Analysis

Beyond the free market

Eric Hobsbawm

Twenty years after the fall of the Berlin Wall, capitalist market fundamentalism crashed as spectacularly as Soviet-style command economies did.

Twenty years after the fall of the Berlin Wall, capitalist market fundamentalism crashed as spectacularly as Soviet-style command economies had by the end of the 1980s. So what is the key political question of the 21st century?

The short 20th century was an era of religious war between secular ideologies. For historical rather than logical reasons it was dominated by the opposition between two mutually exclusive types of economy, “socialism”, which was identified with centrally planned economies of the Soviet type, and “capitalism”, which covered all the rest.

This apparently fundamental opposition between a system that sought to eliminate profit-seeking private enterprise (that is, the market) and one that sought to eliminate all public or other restrictions on the market, was never realistic. All modern economies must combine the public and the private in varying ways and to varying degrees and in fact all do so.

The two attempts to live up to the full binary logic of these definitions of “capitalism” and “socialism” have both failed. The state-planned command economies of the Soviet type did not survive the 1980s. Anglo-American “market fundamentalism”, then at its apogee, crashed in 2008.

The 21st century will have to reconsider its problems in more realistic terms. How has this affected the countries formerly committed to the “socialist” model? Under socialism they had found it impossible to reform their state-planned command systems, although their technicians and economists were well aware of their fundamental flaws. The systems, internationally uncompetitive, remained viable insofar as they were isolated from the rest of the world economy.

This isolation could not be maintained and, when socialism was abandoned, whether by the collapse of political regimes as in Europe or by the regime itself, as in China and Vietnam, these states were plunged at a moment’s notice into what seemed to many the only available alternative: globalising capitalism in the then dominant extremist form of free market capitalism.

The immediate results in Europe were catastrophic. The countries of the former Soviet Union have not yet overcome the effects. Fortunately for China its capitalist model was not Anglo-American neo¬≠liberalism but the much more dirigiste East Asian “tiger economies”. China launched its economic “great leap forward” with little concern for its social and human implications.

This period is now at an end, as is the global dominance of extreme economic liberalism of the Anglo-American type, although we do not yet know what changes the current economic world crisis, the deepest since the 1930s, will bring about, when the shock effects of the past two years have been overcome. Only one thing is already clear and that is a major shift away from the old North Atlantic economies to South and, above all, East Asia.

In this situation the former socialist states (including those still governed by communist parties) face very different prospects and problems. I leave out the differences in their political alignments. Most remain relatively fragile. In Europe some are assimilating to the West European social-capitalist model, though at a much lower level of per capita average income. Neither the countries of the former Soviet Union nor those of Southeast Europe have done so or can be expected to do so.

The future is most difficult to see in Southeast Europe, more balkanised than ever before and reduced by war, corruption and crime. A dual economy is quite likely to emerge within the European Union.

Russia, having recovered to some extent from the catastrophe of the 1990s, is reduced to a strong but vulnerable exporter of primary products and energy and has so far been unable to reconstruct a more balanced economic base. Reaction against the excesses of the neoliberal era have led to a certain return to a form of state capitalism with reversion to aspects of the Soviet heritage. Patently simple “imitation of the West” has ceased to be an option.

This is even more obvious in China, which has developed its own post-communist capitalism with considerable success, so much so that future historians may well see China as the real saviour of the world capitalist economy in the current ­crisis. In short, it is no longer possible to believe in a single global form of capitalism or post-capitalism.

However, shaping tomorrow’s economy is perhaps the least important part of our future concerns. The crucial difference between economic systems lies not in their structure but in their social and moral priorities. In this respect I see two crucial problems.

The first is that the end of communism has meant the sudden end of the values, habits and social practices by which generations had lived—not only those of the communist regimes, but also those of the pre-communist past that had been preserved under these regimes. We must recognise the depth of shock and human calamity brought about by this abrupt and unexpected social earthquake.

This sense of social disruption and disorientation remains, at least for all except those born after 1989, even when economic hardship no longer dominates post-communist populations. It must inevitably take several decades before post-communist societies find a stable way of living in the new era and some of the consequences of social disruption, institutionalised corruption and crime may take even longer to eradicate.

The second is that both Western neoliberalism and the post-communist policies it inspired deliberately subordinated welfare and social justice to the tyranny of the GDP: maximum and deliberately inegalitarian economic growth. In doing so they undermined, and in former communist countries destroyed, the systems of social security, welfare, the values and aims of public service.

This is no basis either for the European “capitalism with a human face” of the post-1945 decades or for satisfactory mixed post-communist systems. The purpose of an economy is not profit but the wellbeing of all people, just as the legitimation of the state is its people not its power.

Economic growth is not an end but a means to good, human and just societies. It does not matter what we call regimes that pursue this aim. It does matter how, and with what priorities, we combine the public and private elements in our mixed economies. That is the key political question of the 21st century.—IPS

The British historian Eric Hobsbawm is the author of The Age of Revolution, The Age of Capital and The Age of Empire, among many other books

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