Free market decline?


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The annual World Economic Forum in Davos, Switzerland, brings together a cadre of the world’s rich, powerful, and über-influential to discuss the great issues of the day. True to form, this year’s forum wasn’t lacking the who’s who of the global elite. Bill Clinton, Bill Gates, Nicolas Sarkozy, and George Soros — to name only a few — were participants this year. Opinions are wide-ranging, but there has historically been near unanimity on the merits of globalization and markets.

But this year’s gathering was different and ended on a rather interesting note — uncertainty about the future of the economic order as it currently exists.

Sarkozy, in a speech on the opening day of the forum, called for “deep fundamental change” in the global economy and that the crisis we find ourselves in is not simply a crisis in globalization “but a crisis of globalization.” Sarkozy’s broad-based critique of ideological and dogmatic “zealotry” in free markets is a constant refrain. In this view the U.S. system sees the market as an end to be pursued and not a mean to achieve broader social goals.

Sarkozy is well-known for his antipathy toward American-fashioned economic “liberalism” and scowling mien. But, he’s not the only one. Billionaire Soros — and even World Economic Forum Executive Chairman Klaus Schwab — are reported to have expressed similar thoughts. There seems to be a crisis of confidence brewing.

Davos sessions included “Rethinking Economic Progress,” “Redesigning Capital Markets,” and even “Rethinking Market Capitalism” and “Rethinking Values in the Post-Crisis World.” Not since the Great Depression has an economic crisis afflicted so much harm and challenged conventional thinking so fundamentally. What is different now is that, as we emerge of the recession, the shape of the system is up for grabs. There are no “wise men” in Bretton Woods providing the architecture for this world.

We’re all aware that the world is changing, but exactly how we aren’t so sure of. And the waxing of countries such as China and Brazil and possible waning of America complicates this further.
In my view, this is a positive development. Our world is seriously in need of a makeover. Legitimate critiques of the market system have typically been cast as fringe or outside the mainstream. The Great Recession that we find ourselves in provides us with an opportunity to think critically about our economic institutions.

And the free-market/ government involvement debate isn’t so far removed from the reality that youth face each and every day.

Sarkozy’s point is and has been not that markets are inherently evil. Nor is he arguing that capitalism should be replaced. Rather, just as governments intervened to stave off disaster in this most recent crisis, it is also a responsibility of governments to intervene when the market doesn’t produce socially desired results. Such as health care. Such as education.

It’s this question — the proper balance between free markets and the role of government — that will continue to frame future debates. We are moving from an age in which markets were held supreme to a more pragmatic and conscience-driven one.

Even at Davos, a gathering of the world’s bankers and financiers — those who contributed to the crisis we find ourselves in now — there is recognition that something must change. I know in some quarters of American political culture there is a reflexively anti-European attitude. But Europe can be instructive to us. Many European countries are able to coexist with open-market economies while providing broad social programs that lead to less economic inequality. Something for us in America to think about.

Last, the failures of our current economic thinking should cause us to think about better ways to address poverty and underdevelopment. The theme of the Davos conference was “Improve the State of the World: Rethink, Redesign, Rebuild.”

And we must certainly do that.

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