Has Capitalism Failed?

The financial crisis has been a truly seismic event: it has inflicted lasting damage on the structural foundations of the global economic and financial systems, wiped out a couple of good years’ gains in real GDP for advanced countries, and has suddenly changed – for the worse – the lives of millions of people. It hit us when we were completely unprepared, lulled by the false sense of comfort and security of the Great Moderation. And, coming as a shock, it has shaken our confidence in a profound way, undermining our very view of the world. The reaction has been commensurately strong and complex, a typical response to unexpected catastrophic events: the rush to identify scapegoats on whom to pin the blame for the disaster, and the interpretation of the catastrophe as the inevitable retribution for a lapse in morality, like the Flood punishing a sinning mankind. I will come back to these two reactions in the next chapter, because of the influence they can have on the policy decisions that will shape the post-crisis world. Here, I want to briefly discuss a third aspect of the reaction, namely the sudden loss of confidence in capitalism as the best available way to organize our economies. At the time of the crisis, many politicians and commentators proclaimed, in more or less nuanced ways, the death of capitalism. Has capitalism failed, just as communism did?