From crisis to a next phase of capitalism

Worth a read is not your ordinary book review. It is rather a meta-review providing an overview of the opinions contained in a variety of book reviews published in the media at large. This week’s meta-review takes a look at “Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis”, written by Anatole Kaletsky and published in July 2010.

What’s it all about?

Following the global financial crisis of 2007 to 2009, some economists predicted the end of capitalism. Adam Smith’s liberal market economy had left Wall Street in tatters and banks around the world were going bust faster than one could say ‘free enterprise’. However, in “Capitalism 4.0”, author Anatole Kaletsky argues that we are not witnessing the end of capitalism. Rather, capitalism is entering its latest and fourth stage – Capitalism 4.0.

For Kaletsky capitalism is not a static and rigid theory and history shows that the interpretation and implementation of capitalism are guided by political, cultural and social factors. He provides a wide overview of the history of capitalism, from Capitalism 1 (1815–1930) that was characterised by a distinct split between economics and politics, to Capitalism 2 (1930–1970), during which the Great Depression forced governments to intervene in crude market outcomes. Capitalism 3 (1970–2007) revealed a shift back to less government intervention and the lifting of restraints on financial markets.

So what does Capitalism 4.0 hold in store? According to Kaletsky the recent economic crisis can be blamed on two factors: policy errors on the part of the United States, and the reluctance of one man, US Treasury Secretary Henry Paulson, to intervene in the Lehman Brothers collapse. Had Paulson recognised that government intervention was warranted, the global economic world might be looking much different at present.

Thus Capitalism 4.0 will be marked by tighter government regulation in the public interest – yet not the type of regulation seen during the Depression years. Rather, understanding that markets are fallible, governments will have more guts to intervene when necessary but they will do so on a pragmatic and case-by-case basis. Free-market principles will be the guiding light, but strong oversight and regulation will be used to prevent burnout.

Will Capitalism 4.0 succeed? There is no way of knowing since Kaletsky himself admits that the economic future is as radically unpredictable as any other kind.

Who’s the author?

Anatole Kaletsky is editor-at-large of The Times of London where he also writes a column on politics, economics and international relations. He was a full-time journalist for 22 years before expanding his activities to include economic forecasting and financial consulting. Kaletsky is an active participant in financial markets through his stake in a Hong Kong-based hedge fund. Along with George Soros he was also instrumental in setting up the Institute for New Economic Thinking, a non-profit organisation promoting and financing new research programmes in economics.

What do others say?

A book on the future of capitalism is bound to elicit serious debate and there is no lack of criticism of Kaletsky’s theories.

With the exception of Paulson, Kaletsky does not criticise the behaviour and values of leading figures in the banking industry, believing rather that it is pointless to criticise people for exploiting available opportunities. Other critics hold that Kaletsky exaggerates the role of particular individuals and decisions in the history of economics.

Kaletsky is also said to be overoptimistic in his faith in bureaucratic discretion – when to intervene and how to ensure that intervention benefits the public at large. This would require a revival of ethical and altruistic values in the civil service, which is not covered in the book.

Nonetheless, despite the fact that criticism abounds, most reviewers ultimately praise the author for his lucid and beautiful writing, his argumentative style, his love of paradox, his avoidance of a lecturing tone, and his insight into a possible future for capitalism.

Financial Times: ‘There are now many – too many – books on the credit crunch. Kaletsky’s considerable achievement is to put these events in a perspective that looks back to history and forward to an extended future, and to do so in a framework which goes far beyond a chronology of events.’

The Economist: ‘Pedants will find plenty to quibble about in Mr Kaletsky’s analysis of the past, let alone his predictions. His tirade against Mr Paulson is unseemly as well as unconvincing. But his book is full of clever insights. For sheer intellectual chutzpah and creativity, it is well worth reading.’

Business Standard: ‘Kaletsky’s  lucid prose is his strength but still he wouldn’t be everyone’s cup of tea. For a casual reader, reading the whole book feels like a marathon unfairly imposed on a jogger. Having said that, invest your time in this tour de force of information and speculation and you’ll be richly rewarded.’

How do I get hold of it?

“Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis” is published by Bloomsbury Publishing. It is available at Exclusive Books at a price of approximately R162.00.