The former chief economist of the International Monetary Fund and professor of economics at Harvard University has listed in an editorial published by Project Syndicate the great obstacles that currently threaten modern capitalism. Rogoff acknowledges that, for the time being, the only alternative to Anglo-American capitalism would be another form of capitalism. To find the solution, it is necessary to identify the problems generated over time and try to correct the malfunction of a system that, as the following keys demonstrate, does not work.
Not properly appreciating public goods
“First, even leading capitalist economies have failed to put an effective price on public goods like clean air or water. The failure of efforts to prevent global climate change is a symptom of paralysis.”
Social inequality
“Second, along with great wealth, capitalism has created extraordinary levels of inequality. The growing gap is, in part, a consequence of innovation and entrepreneurship. People don’t criticize the success of Steve Jobs, his contributions to the world are evident. But this is not always the case: great wealth allows groups and individuals to buy power and political influence, which in turn contributes to generating even more individual wealth. Only a few countries – Sweden, for example – have been able to stop this vicious circle, without causing economic growth to collapse.
Health care supply
“A third problem is the supply and distribution of medical care, a market that does not meet several of the basic requirements necessary to guarantee economic efficiency. The cost of health services in proportion to income has increased as societies have gotten richer and will possibly exceed 30% of GDP in the coming decades.
Underestimating the future of the next generations
“Fourth, today’s capitalist systems underestimate the well-being of future generations. For most generations since the Industrial Revolution this has not mattered, thanks to continued technological advance. Typically, each generation has lived significantly better than the previous one But, with the world population exceeding 7,000 million inhabitants, there are no guarantees that demonstrate that this trajectory is sustainable.
financial crises
“Financial crises are, of course, the fifth problem, perhaps the one that has caused most of the previous ones. In the world of finance, technological innovation has not been used to markedly reduce risks but rather could have magnified them “.
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