The New American Capitalism - Lucrative But Fractious
Capitalism as currently practiced in the United States and many other countries is both lucrative for its most successful participants and a source of profound political fractures, Oxford Analytica argues in a new analysis.
This “new American capitalism” has, and will, inspire increasing global innovation and emulation — but will also create more worker insecurity and political tension, Oxford says.
The sub-prime mortgage crisis illustrates important ways in which US capitalism has changed in the last 20 years. Changing structures, financial products and globalisation have both mitigated old risks and created new ones.
The widely emulated US model now is characterized by:
- Hedge funds emerging as powerful drivers of speculative activity and innovation in financial markets.
- The explosion in global financial assets providing a wider base for speculation, transactions and profits.
- The creation of new, often highly complex financial instruments.
- Easing of regulatory barriers to trade and financial transactions .
Factors affecting the US capitalism model include:
1. Weakening unions. Unless and until unions find means of organising unskilled and semi-skilled service industry workers labor’s political influence will continue to fall.
2. Wealth gap. The new capitalism has produced many exceptionally wealthy individuals. This has led to an upsurge in ‘market-based’ philanthropy, but created massive gaps in societal wealth and income distribution.
3. Emphasis on education. Without proper science and math education, many US workers will be marginal to the country’s new capitalism.
4. Regulatory culture. Designing and enforcing regulatory mechanisms appropriate to the new capitalism presents a continuing challenge; the financial system’s most skilled entrepreneurs constantly seek to devise means to circumvent regulatory
5. Corporate influence. The influence of corporations in US politics will continue to grow. The insatiable need for campaign funds and the explosion in personal and corporate wealth gives business a powerful structural position to leverage influence.
6. Trade politics. The path to wealth in the new capitalism inherently involves participation in global markets — but increased migration and labour competition have also created widespread worker distress and insecurity.
Oxford says the new capitalism is also a US intellectual achievement in two senses:
Market participants have used the opportunities created by modern IT systems, within a deregulated environment, in ways that are genuinely innovative and part of capitalism’s rejuvenation. This has spurred new wealth creation.
The ideology of the market as the most appropriate mechanism for wealth generation and distribution is such that even social democratic or labor groups accept it as a common framework. Only outside the developed capitalist zone — for example, in some Islamic communities and, again, in Russia and China — are there real differences.
The full report can be purchased here.
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