Era Of Hubristic Capitalism

They will also increasingly give rise to oligarchs. No, unregulated markets are not geared to equilibrium. Over several business cycles, they become controlled by those corporate powers that outperform others. Side effects include the neglect of public goods, the deepening of social disparities and the worsening of ecological problems.

For reasons like this, gross domestic product (GDP), which simply counts a country’s annual monetary transactions, does not reveal a good picture of its standard of life. Distribution matters too. However, even high health expenditure as such does not indicate effective social protection. Many people may not have access to medical care. If it is very expensive, but inefficient, moreover, its costs boost GDP, even though patients would be better off if they received better care or needed less of it thanks to healthier lifestyles. In a similar way, environmental harm far too often adds to GDP. That happens when money is spent to repair – or at least alleviate – damages. 

This is why the UN Development Programme launched the Human Development Index (HDI) in 1990. It takes account of GDP, but is also based on indicators for health and education (life expectancy and literacy rates, for example). The idea was to shift attention from income data to public goods. The HDI is useful, but it has not become the commonly used indicator of economic success. In recent years, moreover, the debate on using more valid yardsticks than growth has waned again. At the time of the collapse of the investment bank Lehman Brothers in 2008, economists were discussing this matter. In the following financial crisis, the momentum was lost. 

Unfortunately, even the debate on environmental sustainability is becoming increasingly insane. Proponents of artificial intelligence (AI) are now arguing that the climate challenge is so complex that it will require the smartest possible solution, which, in their eyes, only AI programmes will deliver. As these programmes devour huge quantities of energy, Silicon Valley Titans now want to build new nuclear power plants. No, they do not have viable proposals for keeping radioactive waste safe for many centuries. 

The oligarchs are getting several things wrong. First of all, the legitimacy of policy-making does not depend on how smart a policy is, but whether it finds acceptance. That becomes more likely when it results from good-faith deliberation involving all relevant partners, because that kind of solution is plausible to many different interest groups and thus likely to serve the common interest.  Moreover, we know perfectly well what we must do to get a grip on the global environmental crisis. We must muster the political will to stop.

The oligopolists are not principally interested in climate change of course. What they really want is to entrench their power with new high-tech business models they control. Plutocrats believe they always know best and are thus entitled to impose their superior will on everyone. In doubt, they will not consult anyone representing other interest groups. They will rely on the AI programmes they have created. There is a growing pattern of plutocrats demanding a smaller state in spite of depending on government contracts, subsidies and bailouts themselves. 

We now live in the era of hubristic capitalism. Hubris is an ancient Greek concept that can be summed up as “pride that blinds”. Some of capitalism’s most important players today are so full of themselves and so obsessed with their investment ideas that they do not care about where humankind is heading. The focus on financial transactions instead of real-world results serves their interests. The plain truth is that we are witnessing the worst market failure in history: our species is destroying the planet we depend on.

- Development And Cooperation