One Way or Many Ways? Varieties of Capitalism

The second day of the conference started with quite an intriguing plenary. Most interesting was the diversity in the speakers of the session. Each of the speakers left the participants with a single yet controversial question. The issue to be discussed was “One Way or Many? Varieties of Capitalism”

For Lawrence MacDonald, chair of the session, the answer was pretty clear: “Many” he chose. In his introduction he stated that the US was championing the “Anglo-Saxon Model” while continental Europe wasn’t. He decided to pose a challenge for the speakers, to untangle this mystery capitalism.

Daniel Daianu, Professor of Economics in the National School of Political and Administrative Studies in Romania, addressed the issue in a form of an eloquent plea. He addressed questions which included:

  • Is GDP growth still a suitable measure?
  • How do financial markets function?
  • Can the west meet east in a resting position?

Daianu was calling for a return to common sense. “Some of us have been fooling ourselves; have used inadequate paradigms and not cared about public goods. Economic freedom is not a synonymous with deregulated markets”, he said.

He quoted Nicholas Stern, author of the Stern Report : “The inability of mankind to deal with environmental degradation is the biggest market failure”.

The inability of the government to address the market failure has made the economy have more losers than winners. But when it comes to the environment, it’s the survival that is the link we need to rethink the way we judge performance and how to influence the way markets judge performance.  “All in all we need a major change in our lifestyle”, said Daianu.

He went on to warn the audience about the “big state syndrome” and advised that we need a ‘market-friendly economy’. A regulation of the system can bring peace to the economy. We should believe in technology but also see the limits. Taxes are pretty high but also people want a big amount of good so we need to reach a consensus.

Devesh Kapur, Director of the Center for the Advanced Study of India at the University of Pennsylvania, presented two different varieties of capitalism practiced in India and China.

He contrasted China’s authoritative capitalism with India’s democratic capitalism, and described at breakneck speed, without any supportive materials and with the audience in the palm of his hands, the points of similarity and departure between these two economic giants.  He said that if these two nations were cars, it is said that “China has the engine of a Rolls Royce and the breaks of a bullock cart, and India has the engine of a bullock cart and the breaks of a Rolls Royce.” It claimed quite a laugh in the room, which was a nice change to the mood.

Kapur finished his talk with a challenge to the room to consider whether capitalism and democracy are mutually reinforcing or antagonistic. “What if authoritarian capitalism proves itself to work more profitably and efficiently than conventional capitalism?

James Robinson, Professor of Government at Harvard University, brought to the room a more personal discussion. He stated that economic institutions are the outcome of collective choices and thus reflect the distribution of political power in society.

They will therefore tend to depend on political institutions since these influence how preferences are aggregated. They may influence prosperity (via incentives) but they also influence distribution, which leads to conflict over institutions.

See more stories from the GDN 2010 Conference, watch participants’ videos interviews, download conference presentations and papers

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One Response to One Way or Many Ways? Varieties of Capitalism

  1. Pingback: Communiqué: 11th Annual Global Development Conference Delivers Key Messages on Economic and Regional Integration « GDN 2010 Annual Conference

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