The emergence of nationalist and left leaning parties in Europe and elsewhere seems to have one common feature: a desire to seek fairness for citizens in economic matters that has seemingly left them behind in a mire globalized world where free market forces were supposed to bring more wealth distribution for the many.
Many still speak eloquently and passionately about the merits of free market and capitalism and point to the dysfunctional economies of the Soviet era and stifling state control over the means of production. However, given the rise of nationalist parties and socialist election success, there seems to be a consensus that flaws in the capitalist system need to be addressed to make it work for many more ordinary citizens.
Free market economies, at least in theory, has many aspects that appeal to those who wish to see the government role as an “invisible hand” – guiding but not participating in economic matters. Prices are supposed to respond to supply and demand conditions, enterprise and creativity is unleashed to meet these conditions and everyone is better off.
However, as the global financial crisis showed, excesses and self-interest, if not downright greed, was also part of the free enterprise baggage as in reality the bastions of free market economies have replaced one master – the state – with another – individuals or multinational corporations whose reason for existence is furthering their self-interest.
Such ownership carries no meaning for the general public, unless they are minority shareholders in publicly listed companies, and excessive greed has led to a breakdown of trust in the capitalist system.
President Trump’s slogans of “making America great again” and “America First” are part of this appeal to ensure that the ordinary working citizen feel they are now an important and valued element as opposed to being an abstract decision number that left him or her behind in the corporate search for the holy grail of global profits and out sourcing of production lines.
What is needed is to foster a sense of capital ownership and control that is seen to be more equitable in meeting societal needsDr. Mohamed Ramady
A new campaign for egalitarian capitalism is needed today as governments are finding to their cost. The disenfranchisement of the many and intense polarization of wealth in the hands of the few led to the Brexit vote in the UK and the rise of populist parties in Germany and Austria, as well as a resurgence in the fortunes of leftist parties and the appeal of socialism in many countries across the globe, especially among the young.
For free market to survive, with its undoubted capacity for wealth creation and enterprise, a new agenda has to be introduced. Going back to old style Soviet economic models will also not work, with modern day Russia and China having discarded these models and replacing them with a mixture of paternalistic capitalism, but at the same are also keeping a wary eye at the new economic disparities that are creeping up in these post-Communist or Socialist led economies.
Fighting such disparities and the corruption it raises are major populist initiatives for the leadership of these countries, as well as those in the Gulf who are now addressing the consequences of unbridled free market forces and the corruption it spawned.
The Gulf countries are often touted as models of free economic systems but in reality the hand of the state is not far away in many of the economic decision making process, whether as a producer or consumer of goods and services. How to balance this without the ugly forces of self-interest and corruption is going to be the true test of leadership for the Gulf countries.
What is needed is to foster a sense of capital ownership and control that is seen to be more equitable in meeting societal needs. At the corporate level, governments should encourage more direct share ownership and improved corporate governance so that individual shareowners can take part fully in the governance of the companies in which they have chosen to invest.
Minority and individual shareholder voting interests should be given extra weighting at Board level decisions, otherwise the program of privatizing government assets will end up in placing these assets in the hands of self interest groups, as happened with the multi billionaire so -called oligarchs of the post-Soviet Union.
We intuitively know that the free market works and many religions extol the virtue of making and keeping the hard earned fruits of one’s honest risk taking but also guide us in sharing such wealth with other less fortunate citizens. A new egalitarian form of capitalism, where people can take control over their own lives and help their families and friends do likewise will give a rebranded capitalism a longer lease of life.
The alternative is for more state control by those on the left and the right in their political and economic pursuit of happiness for the many. Unleashing the sprit of animal destructive capitalism so that something better emerges than stymied inefficient bureaucratic methods catches our imagination, but the art is to ensure that the unleashed animal forces do not consume those playing with them.
Dr. Mohamed Ramady is an energy economist and geo political expert on the GCC and former Professor at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia and co-author of ‘OPEC in a Post Shale world – where to next?’. His latest book is on ‘Saudi Aramco 2030: Post IPO challenges’.