The globe saw a policy shift in economic paradigms after the laissez-faire economic model and Keynesian economic setup failed to provide a logical basis to address the Great Depression. Neoliberal economic policies emerged, advocating regulated capitalism as an optimal economic system and the sole solution to global economic issues.
For decades, this system worked well. However, just as capitalists were disproving Marx’s theory of linear collapse, new crises began to arise in more profound and complicated ways. Pakistan and America are two prime examples of this economic failure. Pakistan has become a bailout state per se, while the latter grants intra-bailout packages to private companies to keep its economy afloat. Despite their diplomatically paradoxical client-patron relationship and contrasting social and political structures, both countries display strikingly similar patterns of capitalist failure, making this comparison unexpectedly apt.
Undoubtedly, capitalism aims to promote competition, innovation, growth, and new ideas, and this way it is supposed to be self-regulatory. Moreover, Adam Smith’s concept of the “invisible hand” is the cherry on top that keeps the free market in balance. The invisible hand, simply, is an unseen force that keeps the market free moving at a balance. However, this balance seems to be faltering now, with market monopolies forcing the US Government to grant bailouts to private companies, particularly monopsonies, over the last few decades. But this was not always the case.
In both Pakistan and America, we witness a system struggling under the weight of its contradictions.
Until the 1980s, capitalism seemed to work for America, as its dilemma of economic regulation was working well. It all started with the bailout of Continental Illinois, the first major financial bailout in the early ’80s. This was then followed by a series of bailouts in the savings and loans industry, and from there, bailouts became increasingly larger and more widespread. Contrastingly, while Pakistan followed the suit of capitalism without question, its capitalist collapse started a little earlier, in the 1970s.
Although there was a political effort to nationalize branches of the economic setup in Bhutto’s era, it took no time to reverse. Let alone that the capitalist failure of Pakistan started way back in the 1970s would not be wrong, as Gen Ayub Khan’s “Decade of Progress” was largely spearheaded by 70 per cent of revenue generated from East Pakistan. Since the Bangladesh divorce, Pakistan had been relying on external sources of funding, having received $73 billion in foreign aid between 1960 and 2002 alone, and thus becoming a “bailout state”. The capitalist market failed once again to regulate itself. These events demonstrate how for both countries, the “invisible hand” often seemed invisible, perhaps because it was frequently absent.
Despite mixed economies with significant state intervention, both Pakistan and America exhibit many characteristics that Marx predicted would lead to the downfall of capitalist economies: wealth concentration, labour exploitation, and cyclical crises. According to a CNN survey earlier this year, 42 percent of Americans reported a decline in their financial situation compared to the previous year. A Consumer Confidence Index survey conducted by Ipsos also decrees that only 18 percent of Pakistanis are optimistic about the future of the country, while 82 percent are hopeless. How can it still be justified to assert that the two states, one with a robust democratic framework and the other with a more constrained democratic system, are not failing within their capitalist structures?
Every significant work on material inequality in the 21st century owes a great deal to Amartya Sen. Dr. Sen argues that while famine may represent an acute deficiency of eatables, it rarely results from a mere shortage of food. To understand the reasons behind widespread hunger, one must examine the failings of the moral economy that manages the competing demands on limited resources.
The core issue is severe material inequality spread by a pro-business social setup. Incremental adjustments to production and distribution systems are insufficient remedies according to Dr. Sen. It is imperative to rectify the relationships among various economic actors to address this issue fundamentally. And capitalism is failing to provide that setup now.
Rudolf Rocker, the German writer and libertarian socialist, asserts, “I am an anarchist not because anarchy is the final goal, but rather because there is no such thing as a final goal.” This underscores the evolving critique of capitalism as seen through the socio-economic trajectories of Pakistan and America. Both nations, despite their contrasting political spectra, illustrate Karl Marx’s theory of linear collapse, which posits that capitalist economies are doomed to fail due to inherent systemic contradictions.
Proponents of capitalism often argue that it was designed to foster competition, but this is no longer the predominant characteristic of the system, which they attribute to societal and human shortcomings. However, as highlighted by Ruchir Sharma, Chairman of Rockefeller International, in his book “What Went Wrong with Capitalism,” the current iteration of capitalism seems to favour large corporations rather than encouraging genuine competitive dynamics. This shift suggests that capitalism, in its current form, may either be overly supportive of big business or validate the Marxist critique of the system. Either way, the future of capitalism appears increasingly uncertain.
A system designed to foster equality and opportunity is now steering toward inequality and disparity. The concentration of wealth and power in the hands of a few not only undermines social cohesion but also erodes democratic values. Furthermore, capitalism’s relentless focus on growth and profit often comes at the expense of the environment, and the “decoupling” of economic development from environmental degradation remains a distant prospect.
For now, the current socio-economic landscape looms large with the question: Is capitalism failing? The evidence is compelling. In both Pakistan and America, we witness a system struggling under the weight of its contradictions. What was once hailed as the pinnacle of economic progress now reveals cracks in its foundation. As we grapple with these realities, it becomes increasingly clear that a transformative shift is needed. The answer may not lie in abandoning capitalism but in reimagining it to better serve the majority, ensuring that the dream of prosperity becomes a reality for everyone.
The writer is a freelance columnist.