Capitalism is Capital Investment : Strategic Concept for Progressive Capitalism Part 2

I think there are different ways of explaining capitalism. I want to introduce the concept of Capitalism as Capital Investment in this strategic overview.

The wave of austerity led free-market policies in the name of the laissez faire state exposes a weaknesses of thinking and a strength of prejudice and self interest by some political classes and some of the businesses too. Equally, this is totally detrimental to the financial and economic health of the world and regional economies.

I want to show a different perspective on capitalism. This is important in one of the most significant crises of the 21st century.





The first point I wanted to make is that I believe the world economy is shifting its centripetal force from the West to the East in a strategic sense. The rise of Asia has been a real phenomenon in the world economy. I call it 'the Asian economic revolution' in the world economy for the obvious reason. This development is part of the process unleashed since the Second World War.

Asia has risen in many waves. Japan laid its power in the 19th century wholesale Westernisation policy. Then Japan became the second largest national economy in the world with its amazing take off in the 1950s and 1960s - which is still increasing in some respects (e.g. its car manufacturers overtook Ford of USA recently to take the number one global car company position) - although it is a mature economy with a more flat-lining in its growth curve. There has been a phase of city-state economies rising - e.g. Hong Kong and Singapore as the financial engines of Asian economic growth. ASEAN (South East Asian 'Tiger Economies') rose up and turned up the accelerator for Asia's economic development in the 1970s and 1980s. South Korea, Taiwan and Malaysia did extremely well. The take-off happened here not at the same rate - but it did definitely alter the economic futures of this part of Asia too. Then in the 1980s and 1990s, China and India entered the world economy race with their take-offs as the 'big giants' of Asia's populations. The Middle East also had a rise at different periods - with its oil as the fuel for economic growth during different phases of Asia's economic take-off as well as sustaining the world economy (especially the West). Dubai signalled this as a global crossroads as a city-state (like Hong Kong and Singapore). But all Middle East states with oil had a massive rise in their middle classes and wealthy elites as well as huge economic take-off (despite all the political crises).





The rise of China and India ( in addition to the rise of Japan and South East Asia and the Middle East) has altered the world economic power equation.

The West has not grasped the fundamental changes going on as yet. It's reactive policies have been woefully inadequate. This is because it has failed to grasp strategic history. It has clearly made strategic blunder after blunder - even when it got parts of strategic orientation right. The victory in the Cold War gave it an over-estimate of its economic and political weight. The military weight became a burden on it. So all the geo-strategic calculations fell apart. It tried to cover up this failure by the adoption of very right wing (Neo-Nazi and Racist politics in Europe and 'A Clash of Civilisations' as well as religious sectarian approach to politics in the USA). It did not feel the cost of it until now. Strategic mistakes create very fundamental political and economic disasters.

In USA, this policy has been challenged by President Obama and the liberal/progressive wing of the Democrats as well as by centrist Republicans (even President Bush adopted a very interventionist line in the economic policy and the 'banking/financial crisis' broke out in the West). However, the political right wing of Europe adopted an austerity policy. This has been an utter disaster. It politically strengthened the Tea Party movement in the USA based on a false reading of laissez faire economics and an ideological content to capitalism. The 'Trangulation Tactics' as the political genius of the Bill Clinton and Tony Blair era were cast aside for easy (and very fundamentally foolish strategic orientation of the West in the world economy as well as their strategic understanding of the role of the state and financial system of capitalism).

I want to correct this by introducing my idea of capitalism as capital investment. This does make fortunes because it increases the size of the world economy. However, austerity does not. It misunderstands the inner dynamics of capitalism. Starving a body of food does not work on an ill patient. The Western economies are ill (not because of their own fault but because their relative position is being weakened). Life expectancy is increasing in the West. This is in contrast to what happened to Russia under the 'shock therapy' regime of Professor Jeffrey Sachs. ASEAN countries lost its global advantage after adopting a 'shock therapy' in South East Asia after the diktats of the International Monetary Fund. The same thing happened to Latin America after its structural adjustment programmes (SAP is the right acronym for its because it did sap their economic advantages).

So my criticism of the West is based on a sympathy for it. This is not an attempt to rubbish the West. It is to correct a strategic failure, so that the West can make PROGRESS. It is hard to have a perspective when the West has been so dominant in the world economy. Like all powers (it has been an imperialist power too especially Europe with its Empire and the USA has been a very mild form of it in its territorial ambition, although it has been a very dominant military power as the saviour of Europe and Japan after the Second World War), it is very hard to loose relative advantage.

I want to alter the perspective on capitalism. The West has immense strengths. It is rapidly and seriously destroying them. It's adopting false 'comfort-zone' politics with its ideologies of racism and austerity in Europe and its 'comfort-zone' ideology of laisser-faire Tea Party politics in the USA as well as very distasteful anti-progress politics of Fundamentalism Christianity in USA (as opposed to progressive Christianity). There is no comfort in 'A Clash of Civilisations' perspective. The West is progressive relatively to the Middle East and many terrorist movements and dictators around the world. I say 'relatively' only in the sense of warning against turning off the tap of progress in the West in favour of sapping its energy by very right wing and austerity politics. The West is progressive - but it will lose the political battle if it cannot reverse a disaster in its strategic orientation.

So I want to start with the proposition that capital must be seen as capital investment. How to create capital investment is a good question and different answers are possible e.g. reduce costs to private investors, increase state capital investment, use human skills/capital better, use social capital, use technological/educational advantages better, etc.

My view is that the world economy is going into a state-based capitalism in reaction to the austerity policy which is killing off private capital investment and by attacking private capital investment. It is only investment that can create jobs (although strategically I favour a 'full employment' policy for the West for social and economic reasons).

All the money in the world is going into Western state-led saving and investment portfolios based on the risk felt in the private capital investment sector. So contrary to the austerity policy creating private capitalism as the ideologues would have us believe, it is hurting the private sector in a very big way. It is completely hurting the West and creating a false and unnecessary crisis of enormous depth. A shock therapy can very seriously weaken the power of the West. Extreme right politics can alienate the world's people (of Asia, of emerging economies, of Africa and Latin America) from the West.

It has already done this to the Muslim population - which expresses this politics in strident support for 'Islamism' in all its backwardness as well as its terrorist components as well as for overthrow of pro-Western secular regimes. Iraq, Afghanistan and Pakistan faced serious crisis because of political mistakes in the West's approach to secular and liberal Islam as well as developing a non-sectarian progressive and modern Islam - not by the West, but highlighting it within the Muslim populations and history of the world. So alienating a population does not make it easier for the progressives. It makes it harder. The killing of Osama Bin Laden naturally created a sympathy for him in the pro-terrorist massive movements in the Middle East and South Asia as well as the growing very extremes in the West, India, China, Russia, Nigeria, etc.

I want the West to succeed. I want it to be progressive. I am fighting politically to correct its strategic errors. Intellectually, I want to show the healthy relationship between capitalism and progress. This is my intellectual mission.

So I wanted to introduce the concept now. I will elaborate on it in the future. I will show how it can work in economic policy.

I want to rescue the West from a certain disaster it is facing now - as much as I can.

Strategic Mistakes: Lessons for the West (1)

Introduction

The starting point for an analysis of the current ECONOMIC crisis is to look at the STRATEGIC POLITICAL mistakes made by the West.

The second thing to get right is to view the crisis in a historical context. The truth of this is that there is a RELATIVE shift of the world economic power from the near monopoly of the West to a more diverse centres of economic power in the world economy. I call this 'transition' to 'the Asian Century'. This may seem to be provocative, but I think this offers a better framework than the Project of the American Century or the European Century thesis. There is one of the biggest shifts in world economic history going on - in this period of the start of the 21st century in its first few decades. The magnitude of the change is denied by political denial on the part of the West.

The strategic political mistakes have been very costly.

Part One: The West and Strategic Political Mission Failure

The West has created a Trans-Atlantic rift between itself - European Union versus North America. Both sides of the right are mistaken in their thinking. The vicious political fight between Europe and America for hegemony of the world has resulted in failure in both sides. However, this does not explain the magniture of the mistakes made.

Europe adopted a strategy of a gated community amidst the globe. European unity took precedence over Europe's role in the world economy. This role is not about dominating the world economy at all - or beating the USA in terms of hegemony. It's a very different type of role. I will call it 'the synergy role' in the world economy. For Europe to progress, it has to work on a global win-win strategy with all parts of the world economy. From the USA and North America, to Asia and Africa and Latin America, it has to think about how to create a new global jigsaw of the world economy, where the different pieces fit together without breaking them. Europe created inside its own gated community, a terribly destructive politics. This is the rise of neo-Nazi racist parties. They are reactionary pulls on Europe to be hostile to globalisation, multi-cultural realities, reverse progress - and then of course - be hostile to European Union in depth or breadth.

For the USA, military dominance and 'victory' in the Cold War went to the head. The Project for the American Century was the biggest mistake to make. This was accompanied by strategic errors towards the world - seeing different parts of the world as enemies - in the self-fulfilling and sectarian 'Clash of Civilisations' policy, which has dragged USA secularism into a new religious Cold War. Securalism is the ideology of modern capitalism and progressive movements in the world. It fits into new forms of globalisation, which are not based on dominance but based on co-operation (synergy politics). The West specifically USA has got hostile forces facing it in the World. However, it has rejected the strategic mindsets needed to address these in a politically effective way. Instead, it has lost major battles e.g. with terrorism. USA won the Iraq war, but very badly lost the peace and stability after its early military dominance. The same has happened in Afghanistan, which had an unambiguous UN mandate for action. Similarly, it has failed in dealing with Iran and its foot-soldiers in the Middle East (e.g. Muslim Brotherhood/Hamas).

In its own backyard, it has failed to deal with Latin America anti-USA political movements. A simple failure to comprehend the strategic development of Latin American left/progressive forces as the centre of political gravity - with some pro-America and some anti-America (both part of the left forces). Progressive capitalism is a force in Latin America - with extreme left forces moving into the mainstream politics, rejecting anti-USA positions and delivering social justice programmes e.g. President 'Lula' in Brazil.

Similarly, the USA did not fully appreciate the rise of Asia. Ironically, President Bush played a strong role in this. He advocated APEC (Pacific based economic community) - Americas and Asia. He also supported ASEAN and wanted it to be an important forum. There was political jockeying, but it was a serious strategic approach. There was a principled and pragmatic attitude towards China. President Bush pushed this agenda. He managed to strike a major deal with India - Indo-US Nuclear Agreement - which was a major strategic victory, but it was not pursued into a fuller agreement with India across different areas to make India into a political centre for all democratic nations of the world specifically EU, North America, Japan, ASEAN, etc. India has to be made into a global super-power - because it is potentially huge political and economic ally of the West/Japan. However, this is a massive internal change for India and requires massive strategic thinking to put India into the centre of world affairs e.g. supporting a real political campaign to make India a permanent member of the UN Security Council - and not accepting any compromise on this issue.

The next major Western strategic mistake was to wave the flag of victory: 'End of History' when only East Europe and Soviet Union abandoned Communism. The world is not just Europe or the West. China exists as a Communist state. Basically, the third world is a mixture of democracies and dictatorships. There is a real fight going on the third world on this issue. The West could have boosted this in a strategic way - by boosting democracies - and not using war to create democracies. The Alliance of Democracies is potentially a powerful alliance - providing it becomes meaningful at an economic and technological level. The strategy of military war-fighting has many weaknesses - and has a very muddled record in the last decade - more defeats than victories for the West - with considerable damage to its military reputation and political alliances in the world as well as alienating vast global communities under the 'clash of civilisations' thesis.

East Europe has been a success politically and strategically. Both EU/USA deserve credit for this. The forces of the Right pursued this on the basis of individual freedoms. The forces of the centre on a similar human rights basis. Both were politically and strategically the right thing to do. There are still strategic issues at stake. For instance, Poland should have been given the Missile Defence Shield. There are concerns about Russia pursuing an attack similar to Georgia in Europe.

The West needed to construct a new paradigm that could work at a strategic, political, economic and hegemonic (leadership/mobilisation) level. I contend that 'Progressive Capitalism' is the paradigm. It must start off this progressive thinking by rejecting racism and neo-Nazism in Europe and the Christian fundamentalism in USA. EU/USA must promote multi-culturalism (this is separate from its immigration policy as long as it is not a racist one) in order to send the message that progressive societies love all mankind with universal rights and freedom. Multi-cultural world can be related to the concept of multi-cultural EU/USA.

On religion, EU/USA should be clearly secular. Freedom of religion - but a clear separation of the 'religion' and 'state'. This has to be the message sent to all parts of the world. Governments must not be based on religious ideologies, but on a democratic basis - the people determining government. Religious conflicts take societies/government/economics into a backward and reactionary, non-scientific direction. Progress is fundamentally damaged by religious sectarian and reactionary forces. The whole world is set back. Islamic terrorism has become a problem. Clash of civilisations is the wrong framework. Multi-culturalism is the right one. The West has to provide clear leadership on this issue by winning this internal battle. This is the number one cause of the gradual weakening of the 'progressive' mission of the West. Racism/sectarianism has to go - and replaced by the doctrines of the Founding Fathers USA, Universal Rights of Man France and Bill of Rights UK, etc. - the fundamental foundation doctrines of the West.