One of the biggest mistakes made by the industrialized world since the collapse of the Soviet Union in 1991 is that, because communism self-destructed, it follows that capitalism was the victor. Setting aside the checkered history of capitalism prior to 1991, it seems that only the visually impaired could overlook capitalism's grim record over the past fifteen years.
For example, the same year that the Soviet system was torn asunder, the American stock market crashed over the bursting of the dotcom bubble, during which trillions of dollars were lost by shareholders and workers' pensions, producing a painful recession. Economic growth in the bastions of capitalism - Japan, Western Europe and the United States - has been at best anemic. Under terminal siege were the social programs of the Western world - especially health and retirement support - because the contemporary capitalist systems were proving incapable of supporting the social commitments made by employers, including governments, to workers.
In the United States corporate scandals surfaced in unprecedented numbers and scale, involving the theft or misappropriation of tens of billions of dollars, while corporate CEOs and their inner circles fraudulently enriched themselves through stock options based upon criminal manipulations of their profit margins and financial statements. According to a New York Times editorial (1/1/05), the ratio of corporate CEO compensation to that of American workers soared to 431 to 1 in 2004. In these massive acts of piracy, corporate leaders were guided by the largest accounting firms, most major banks and brokerage houses and the most prestigious law firms in the nation. Their acts were "justified" by some of the nation's most prominent academics and members of Congress, while regulatory agencies were packed by the Reagan and the two Bush administrations with agents of the very industries they were supposed to be regulating.
Meanwhile, the average annual pay and the standard of living of the vast majority of Americans has declined since 1991, while a tiny minority - less than one-tenth of one percent - have added billions to their net worth, partly through tax cuts heavily targeted for the mega-rich. The official number of Americans living below the poverty line (that is, prior to Katrina) has grown, as has the number of Americans without health insurance. The corporate scandals have now morphed into lobbying scandals which will implicate scores of Senators and Congresspersons, their staffs and officials of the Bush Administration.
If these facts were not sufficient to verify the dysfunctionality of capitalism as we know it today, one need only briefly review how "victorious capitalism" has played out in American foreign policy since the Soviet collapse. The administration of Jimmy Carter (1977-1981) undertook a brave attempt to focus foreign policy on human rights issues, under the perseverant direction of Assistant Secretary of State Pat Derian. That focus was peremptorily abandoned by Reagan's minions, who instead sought to spend the Soviet Union to its demise and to impose new free market standards upon the world. However, until the United States became the sole superpower in 1991, that initiative was only partially successful. It remained for the two Bush presidencies, and a not insubstantial boost from the centrist Clinton presidency during which the Republicans gained control of Congress, to carry the objective to its fullest extent.
By controlling the World Bank, the International Monetary Fund and the regional international funds, the United States had sold the rest of the world, but most importantly, many developing nations, two debatable propositions. The first was that every time a developing nation fails to meet its loan obligations to public and private lenders, it must as promptly as possible repay the lenders the full amount with interest, in order to retain its "credibility" with international capital markers. That principle was aggressively enforced, despite the fact that in most cases it meant imposing enormous hardship and grinding poverty on the majority of the citizens of the borrowing governments. It was also imposed despite the destabilizing effect such policies had upon nascent democracies and allies. While a few ideologues within both Bush Administrations and some Wall Street big wigs guiding the Clinton economic policies may well have believed philosophically in such drastic measures, the principal motivation was to ensure that American and other Western banks were not strapped with heavy losses. In short, the State Department for most of the past two decades served as a collection agency for the big lending institutions. Rarely, if ever, has anyone suggested that part of the responsibility for making bad loans fell upon the banking officials themselves for taking reckless risks. Nobody asked who was responsible for due diligence in approving huge loans to countries like Bolivia, Argentina and Peru.
The second, and equally devastating, policy was the aggressive pursuit of so-called free markets, which in practice meant the opening of Third World markets to American manufactured goods and services, while stonewalling the reciprocal removal of huge subsidies and even tariffs for American agricultural products. A few years ago George W. Bush and the US Congress approved a sum of $21 billion in agricultural subsidies for cotton, sugar, soy beans, and wheat and other crops, most of which were in direct competition with small farmers in developing countries. The consequences were tragic: over the past decade American subsidized farm products (and the even more heavily subsidized European agriculture) have wiped out hundreds of thousands of small farmers in Africa, the Caribbean and Latin America, greatly contributing to the massive poverty of the nations of those regions. Both the United States and the European Union have stonewalled real reform while making the usual pleasant sounds that they have learned from civil society. They will stonewall for as long as they can get away with it for that is the mantra of capitalism - hang on to your own profits at the expense of every one else.
For a variety of complicated reasons, however, the seemingly limitless power of the United States has begun to diminish over the past few years (and the gross incompetence and cruelty of the Bush response to the victims of Hurricanes Katrina and Rita have hastened this decline.) The world has watched the US lose much of its moral authority by opting out of vitally important treaty obligations (including the Geneva Conventions and the nuclear reduction agreement with Russia), by repudiating its signature on the treaty establishing the International Criminal Court and strong-arming dozens of small nations to accept bilateral agreements which would void the ICC's jurisdiction over American soldiers and civilians, by espousing the notion of preventive war, and by invading a nation (Iraq) which posed no concrete threat to the US and then failing horribly to impose a peaceful occupation.
The rebellion began in Argentina when a newly-elected president with Peronista influences refused to strip his nation and his people of their limited material wealth in order to pay back the loans provided (imprudently) to previous regimes by world and American lending institutions. The rest of Latin America watched in awe and observed that the sky had not fallen on either Argentina or its left-leaning president, Nestor Kirchner, when four years ago he defaulted on over $100 billion in foreign debt. Quickly the lenders comprehended his resolve and restructured the debt. Last month Kirchner made a $9.8 billion payment to the IMF, which seems have settled Argentinean accounts with the global institution. It has no plans to involve itself further with the American-dominated IMF.
Then the demagogic elected president of Venezuela, Hugo Chavez, found his voice and it was both anti-capitalist and anti-imperialist. He became a public ward of Fidel Castro to the open consternation of Bush and Cheney. Secret American efforts, including financing, to topple Chavez through elections failed by sizable margins. After all, to a majority of Venezuelans, Chavez' major "crime" is that he is using the nation's oil profits to raise the living standards of the nation's poorer classes which the wealthier classes believe to be at their own expense.
Next came the resounding presidential victory of an acknowledged socialist and labor leader, Brazil's Luis Iñacio Lula da Silva, who has decided to repay only a small portion of the hundreds of billions of foreign loans to Brazil. He has made it clear that Brazil will not repay these vast loans on the backs of its poor, as had been the earlier practice of Third World debtors. Meanwhile, Brazil's GNP has grown consistently since Lula's inauguration and there appears to be a seed of unity developing among Brazil, Argentina, Uruguay and Paraguay. (Can Chile be far behind?)
Next, after considerable global pressure, the G-8 members have agreed to forgive the debts of the world's forty poorest nation, not particularly welcomed by the Secretary of State Rice or the Oval Office.
The most leftward political change took place in Bolivia in mid-December, when Evo Morales, a socialist and native Indian, decisively won the presidency of that incredibly poor nation. He was the first Indian president (the Bolivian majority is Indian) and the first person to win the presidency by an absolute majority. His principal objectives have been to reclaim control of the nation's sizable natural gas resources in order to negotiate a larger share of the income for his people and to reverse the US-imposed program to halt the growth of the coca leaf, on which most Bolivians are dependent as a mild stimulant. Washington seeks to wipe out coca production because it is the primary base for the drug cocaine, offering no equivalent alternative to coca growing.
As the United States holds it nose over the leftward swing in Latin America, its involvement on that continent is becoming a victim of inertia. The vacuum created by this posture is quickly being filled by China and Russia, as well as the European Union, Taiwan, South Korea and Japan. Pro-capitalist as each of these Statist economies claim to be, they are not about to lose major economic opportunities, now that the United States' global power has begun to diminish. It should be self-evident to even a college economics major that most of the industrialized nations have reached their present economic development either through a mixture of socialist and capitalist policies or through Statism, in which the government played the major role in economic decision-making and financial subsidization. The developing nations have been increasingly aware of those lessons and will increasingly choose the welfare of their people over any externally-imposed ideology, capitalist or otherwise.
Since its inception, the American world federalist movement has been dominated by those who have strong reservations about socialist or populist economic philosophies. The majority have long preferred a limited form of world federation which would eliminate war but which would involve itself minimally in global economic affairs. That has no resonance today any where else. The vast majority of the human race desperately require the active investment of the industrialized world, either on the way towards federation or as part of a federalist package. Failure to accept the active developmental participation of government, nationally or globally, would doom the billions who endure poverty every day. It would also make the participation of the developing nations far less likely in any proposed world federal government.