In the summer of 2007, the bursting of the housing bubble started one of the worst financial crises that capitalism has ever faced. The scale and aftermath of the subprime bubble was touted to be comparable to that of the Great Depression or even worse.
It did not take long for governments to implement massive bailouts and interest rate cuts, their usual remedies for arresting financial crises. But apparently, the usual remedies just weren’t enough for this “subprime superbug”. The financial system had been infected fundamentally and in 2009, the European debt crisis erupted. Till today, the global economy is still in limbo and is far from returning to the days of “irrational exuberance”. Just how this is going to play out is a question mark for everyone but what is clear is that capitalist policies have to be reviewed critically.
Capitalism and Democracy
National political ideologies in the modern era are split into two main groups; Democracy and Communism. While communism has declined ever since the cold war, the global recession has exposed fundamental faults of capitalism, a major pillar of democracy.
Capitalism and Income Disparity
As the crisis exposed banker’s pay and remunerations, the increasing income gap between the rich and poor worldwide fuelled resentment against the rich in societies globally. This was evident in a series of revolts and revolutions first started from the 2010 “Arab Awakening/Spring” in the Middle East, spreading to the Chinese pro-democracy protest and Occupy movements which originated from America and spread globally. It did not matter if the societies were communists or democracies, as the rise of social media and the anger at income disparity caused the revolts to spread quickly and efficiently.
The global financial crisis has had a deep impact on national politics. In present day, a key benchmark that citizens use to rate their politicians is the state of their domestic economy. For America, the chance of Barack Obama getting reelected in November for another term in the oval office is bleak. Obama, though charismatic and with well-intentioned policies such as reducing state dependence for welfare citizens and increased spending on education, is a victim of the global financial crisis and the fundamentally flawed pre-2008 financial system. The delay in raising the credit limit in 2011 further highlights the disunity in congress, which is a result of politicians using income disparity as a political tool.
More recently, the newly elected populist French president, Francois Hollande, is seeking to cap the wages of chief executives to a maximum of 20times to that of the lowest paid employee.
Rejection of elitism
While political leaders and public administrators were deemed to be the cream of the crop in the past and most of them came from top schools with good social background, the global financial crisis seems to have caused a paradigm shift in the selection of political leaders.
The incumbent chief executive of Hong Kong, Leung Chun Ying, was educated in Bristol polytechnic and nicknamed “Emperor of the working class”. This is a stark contrast to his predecessor, Donald Tsang who has a master’s in public administration from the Harvard Kennedy School of Government and rose to the chief executive position from the civil service.
In Singapore, the main opposition, the Workers Party also gained a foothold in parliament after the 2011 elections, with many calling for a change in what is perceived as an elitism mindset of the ruling party, the People’s Action Party. The election campaign of the opposition also banked heavily on the topic of income disparity, an issue that came into focus worldwide after the 2008 global financial crisis.
Should public administrators and leaders be selected because of their academic qualifications? Does it mean that the brightest can best solve the problems of societies? Why is income disparity growing and why is the global recession unresolved? In most developed countries, the education system filters out the brightest from an early age. Should they be groomed to tackle the problems in societies in the future? All these are rhetorical questions, but to select the cream of the crop for the toughest task does seem to be a credible strategy even though it is important to remember that many future problems may not be a resolvable even for the brightest minds of our generation.
With the emergence of social media, the current geopolitical landscape worldwide is very different from the past. Politicians can no longer control the media or suppress any revolts by force. Current policies of capitalism would likely be tweaked to reduce income disparity and the future might be a divergence of communism and democracy, similar to what china did by tweaking its communist economic policies to include certain features of capitalism, such as allowing international trade.
The financial crisis not only triggered a “spring awakening” but also, a global awakening of the need to reduce growing income disparity. National policies made today are increasingly becoming populist and domestically protective in nature but is that the way to reduce income disparity in the long run? While measures should be made to reduce inequalities in the world, it is also important that we implement corrective measures with foresight.
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