very convincing when big corporates and special interests are revealed to have been in profitable alliance with politicians all along. It is this hoax of power that many people, middle class as well as poor, have awakened to — an interconnected but deeply unequal world. And their rage and frustration is unlikely to be allayed by an economic recovery or restoration of growth rates — which will again seem to benefit a small minority disproportionately.

There is no danger of a 1989-style collapse. But the grand narrative of liberal capitalism in 2013 faced a deeper crisis than one caused by the periodic economic dysfunctions: It suffered a loss of ideological legitimacy and credibility.