Capitalism’s Great Tests

And at the time of writing this post the FTSE 100 here in London is down 1.3% after about 5 hours trading.

If we look back over just the last three months we see a real roller coaster:

FTSE 100
3 month view of FTSE 100

Since the end of July the total value of investments (or should I say Joe Public’s savings) has dropped by nearly 15%.

Why? This is the question on everyone’s lips. Well, we had an emerging US debt crisis, similar concerns regarding the credit worthiness of Spain and Italy, banking worries in Europe and worries too about global growth.

All conventional explanations. But these issues have been around for months if not years. None of this is new news. The stock markets should be good, efficient mechanisms for discounting, or projecting, the future. But from Joe Public’s perspective they are not. The ‘markets’ appear to be irrational custodians of Joe’s savings.

And this leads me to the point of this posting. The world is changing. The influence of the US, who nearly single-handedly crafted the post second world war world order is in decline. There are new eyes watching what is happening.

We are witnessing far more than the prospect of a double dip recession. We are facing the second great test of capitalism.

Capitalism’s first great test within this new, emerging, multi-polar landscape occurred on 15th September 2008 with the banking sector crisis that led to the so-called Great Recession. The rather mild problem is that the jury failed to come to a verdict on whether or not capitalism passed this first great test. At that time, capitalism escaped with merely a stern written warning in the form of the comminique issued after the first G20 meeting.

But now capitalism is facing its final warning. If it delivers a depression instead of jobs we can expect radical changes and the US will not be the leading architect of the next world order.

Some say that even communism could be back[1].

[1] N. Lezard, “First As Tragedy, Then As Farce by Slavoj Žižek,”, 24-Oct-2009. [Online]. Available: [Accessed: 23-Mar-2010].

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