More than 5 years into the Second Great Depression, capitalism continues to suffer from a legitimation crisis.
How do we know this? Two recent examples give evidence of the fact that capitalism’s legitimacy remains in question.
First, those who believe austerity needs to be imposed as a way of saving capitalism continue to search for an example of where such a set of policies has worked. And, once again, they are trying to point to Latvia as a success story. At least that’s what the lead-in to the New York Times story would have us believe.
When a credit-fueled economic boom turned to bust in this tiny Baltic nation in 2008, Didzis Krumins, who ran a small architectural company, fired his staff one by one and then shut down the business. He watched in dismay as Latvia’s misery deepened under a harsh austerity drive that scythed wages, jobs and state financing for schools and hospitals.
But instead of taking to the streets to protest the cuts, Mr. Krumins, whose newborn child, in the meantime, needed major surgery, bought a tractor and began hauling wood to heating plants that needed fuel. Then, as Latvia’s economy began to pull out of its nose-dive, he returned to architecture and today employs 15 people — five more than he had before. “We have a different mentality here,” he said.
But the information supplied toward the end of the article undermines that rosy view.
Economic gains have still left 30.9 percent of Latvia’s population “severely materially deprived,” according to 2011 data released in December by Eurostat, the European Union’s statistics agency, second only to Bulgaria. Unemployment has fallen from more than 20 percent in early 2010, but was still 14.2 percent in the third quarter of 2012, according to Eurostat, and closer to 17 percent if “discouraged workers” are included. . .
Since 2008, Latvia has lost more than 5 percent of its population, mostly young people, to emigration. The recent exodus peaked in 2010, when 42,263 people moved abroad, a huge number in a country of just two million now, according to Mihails Hazans, a professor at the University of Latvia. . .
Alf Vanags, director of the Baltic International Center for Economic Policy Studies here, is skeptical. “The idea of a Latvian ‘success story’ is ridiculous,” he said. “Latvia is not a model for anybody.”
As it turns out, Latvia is a better example of the shock doctrine than it is of the proposition that pain pays.
And then there’s the Wall Street Journal worried about “How Capitalism Can Repair Its Bruised Image.”
One of the alarming effects of the global financial crisis has been the widespread erosion of confidence in capitalism itself. Doubt has grown that capitalist societies offer everyone as much chance of success as risk of failure. Better government policies might help accelerate economic recovery, but only business itself can restore faith in capitalism.
The need is acute, because the general public’s sense of disenfranchisement goes well beyond the Occupy Wall Street movement or protesters on the streets of Athens and Madrid. A recent poll by the Public Religion Research Institute found that 70% of white working-class Americans, 78% of blacks and 69% of Hispanics believe that the U.S. economic system “unfairly favors the wealthy.” And according to the latest Pew Research Center Global Attitudes Project survey, support for capitalism since the 2007-08 financial crisis is down in nine of the 16 countries surveyed, and in none—not even in thriving China or Brazil—has support risen.
But the best they can come up with is a few suggestions about how “companies should invest in workers and business relationships” in order to restore faith in capitalism.
The fact is, capitalism’s legitimacy continues to be questioned in the United States and around the world. And, to be honest, that’s not because of its longstanding critics but because of the pain and suffering capitalism itself has wrought.