Volume 8, Issue 4, Fall 1998
The End Of Triumphalism
Nineteen ninety-eight will go down in history as the year in which the
export of American capitalism failed, the year the Big Backlash against
it gained momentum, and the year in which the quest for finding new ways
to deal with globalism started in earnest. Just a few years ago, Americans
were celebrating unabashedly the worldwide victory of capitalism. (It was
what Robert Kuttner has called the "grand illusion.") The main "other"
form of economic order, that of command and control, declared bankrup tcy
as the Soviet Union collapsed. Other communist regimes toppled like so many
dominos. China privatized its economy. And scores of nations in Asia, Africa,
and Latin America deregulated, cut their deficits, and otherwise openly
embraced the thesis that the best economy was one that exposed itself to the
bracing forces of the global market. American economists predicted dire
consequences for those few countries that were slow to join the parade. The
recent troubled Asian economies suggested that crony ca pitalism was not
going to work either. All that was left standing was the American way, or so
it seemed. All of this was a short yesterday away.
Now countries from Russia to Malaysia are being swept by huge waves of rejection
of the American form of capitalism. They have discovered that the recommendations
of the IMF, the World Bank, AID, and the Jeffrey Sackses of the Western world,
have brought to the majority of their people economic chaos, misery, loss of real
income, dilution of assets (especially pensions), falling health standards,
indignity, massive organized crime, large-scale corruption, AIDS, drug abuse,
self-centeredness, and the worship of materialism.
As of 1998 many people in the countries that until recently were counted as newly
Americanizing are now demandingCand gainingCa change of course, to better protect
their communities from financial if not economic globalism. In Malaysia the government
imposed currency controls. Russia plans to re-expand the role of government in
conducting the economy. The Czech Republic kicked out of government Vaclav Klaus,
the great privatizer, and replaced his government with a more moderate one. In
neighboring Au stria, even very minor attempts to trim the welfare state have
contributed to the rise of a major right-wing protest party. In the eastern parts
of Germany, frustrated people voted against Kohl and the CDU and its relative free
market policies. Many other nations, which never sailed far down the American course,
are taking note.
The reasons for the worldwide failure of American capitalism and the rising backlash
against it are numerous. Most important is the fact, often ignored by Americans, that
many of the societies involved do not have the cultural, social, and political infrastructure
a free economy requires. In these countries the most obvious expression of this deficit
is the large-scale lawlessness that prevails. More is required than a few new laws, deregulation,
and currency convertibility. For a people to be basica lly law abiding requires a mentality,
personality, and culture that took the West centuries to evolve.
In addition, other cultures have much less of an inclination to work hard and trade harder
to gain individual advancement at the cost of other considerations, from familial commitments
to communal bonds. To provide but one example: Austrian and Germa n workers are frequently
described as having habits that are detrimental to participation in the global markets, as
these workers are reluctant to move to new locations ("retarding essential labor mobility"),
preferring instead to stay in communities in w hich their family's graves are, where they
grew up, their friends reside, and their children can walk to school unmolested.
As a result of these profound cultural differences between the United States and other
countries, champions of American capitalism run into two difficulties. Superficially
their counselCto jump into capitalism rather than introduce changes gradually, and to
engineer the shift by resetting a few economic dials (interest rates, deficits)Cruns
into deeply rooted, slow-to-change cultural and social legacies. More profoundly, it
is becoming increasingly clear that many societies have strong social prefere nces that
they seek to protect even if it means not maximizing their economic efficiency.
American economists tend to sneer at such notions, arguing that societies have no choice
but to yield to globalism and that problems arise out of not yielding fast enough rather
than too rapidly. These economists, backed up by the IMF et al., believe that the people
of the world need to take more of the painful medicine they prescribe rather than less.
However, more and more nations are finding that the drubbing they are taking is too
devastating to endure, sense that they may not have the kind of cu ltural infrastructure
and ambitions American capitalism presumes, and conclude that they ought to intensify
their search for ways to shield themselves at least from global financial forces. Putting
brakes on hot money (which floods a country one day and g ushes out the next), even if it
means scaring away short-term funds and some long-term investments, seems far from an
All this does not mean a return to command and control regimes or "Asian capitalism."
Numerous nations are about to experiment with different combinations of varying degrees
of capitalism with various forms of social protections for their people. The outcomes
are far from evident but one thing is clear: the age of throwing one's nation on the
tender mercies of global forces is over, after it barely began.