Capitalism needs better handling

A press report earlier this month quoted the director of German publishing house Karl Dietz as saying: "Karl Marx is back in fashion.... 1,500 copies of Das Kapital were sold this year, up from the 200 it usually sells annually."

The news report raised many eyebrows. Some felt it was a joke. Others took it seriously while some tried to explain and interpret it.

Das Kapital, which means The Capital in English, is the most famous book written by German philosopher Karl Marx in 1867 and edited in part by his friend Friedrich Engels. It is an extensive treatise on political economy.

The director of the publisher house, Joern Schuetrumpt, attributed the new popularity of the communist's book to the current international financial crisis, and to the young generation's desire to find answers to the "hard questions" they have. They are dismayed over the direction of the previous generations' policies, he noted.

Economists agree, but only to a certain extent. They stress that looking for new perspective in Marx's writings does not and should not be interpreted as a return to communism, as it has entirely collapsed and proved to be a failure.

"It is human nature," prominent Kuwaiti economist Jassem Al Sa'adoun said, "to go the extreme in case of crisis." Usually during these times, people's emotions run high and they "start talking about a change in the system and this change tends to be revolutionary and lead to the furthest extreme, which in this case is communism."

However, its return seems unrealistic. "State communism in the East is gone," Eckart Woertz, Programme Manager Economics at the Dubai-based Gulf Research Centre, said.

Yet, "I think Marx is a very interesting writer to read at this time," he said, expecting a "new interpretations" for the writings of Marx as well as British economist John Keynes.

One of the ten essential steps to communism, Marx wrote in his Communist Manifesto, which was published in 1848, was "centralisation of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly".

Other steps, however, called for a direct centralisation of private property and means of communications and transportation in the hands of the state.

Such principles are categorically rejected even by countries adopting the "communist" system, including China, which said it still believes in the "invisible hands" - a term used by the father of capitalism, Adam Smith - in reference to the demand and supply as the basis for market stability and social system welfare.

The current financial crisis that is sweeping the world "is not a crisis of capitalism" Syrian economist Nabeel Sukar said. "It is a crisis of regulations, of managing capital flows among countries," the former World Bank economist added.

"It is a question of how to regulate banks, how the banks operate, how they lend, to what extent they are aggressive in their lending...It is not an issue whether capitalism is right or wrong," Sukar added.

Revamp needed

Lebanese economist Adan Al Hajj agreed. "This is mismanagement and not a failure of capitalism," he said. "There are people who lost billions of dollars, and there are people who gained this money. Who benefited from this [crisis]? Nobody talks about this," Al Hajj said.

While economists recalled the collapse of the former Soviet Union and communism as an economic system in a "few days" in the late 1980s, they stressed the need to rework the new world's financial system after emerging from the current crisis.

The state should play a major "monitoring" role in future, economists believe. The current crisis "is a problem of managing the economic system, not a problem of the system itself," prominent Jordanian economist Khalid Al Wazani said.

The government's intervention to save the markets and major financial institutions was an "acquisition and not nationalisation," Al Wazani, former head of Economic Unit at the Royal Court in Amman, said.

Meanwhile, many economists, including Al Wazani, believe a new organisation should be established under the "International Agency for Good Governance" to be responsible for the "good governance" on both governments and corporate levels. It would support the role of both the International Monetary Fund and the World Bank. None of them can run the world, but the new agency can, they believe.

But until then, the world needs to recover from the current crisis, an effort that might need several years. "There is so much debt out there [in the world]. People can't repay it," Woertz said. "So either they go bust and you have a depression, or the government pays them out by printing money. Then you have inflation."

Economists compare the current crisis with the Depression of 1930, which took many years to overcome. They believe the current situation is also similar to the period that followed the Depression. "We are [now] close to the school of thought that dominated in the post-Depression era: the Keynesian school," Al Sa'adoun said.

Keynes called for a major role for the state, but in the regulatory and monitoring sphere. The state, according to him, can stimulate growth and improve stability in the private sector - through, for example, interest rates, taxation and public projects. As for mitigating the negative effects of economic recessions, depressions and booms, Keynes had called for a governmental policy in which the authority would use fiscal and monetary measures.

But in all cases, the market fundamentals of demand and supply will continue to be the key.