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Capitalism – a vacuum waiting to be filled

The old forms of capitalism have proved to be useless at dealing with the problems currently afflicting the developed world, says Adrian Sykes. We need a new variant.

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Markets are falling and nobody really knows why

Without getting too worked up about the pros and cons of political systems and precise definitions of economic models, it seems to me that we need a new variant of capitalism to cope with the present crises afflicting the developed world.

A tired old clich sums it up: "trees don't reach the sky". We have got used to inexorable growth, and have come to consider it to be inevitable. Well, it isn't, and current expectations need re-tuning. China, which we loved for its cheap manufacturing and for buying our luxury goods, has screwed us. Over a billion Indians are yet to make their mark, too.

A vague, uneasy, seeping demoralisation among investors is playing havoc with stock and commodity markets today. No one really knows why they are falling, and the so-called authorities appear to have no means of coping.

Interest rates are about to go negative, a flood of printed money has emptied treasuries. Policymakers are bereft of new ideas, now that the old ones have proved to be useless. "Deflation" is the catchword, but consumers have no real concept of what it implies. We must remind ourselves that agricultural land in Norfolk changed hands at ten shillings (50 pence) an acre in 1935 and US living standards fell by more than 75% in the 1930s.

The world has been transformed by over three centuries of agricultural improvisation, scientific invention, industrialisation, increasingly free trade, and year-on-year rising standards of living. This was fine when only 10% of the global population aspired to, and benefited from, a growing level of prosperity that depended on the exploitation of labour and resources of the other 90%. This is not a socialist polemic, far from it, simply a statement of fact.

Now that China has broken this in US and European eyes comfortable arrangement, we must consider new ways to reboot the system not to replace it, simply to adapt it. The danger is that if we don't do this voluntarily it will happen anyway, but in ways that we won't like.

Too many in the "second world" want the luxuries of the "first"; Western films and TV have encouraged five billion people in the "third world" to dream of a better life too. The result is mass migration, asymmetrical warfare, famine and desecration of rain forests (I won't bore you with "global warming" which, if anything, is a symptom and not a cause).

The 180 million population of Nigeria in 2014 (up from 45 million in 1960) is calculated, on present trends, to reach 450 million in 2050 all wanting to come to Europe, which might by then be awash with pensioners chewing roots in untended fields.

In the West, for want of a better word, we have an urbanised, privileged and spoilt consumer society which becomes more indebted and work-shy by the day. As it loses touch with real values and turns away from organised religion, these people are beginning to realise there is nothing left for them to buy that they actually need. So the poor in the third world, who must sell their labour and their natural endowment to survive, will lose their markets, which are saturated and over-borrowed.

Worries about an old age which is getting longer, and with no young left to care for them, abound. A ridiculous mathematical calculation, making no allowances for change, calculates that the population of Japan, presently 128 million, will fall to only 46,000 in 100 years.

So change is coming, willy-nilly, and maybe soon. What shall we do? Well, there's the rub: we don't know nor do markets, hence their plunge. The longer politically correct and spineless politicians dither, the more draconian and unpleasant things will become. We must take evasive action, hunker down and sweat it out: but how, is the question?

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