Martin Wolf’s “seven ways” to fix capitalism draw the perfect line between the 99 and the 1 percent. His reform agenda would find applause at the Institute of International Finance just as it would raise some hands at the Occupy camps. Defining the “realpolitik” of economic reform in such an intelligent way is admirable, but unfortunately also dreadfully inadequate and insufficient.
Wolf touches some of the major systemic flaws, going beyond the superficial reform concessions of the direct profiteers of current crisis capitalism. He lists problems with pro-cyclicality in financial markets as well as regulation, rising inequality across the world, the incentives to manipulate and loot under current corporate governance regimes, the need for taxation in order to redistribute, to invest, to employ and provide for (global) public goods. He also seeks to protect politics from being purchased by private interests by providing more direct public financing to political actors and parties. All these ideas are spot-on. His conclusions, however, remain overly incrementalist – for good reasons, of course.
Take the example of rising inequality: Wolf lists a number of solid arguments explaining the phenomenon across the OECD-world, ranging from globalisation to the rise of unfettered finance. Politics matters, he writes, in order to correct that trend and emphasizes the immediate need to subsidise job creation or generally promote public employment. This sounds almost like the creation of a Scandinavian, ideal-type social democratic variant of capitalism. But he avoids a crucial point: Politics has lost a great deal of its influence and effectiveness! Establishing and maintaining a fair tax system that generates sufficient revenues – the precondition for state action – has become a nearly impossible task, undermining the acceptance of regionalism or globalisation as such. The rise of anti-European right wing populists, combining welfare chauvinism and nationalism on the back of immigrants is a case in point. If Wolf remained true to his analysis, he would not only demand a wealth tax and more indirect taxation at the national level, but endeavour to explain the win-win-situation of an internationalisation of some taxation in order to regain national tax sovereignty and provide for the appropriate means to generate more equality effectively. Davos would a good place to argue for such true “realpolitik”, going beyond the narrow interests of an increasingly destructive logic of “über-competition” and promoting a compelling logic designed to regain national political space by international cooperation for a better variant of capitalism.
Capitalism needs to be decent if it is to be accepted by the 99 percent. It needs more profiteers and for that it needs strong politics. Relying on capitalism’s “genius” alone to fulfil this task is an approach too close to the 1 percent and will fail. In Wolf’s world politics matters only theoretically. Most in Davos can very well live with this – for the time being.