Capitalism need not apologise

Published: September 17, 2011

The government cannot ‘create jobs’ by employing people in state-owned companies far beyond their capacity and then pay for them with bailouts.

To those who have watched the financial crises of the United States and Europe unfolding with glee and pronounced with unabashed joy that capitalism is about to die, or at the very least, humbled, I have some very bad news: capitalism is very much here to stay and is not about to apologise to anyone for the mess the world is in.

Most Pakistanis do not think about how the economy should be organised, but it is surprising that amongst the few that do, a large number does not believe that the nation’s economic foundations should be built upon the principles of free market capitalism. It is nothing short of appalling to see even economics and business school professors at leading Pakistani universities support policies that are nothing short of populist drivel.

Take, for instance, the nonsensical idea that the government should own and operate companies for ‘strategic reasons’. To those that say that, I have one question: is it part of your ‘strategic’ plan to also ensure that these companies do not function adequately and constantly require bailouts? Is it worth spending more than Rs250 billion every year to keep propping up these ‘strategic’ companies?

The fact remains that, for all its flaws, the free market remains the best known system for organising an economy. Yes, the government needs to act as a regulator to ensure that everyone plays by the rules and ideally, the government should provide a basic set of services (education, infrastructure, etc) to ensure that there is a level playing field, but the government should not attempt to run companies on its own. It is absolutely laughable that the government thinks it can ‘create jobs’ by employing people in state-owned companies far beyond their capacity and need and then pay for them with bailouts. In essence, this is nothing short of stealing my tax money and giving to a politically connected constituent of some minister. I am surprised more people are not outraged.

So when I hear babbling about how the government should not sell off companies it owns for ‘strategic’ reasons, I would like to say this to the Zaid Hamid-style populists: you have no idea what you are talking about. Stick to your silly political conspiracy theories and leave the business of running the economy to those who have bothered to try and understand it.

farooq.tirmizi

Farooq Tirmizi

The author is an investment analyst. He tweets as @FarooqTirmizi (twitter.com/FarooqTirmizi)

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.

  • http://www.marxists.org Comrade

    Molvi Sahab,

    Here are a few facts for you, and every other advocate of “free-market” or capitalism:

    923 million people across the world are hungry most of the time.
    In 2005, almost 1.4 billion people lived below the international poverty line, earning less than $1.25 per day.

    -According to UNICEF, 22,000 children die each day due to poverty. And they “die quietly in some of the poorest villages on earth, far removed from the scrutiny and the conscience of the world. Being meek and weak in life makes these dying multitudes even more invisible in death”. Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen.

    -Every year six million children die from malnutrition before their fifth birthday.

    More precisely, one third of deaths – some 18 million people a year – are caused by POVERTY.

    And thanks to capitalism that Americans spend $ 8 billion a year on cosmetics — $2 billion more than the estimated annual total needed to provide basic education for everyone in the world.

    I honestly suggest you to read what Lenin clarified about Imperialism, the higher stage of capitalism and know about the miseries capitalism has brought before writing such pieces. Otherwise you will be stereotyped as another example of the ancient old love story of religion and oppression. Recommend

  • Meekal Ahmed

    I think this is an excellent statement, Mr Tirmazi and I especially like your last paragraph. The government needs to get the hell out of their “strategic” investments which, as you point out, are bleeding the economy dry with no end in sight.

    If you add these loss-making entities to capture the wider (and more appropriate) definition of the internal deficit, we are probably running a public sector deficit of about 9% of GDP. Recommend

  • Bilal

    Yar humaray politicians khud illiterate hain, what can they do for Pakistan. Next time vote for a party that is educated, like Imran Khan.Recommend

  • http://pakologist.blogspot.com Pakologist

    I believe that you have contradicted your argument yourself by saying that the government needs to act as a regulator. In this case it is no longer “free market” capitalism, it is regulated capitalism. Government intervention in the markets is imperative to avoid monopolies and to create a level-playing field. Even so-called free market capitalism is not unfettered/unregulated. It is regulated in favor of privileged classes. But we need to tilt this government intervention from pro-capital and pro-rich to pro-skill/labor and pro-poor. But unfortunately neo-liberal economics only concerns itself with growth to the prejudice of social justice and egalitarianism. Do you think that growth and social justice are mutually exclusive or is it possible to devise a system where both these goals can be simultaneously implemented?Recommend

  • umar abad

    why are you trying to impose that we ought to believe in capitalism and that there is no way out. I agree government owned industries might not be efficient and that free market is more efficient and i would say the most efficient, but is it fair???
    the world has to decide on weather the most efficient outcomes are required where the fittest survive only or that we need to give off something to feed the poor so that they can at least not die out of hunger.
    of course in the long term, governments can plan to aggravate the human potential and capital where everybody is strong enough to feed himself and have the basic requirements, though that looks highly unrealistic, considering the nature of the governments and the system through which they operate.Recommend

  • Wizard

    “It is nothing short of appalling to see even economics and business school professors at leading Pakistani universities support policies that are nothing short of populist drivel.”

    I think the author’s pointing a not-so-subtle finger at LUMS… And I for one tend to agree with his opinionRecommend

  • Mir Agha

    It’s not capitalism’s fault that the people suck at capitalism.Recommend

  • Nadeem Ahmed

    Once Obama is kicked out of the office, American and world economy will be back on track. American corporations are sitting on tons of money. Apple has more cash than enitre American government. These corporations are not investing and creating jobs because they are afraid of Obama’s policies. Its a brief set back for capitalism. The difference between capitalism and other economic systems is that capitalism accepts its weaknesses and greed whereas others do not.Recommend

  • Omair Lodhi

    The writer seems confused or has not indulged in comprehensive research.
    If talking just about Pakistan, then state run enterprises is not a capitalist
    problem but a political one. As far as strategic units are concerned no country
    operates without them, showing full well capitalism is only a thought to be enforced
    on to others. NASARecommend

  • faraz

    @Comrade

    The average life span of an individual has almost tripled over the past 2 centuries mainly due to advances made under capitalism. The populations could never have increased to 6 billion without the surplus production. Populations dont get wiped out because of a small bacteria. The largest famines of the 20 the century were orchestrated by the Communist regimes of Russia and China. Even the great Lenin had to export wheat from US after his economic policies failed Recommend

  • Tribune Reader

    Out with the liberal market anglo saxan model, each economy needs its own customised approach to the free market model, the anglo saxan model is not a one fix solution ideally suited for all economies. The writer seems to be a die hard supporter of the free market, there pitfalls to the free market and people know it.Recommend

  • Parvez

    The capatalist ‘ free market ‘ system needs an enabling environment to give benefit to the masses. If the environment is such that only the fortunate few benefit and not the masses then it’s not a good system. In Pakistan whatever system you introduce the enabling environment will always be shaped to benefit the fortunate few, as such this argument, though sound, is futile. Recommend

  • http://www.chingaree.com,www.marxist.com Imran Kamyana

    It is funny to find that some pseudo economist are still advocating the ‘free market’ economy when official ‘free marketers’ have stopped advocating it. Capitalism is dead body, rotting for the last many decades now, and need to be replaced with something humane.
    Capitalism like any ‘fresh’ system gave progress and prosperity to humanity in its progressive period. But every system has its own limitations, and mean of production are now one step further, and can’t be accomodated by the economic relations under capitalism. The very relaxtions & prosperity it gave to the west during last 300 years is now being undone by the same inherently flawed system. Write needs to do some more research to find statistics about unemplyment, poverty and decreasing purchasing power in west. Average wage of American working class is stagnant since 1970s for instance.

    And to talk of ‘free market’ in a third word country would be mere stupidity when it is unable to deliever anything in advanced capitalist countreis in period of its terminal decay. Recommend

  • http://www.chingaree.com,www.marxist.com Imran Kamyana

    When things are good, the ruling class keeps on telling the state “stay away! its free market” and when things bust, due to inherent flaws/contradictions of capitalism and free market they start blackmailing the same state to “bail them out”! Wao ! There is no free market for the rich guys, free market is for the poor and working class to be exploited, for owners of Capital it is “Socialism” where state is always there to bail them out after there is no blood lest for them to be sucked! Recommend

  • Deb

    Capitalism is not perfect,but there is no better economic model at sight.
    Important thing is checks and balances.Recommend

  • http://www.chingaree.com Imran Kamyana

    There is an alternate Socialism. A planned economy under workers’ democratic control (unlike USSR) can end poverty, unemployment, energy crisis and provide universal health care, free education and housing within one decade in a third word country like Pakistan. Resources are abundant, but unluckily in few hands due to the private ownership of means of production. Capitalism one more time I would say, is has been literally expired due to inherent contradictions it contains.Recommend

  • A.

    to the author
    pakistanis need to ‘accept it’? i woudl rather CHANGE IT than accept it.Recommend

  • http://www.northstarcompass.org/nsc9912/lies.htm Comrade

    @ Faraz

    The average life of those who own the means or productions may have increased but not of the majority of human beings: The Working Class.

    Do you even know what surplus value is?
    More precisely, it is the unpaid labor, the value which does directly to the capitalist (that who owns the means of production) instead of the worker who produces that value.
    As far as your irrational “point” about Russia (the correct term is Soviet Union) and the People’s republic of China is concerned, this historical analysis will clarify the lies – as propagated by the imperialist:

    http://www.northstarcompass.org/nsc9912/lies.htm

    Whether one agrees with the contributions of USSR and other Socialist countries or not, it is however very irrational to defend capitalism when the Wall Street itself is very certain about its fall. We need some system that abolishes class suppression, poverty, religious fascism, gender discrimination, private ownership of wealth for few people and starvation for the majorit and that “something” is called Socialism whether you like the sound of that or not.Recommend

  • faraz

    @Comrade

    I think you don’t know what surplus production is. I said surplus production; you are talking of surplus value. Surplus production is whatever is produced in excess of necessaries. It is essential to meet the needs of a growing population and increases the standard of living.

    Well proletariat is not the majority in Pakistan. In Russia, the majority were peasants which were a victim of Lenin’s Red terror and Stalin’s dekulakization. Communists forcibly acquired land and their produce and left them to starve. Only in a full blown capitalist economy does a proletariat majority emerge. And according to Marx, only then the proletariat will overthrow the Capitalists. These conditions never existed in Russia. Lenin had nothing good to offer for the majority of Russians – the peasants. Bolsheviks had support only in cities. Lenin’s revolution was not the transition predicted by Marx but a fascist dictatorship.

    Even the staunchest Marxists believe that Stalin destroyed Communism. Mass murder under Lenin, Stalin and Mao is no fiction. In Afghanistan, we all witnesses first-hand the virtues of Communism as Soviets bombed villages and towns; was that too a myth?

    I don’t believe in Communism but I support state intervention to provide education, health and basic needs of life. But state can’t run other departments; just look at Railways or Wapda. Recommend

  • http://www.northstarcompass.org/nsc9912/lies.htm Comrade

    @Faraz

    You see, we cannot understand capitalism without understanding its historical roots and how capitalist relations of production expanded over geographic regions, eventually subsuming much of the world economy.

    Capitalism did not develop just because some humane, liberal, enlightened people in Europe decided to “try out” the free market, and voila, everyone started getting very efficient, productive, Protestant and rich. No, it was not like that. Farooq Tirmizi, I’m also talking to you here, you hardcore humane bourgeois liberal capitalist, you. :D

    Anyhow, Faraz the story of how capitalist relations of production triumphed is a long and rather unsavoury tale. The rise of capitalism can be divided into several global stages in the accumulation of capital, each stage involved a new phase of colonization in areas like South America, Africa and Asia.

    The rise of capitalism involved factors such as the Black Death plague in Europe killing off huge sections of the rural peasant population, allowing people to consolidate larger land holdings and generate an agricultural surplus. It involved, moreover, the colonization of many lands, initially to generate bullion for mercantile capitalism (i.e. the Spaniards, Portugese and others wiping out entire civilizations and peoples in South America). It involved the colonization of India, China, Africa and other regions to provide cheap labour, raw materials and markets. It involved also the consolidation of state power by a rising European bourgeoisie, which enabled them to more effective at colonizing the rest of the world and suppressing those unruly, savage natives who were (ahem) too stupid to realize that genocide and dis-possession by the white man would actually help them.
    To cut a long story short, the rise of capitalism was inherently tied in to racism, colonialism and dis-possession.

    Where we stand today, in terms of this economic evolution, is therefore a complex thing to argue about. Even if you disgrace Lenin, you can’t ignore his intellectual contributions in taking Marxism a step further as a practical implementation.

    USSR is the ONLY example in the history of state on earth which reached the new heights of progress merely in 70 years. (Your land of the year is 65 years old and the situation is in front of you).

    We don’t claim that it was the perfect and the final destination but we can’t ignore the human progress that took place owing to the collective handwork of the working class.Stalin’s purges, Great terror, secret police were all exaggerations by the imperialist media (I suggest you to skim through the link I provided you: http://www.northstarcompass.org/nsc9912/lies.htm)

    Or read the book by Ludo Martens:

    http://marxism.halkcephesi.net/Ludo%20Martens/

    You may know that it was the need of the time, as an important cold war tactic of US to represent the Soviet Union as the most evil society.

    As far as your assumption about “attack” on Afghanistan is concerned, do you know what was the situation there after the Saur revolution? The Soviets were invited by the People’s Democratic Party of Afghanistan in order to help them to develop a Socialist society. CIA’s involvement changed that into the final chapter of the cold war era and ISI along with other “Muslim heroes” played a key role against “Atheism” with the help of millions of dollars.
    Kindly do some research on that.

    You don’t want to believe in communism. Don’t do that. But, please, don’t idealize capitalism either and never compromise on facts and the real side of history, the people’s history.Recommend

  • J

    And yes, I am an Anarcho-Capitalist!!!Recommend

  • http://www.chingaree.com Imran Kamyana

    @Faraz

    //Only in a full blown capitalist economy does a proletariat majority emerge. And according to Marx, only then the proletariat will overthrow the Capitalists. //

    Brother there is no such kind of prophecy anywhere, and Marxism is not a religion so please don’t interpret it in that way. For you question I would like you to study “Theory of uneven and combined development” & “Theory of Permanent Revolution” both by Leon Trotsky which would clear your concept about the Socialist Revolution in a third world country. Recommend

  • Charagh

    Writer has tried to some up a whole concept and theory in few words and obviously failed. This is the problem that we, being master of none & jack of all trades, consider ourselves an authority on all subjects, be it religious, cultural, economical or anything else. This article is written just to server the purpose of writing an article and has increased confusion.Recommend

  • Marx’s classmate

    To say that the lack of government intervention is the negation of capitalism is , how do you say, a big fail:P He seems to be referring to the nationalization model(third worldism) but even that is “capitalism”. Infact, there is no such thing as a free market, not even in the U.S, as is evidenced throughout it’s history. Some people are just too big to failwink wink i.e intervention through the state for the ones on the top of the scale(i.e the super rich). Oh and those quoting Friedman, well they used to call him a neoliberal shmuck at Chicago so i wont try to rely on that too much. Also lulz on Anarcho-Capitalist (too much ayn rand?:D)

    As for those talking about Stalin-who was, along with lenin, a right wing deviation in the progression of the movement-, one should know that just in terms of the growth indicators used by bourgeois economists to denote “development'( im sure you hear about India’s growth all the time? just look at the poverty readings at the same time), the ussr saw some of the highest points in global history during which it was transformed from an agrarian society to a largely industrious one(in russia mostly). As for the number of people who die on a daily basis because of hunger in the simultaneous presence of millionaires in those same societies, one doesnt need to read too much to know it. And the sad fact is that those who are effected the most by it(in sofar as they can associate with certain nationalities-statestructures) i.e the postcolonial societies, have members espousing the same policies the guys at the top of the hierarchy propose(western europe and the U.S); those who benefit the most from that status quo.
    The U.S alone produces enough food to feed the whole world and (or has the means of production, to use a rather of putting word for some, to do the same) yet it isnt.
    Anywho the system is going to self implode one way or the other; the question is for how along and just how many people it is going to let die and be impoverished(mostly the “thirdworld”) before it does so.
    Finally i know its Pakistan and standards are not that high, but people should read more. For immediately accessible work i suggest David Harvey(he’s on youtube too, just see his analysis of the recent crash) of Cuny.Recommend

  • Raja Islam

    Clearly government should not be running industry or other corporations. In Pakistan matters are made even worse because of a high degree of corruption and inefficiency within the government run corporations.

    Pure unregulated capitalism is not the answer either. It is a zero sum game. If someone becomes extremely wealthy then many others will remain extremely poor. The job of the government is to regulate capitalism so that monopolies are discouraged and exploitation is minimized. Additionally, the government needs to have a system in place for social services so that there is healthcare, shelter, education and food for all.Recommend

  • http://www.chingaree.com Imran Kamyana

    Evil cannot be regulated. When one talks about regulation in a society based upon private ownership & profit, the first ones to be bought off are regulators themselves. The only solution is to overthrow the obsolete system which has served its role in human history and to replace it with profit free planned economy where means of production are under the ownership of whole society collectively and democratically. Recommend