After the laissez-faire economic model and Keynesian economic setup failed to provide a logical basis to address the Great Depression, the world saw a policy shift in economic paradigms. Neoliberal economic policies emerged, advocating for regulated capitalism as an optimal economic system and the sole solution to global economic issues. For decades, this system has worked well. However, just as capitalists were disproving Karl Marx's theory of linear collapse, new crises began to emerge in profound and complicated ways.
Pakistan and America are two prime examples of this economic failure. Pakistan has become a perpetual bailout state per se, while the latter grants bailout packages to private companies to keep its economy afloat. Despite their diplomatically paradoxical client-patron relationship and contrasting social and political structures, the 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 the immense profits that come with them. In this way, it is supposed to be self-regulatory.
Adam Smith's concept of the "invisible hand" is the cherry on top that balances the free market. The invisible hand is simply an unseen force that keeps the market free, moving it in 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.
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 1980s. This was followed by a series of bailouts in the savings and loans industry, and from there, bailouts became increasingly larger and more widespread.
In contrast, Pakistan followed the path of capitalism unquestioningly, and its capitalist collapse started a little earlier, in the 1970s. Although there was a prominent political effort to nationalise branches of the economy during Zulfikar Ali Bhutto's era, it took little to no time to reverse this trend after Bhutto. However, to say that the capitalist failure of Pakistan began even before the 1970s would not be incorrect, as Gen. Ayub Khan's "Decade of Progress" was largely spearheaded by 70% of the revenue generated by East Pakistan. Since Bangladesh became independent, Pakistan has been relying on external sources of funding (compensating for its lost revenue rather than developing indigenous revenue sources), having received $73 billion in foreign aid between 1960 and 2002 alone, and has thus become a perennial "bailout state".
These events demonstrate how, for both countries, the "invisible hand" often seemed invisible, perhaps because it was frequently absent.
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
Despite featuring 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. A CNN survey conducted earlier this year found that 42% of Americans reported a decline in their financial situation compared to the previous year.
Similarly, a Consumer Confidence Index survey conducted by Ipsos also decrees that only 18% of Pakistanis are optimistic about the country's future, while 82% 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 Dr Amartya Sen. Dr Sen argues that while famine may represent an acute deficiency of eatables, it rarely results from the mere shortage of food. To understand the reasons for widespread hunger, one must examine the failings of the moral economy that manages 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, thus, imperative to rectify the relationships among various economic actors to fundamentally address this issue, and capitalism is evidently 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. Despite their contrasting political spectra, both nations 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, Rockefeller International's Chairman Ruchir Sharma highlights in his book "What Went Wrong with Capitalism," that the current iteration of capitalism seems to favour large corporations rather than encouraging genuine competitive dynamics. This shift suggests capitalism, in its current form, may either be overly supportive of big business or, alternatively, 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 groaning under the weight of its contradictions. What was once hailed as the pinnacle of economic progress, is now revealing its 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 altogether but in reimagining it to better serve the majority, ensuring that the dream of prosperity becomes a reality for everyone.