Powerful state capitalism - Chinese version of capitlism

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

Economic redistribution, tax preference regime and austerity are new socioeconomic measures that politicians and people are circulating these days. They, with ideological bias, favour one these measures and claim that they get the fittest strategy to solve today’s crises. Some says “it is not rocket science”. Other put its blame on lack of political wills. One views Wall Street as the source of the crises.

Indeed. it is not easy as it may seem. I wish it would have been a rocket science, and then human being could quickly come up with a solution. The problem falls in the realm of social science and it should deal with a big variety of individuals’ interests and behaviours. It enormously contributes in the complexity of the problem.

It is a general consensus that Liberal democracy is the default ideology around much of the world today. In part because it is facilitated by certain socioeconomic structures. From liberalism perspective, one can formulate an abstract framework and prescribe based upon a straightforward solution such as tax cut. Or one with more sympathy to democracy may prefer taxing riches the most and one from the far-left advocates economic redistribution. Despite liberalism offers a well-built socioeconomic structure which has well performed in national and regional levels in developed countries, in our day’s challenges liberalism faces difficulties particularly when its socioeconomic structure is implemented in global scale.

Let me add the liberal foreign policy dimension to the standard assumption which is made by liberalism in regional level. The mobility of money and workforce has lubricated international investments and trade. It has contributed significantly in improving standard of life globally!! This move has generated enormous profits for investors and also increased the number of world-class milliners. It has generated middle class in developing countries while new classes in developed nations emerged in the vacancy of the past middle class. It draws new division lines in labour market.

They are all the fantastic side of a liberal foreign policy.

To analyse some implications of what liberals or liberal democrats prescribe, I take a global perspective and look into the issue in the context of globalization.

Liberals with far-right tendency prescribe tax cut. Giving the above mentioned context, when investors and riches can easily invest WHERVER they wish, at any points of the world (quite literally) where tax level is as low as zero, and can reside wherever they love,

§               HOW can an old fashion tax code in national level which does not accommodate the realities of our days, be effective?

Developed nations have long restructured their economies. New social classes have emerged and political parties are overwhelmingly polarized

§               How can an old fashion tax system guarantee distribution of wealth? Or in fact which wealth? (Liberal democracy advocators’ prescribe falls short)

One of the credits, in the idea of liberalism, is Strong State. It, side by side with the rule of law and accountability, has long proven the sustainability of states. No matter the size of government, strong state is needed to guarantee tax collection, existence of social benefits and services, and the solidarity of nation.

England’s Glorious Revolution was the starting point for modern liberalism. It created a strong state and the constitutional principle that state could not legitimately tax its citizens without their consent. And citizens without paying tax, were not included in.    

Given globalization and mobility of money, lack of a strong global governance and institution, political polarity (and all facts counted above),

§               Does one expect imposing/cutting tax would help to sustain economic growth in developed world?

§               Can one hope a strong state emerge with sufficient authority to collect tax?

§               Can one see a day when states would not owe any penny to private creditors?

Liberalism has always been the finest ideology that has provided a suitable platform for human beings to live up their needs and realize their dreams. It explains why liberalism has been and will remain the default ideology. HOWEVER there is a chronic problem with liberalism as the conservative economist Joseph Schumpeter wrote in his 1942 book Capitalism, Socialism and Democracy, that capitalist society was culturally self-undermining.  

So it won’t be easy to solve financial crisis with the means of tax in the context of globalization, unless capitalism can adapt with external forces…..It would be critical moment to chose, being Whig, China-like capitalism, adapt realism and…..or….. 

Irrational world and radical forces

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

“When economic distress reaches a certain point, the individual citizen no longer uses its political power (in a democratic system) to serve in the public weal, but only to help himself. Its ideal of political liberty pales before its ideal of economic equality. Once this sentiment has eaten its way into the hearts of majority of a nation, any political system is doomed to failure”.  They are words written by Erich Koch – Weser in 1931, the former minister of justice – Germany. He believed that it would be useless to put blame on leaders the responsibility of these misfortunes. He continued that it would be pointless to point out to individuals that a revolution with its attendant disorders would not improve their situation, but would hopelessly compromise it.

The world today faces the same troubles as it was in the 1920s and 30s. Financial crisis, shifting power, social class – conflicts and competition of states occur in a similar pattern. Despite the facts that our world has come long way since then with the dark experience of World War II, dozens of regional wars, ethnic clashes, ideological wars and consequently demise of communist system and the contraction of authoritarian regimes, yet it lacks a concrete and reliable global governance system.

Our leaders claim the fruits of globalization only in words. However the facts display contradictory achievements. It is expected that technology advancement and the expansion of human’s knowledge perpetuate the world toward an international peace, cooperation and sustainable growth. But again when security comes fore, the ideal system fails and it plunges in the same pitfalls as it did in the early twentieth century. 

The world is not thoroughly ruled by reason but passion influences when time is on its side.

When a man is driven to despair he is ready to smash everything in the vague hope that a better world may arise out of the ruins (E. K. Weser)  

Policy design in contemporary democracy

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

Inevitably the idea of democracy has contributed in human beings' advancements over the course of times. With the demise of communism in the early 90s, the idea of democracy has been pivotal for shaping every political systems, ideologies and doctrines. the idea contains its merits which meet human beings' ultimate desires.
However a key challenge for democracy would be its resilience when time comes for the need of a strong, well-organized, effecient state. When accountability should give some room for subjectively policy goal setting.When time comes to accept altering preveiling institutions where there are polarized societies (politically) for the sake of the state.It is hard but it is reality

From system analysis perspective, a system should properly balance its external and internal forces if it is supposed to be alive. When rigidity (conservative views) wins resilience, and where the realism gives way to idealism (in time of trouble), no matter what system is called or is humans' favourable one, the system will be gone

It is time for realism

Ideology in Modernity and its future

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

The political scientist Sheri Berman has defined the post world war II order as something historically unusual. He observed “capitalism remained, but it was capitalism of a very different type from that which had existed before the war - one limited by the power of democratic state and often made subservient to the goals of social stability and solidarity rather than the other way around and it was social democracy”

It is general consensus that the rise of capitalism in eighteenth and nineteenth centuries caused erosion to traditional political and economic order in the western societies. The dominance of market relationships produced economic and social dynamism. The former was driven by the notion of material benefits and the latter got its boost from the idea of personal freedoms and a decrease in communal feeling. Liberalism, then, stressed the importance of the rule of law, limited government, and free commercial transactions. (Foreign Affairs volume 91, the basic question of modernity)

Up to the great depression and the world war II, liberalism was considered as a perfect ideology for basing political and economic systems upon it.

However the catastrophes following the two world wars and the great depression questioned the reliability of liberalism as a perfect ideology to guarantee social stability and economic growth.

Jan Muller, Francis Fukuyama and John Ruggie (Alexandre Kojeve, Hegel scholar) believe that ideology reaches its end in its enough perfect shape. This perfect shape includes mixed economics and democracy. Only systems which are organized around this ideology would be altered and modified in order to adapt with conditions and attitudes change.  In other words, policies and institutions go through an evolutionary process as contexts change.

True. Evidence supports what the scholars saw. Human beings put faith in policies and institutions for building better lives (if not saying creating better idea of life). However the international environment has been radically changed since the early 90s. World free trade, markets deregulation, easy money mobility, economy restructure, information revolution, the fast moving forward world, climate change and global competition are few realities which have changed the individual lifestyle, desires and the protocol of international relationships. The events caused changes in the concept of capitalism and democracy. 

Suppose we concede what Berman observed and the position scholars take in respect to ideology maturity, thus in order to deal with today’s problems,

“One should expect competence policymakers at jobs, who subscribe to realism and are able to come up with policies which promise stability and security in societies through economic equality and life quality”

Is it realistic to expect shaping strong global institutions? Can we expect Neo-Capitalism without contemporary bankers and their attitudes?

Scholars do not deny possibilities         

Where policy matters - Today’s troubles root in policy not principles

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

In political and social science journals, a general consensus is advertised that human beings have reached to best fitted and an effective ideology and need not any longer to develop new ones to model a better life. They also provide further explanations that this matured ideology, however, is dynamics and in progress while its framework remains intact.

They conclude that today’s troubles relate more to policies than principles. It holds true for energy, environment and development policies.

Despite the disagreement between scholars in science and economics in HOWs, the necessity of preservation of environment and economic growth are generally conceded by both. Yet there are no common principles to agree upon for policies development. It leads, as evidence shown up to this date, to confusion and therefore introduces ineffective policies in the realm of energy, environment and development.      

Scientists often view resource depletion and pollution as irreversible and inevitable results of growth in economic output as measured by gross domestic product (GDP). In contrast economists, based on some evidence which indicate economic growth might be necessary before a modern society, generally hold optimism about human’s ability to protect environmental quality and to keep the preservation of natural. They put their faith in ingenuity and adaptability of homo economicus and its ability to extend that ingenuity to the protection of its environment.

With a sole scientist’s perspective, environmental policies should be devised with regulating tools which could implicitly fine tune the economic growth policies. Economies should pay off externalities and clean up their mess by expending at environmental friendly programs. Also the natural resources should moderately be exploited.

Economists believe incentives in markets are the key focus. Technology policy and price instruments in policies can be designed in ways to protect the natural resources, and environments in minimum costs and at least distortion in the market decisions. They view the economic growth along with optimum paths. In this sense one may tag economists, “idealist” rather than “realist”.

Neither scientists could bring global collective actions, nor has the economist’s practice shown any improvement in the environment protection in the global scale      

The fact is, as long as a society is free from the threat of starvation and war, resources can be devoted to protecting and improving environmental quality and preserving remaining wilderness. In a volatile and vulnerable context, when nations compete each others to secure their resources and assure the availability of their supply in future, even with the means of trade-investment policy or aggression to extend beyond their states’ boundary, an economic incentive and scientific consensus and morality seems working less effective.

We should posit SECURITY and STABILITY as the most chief elements that influence the behaviour of human beings in today’s context. The existing international environmental policy has failed to live up the requirements of security and stability through a genuine collective action in the global scale.

Perhaps policies with focus on security, stability, and an effective distribution of wealth doctrine (downgrade from the global level to regional level) would be promising and push our growth toward the quality of life within an environmental friendly atmosphere.

On origin of value emergence and transition

Shahab Sabahi

Energy and Environment for Development – Policy Analysis Research Group

The psychological and moral development of humanity occurred in the first millennium of Before Common Era (BCE). It is called the Axial Age (K. Jaspers) .Over this period inspirations and anxieties were yielded from natural disasters and social pressures, among societies in four distinct regions in the world. This kicked off the evolutionary process of human minds. It shaped the world traditions whose principles are still alive among our today’s societies.

The Axle Age viewed intense creativity in human thoughts and philosophies. The seed of intellectual change was spread and human beings looked profoundly in themselves to find purposes for a steady existence. YES it, self curiosity as an individual among a society, was the beginning of the dream of progress.

In the date of globalization, modernity, financial crisis, yet unsettled territorial disputes and ethnical clashes; to get the course of life change: Do we need to create more innovative value systems that reflect the realities of our world now? Do the traditions from the old days speak to our current condition?            

The east still, in part, tries to be faithful to the doctrines “immeasurable outlook” (Buddhists) or “concern for everybody” (Mozi: Jian ai). Societies, at large, still subscribe into these doctrines, however elites interpret and practice them in different ways. Inevitably these doctrines are still cohesive agents for Asian societies.

The story may differently shape in the rest of the world. Alexandre Kojeve describes a notion which could be attributed to democracy in the WEST. He suggests that the principles of liberty and equality in society had been established by the time of the battle of Jena, the task thereafter was not to find new principles but rather to implement them through larger parts of the world. They are certainly the chief principles which have been never implemented fully even in the west.

Both traditional value systems, the EAST’s and the WEST’s, are gradually faded away from societies’ core Their substitute is greedy notion (BANK like) of VALUE that favors few with large positive time preference instead of society as a whole.  In the vacuum of a meaningful value system, there is a potential for other traditions reversion in the form of fundamentalism.      

Rotten Spirit of Individualism

Shahab Sabahi

Energy and Environment for Development - Policy Analysis Research Group

In 1865, a theory with its origin in Europe put in practice in North America. A radical, profound and calculated change took place in America. The change was to affect nearly every aspect of individuality for generations to come. It was a lesson-learned from the past, and ready to shape the future and the destiny of millions. The ideology was embraced since its birth. Both it targeted individual’s natural incentive while it could create collective incentive within the concept of progress by the means of joining the common liberal man together, for strengthening and moving forward toward collective progress. The force with such overwhelming strength would condition the minds of the people to accept and withstand the cry of torture, hunger, death, while tilting the scales of justice in favor of social injustice. This was a true force which would cause to alter the common man’s value system so as to conform to its purpose of a new ideology. It would create a new value and faith, undermined radicalism, fueled by greed, and chosen as an alternative to prevent revolution of the masses. It was a two-edged sword, one for powerful elite, and one for common man; one for the rich and one for the poor.

But now, it is a stranger to its founders and lost touch to its original principle. Bankers have taken over not only the wealth of nations also their minds’ assets.

Please, the spirit of Norseman and the great arctic breath, please, please puff fresh air again