Without doubt, the most outstanding development in the world economic scene before the turn of the century was the collapse of communism in the former Soviet Union and its far-flung empire, and the rapid spread of market economies in the third world.

These two developments coincided with the end of the Cold War.

The disintegration of the communist system mesmerised an astounded world.

The significance of the predominance of the market system has taken longer to sink in. It may yet turn out to be the herald of greater transformations than the past revolutions of Eastern Europe

The collapse of communism hardened the resolve of reformers and weakened the forces of the extreme left. The model of the command economy does not appeal anymore. But it is still too early to affirm that an acceptable concept of a market economy has triumphed.

There are still plenty of critics who hold that the market system has failed to bring about rapid material advance for everyone.

The problem of poverty continues to be a real challenge in the midst of abundance.

This verdict borders on the absurd. Coinciding with that turning point in history, with hundreds of millions breaking out onto the wide open spaces of political freedom, one must register, not without awe, that the market system, and the economic growth it fostered, freed many millions from poverty and created the means of self-help for millions more.

Unmatched achievement

It has been rightly claimed that no other economic system in history comes close to matching the achievement of the market system in any aspect of economic and social progress.

It is, however, just as true to say that advances have been patchy and uneven.

Successful capitalist economies made progress where the realms of politics and economics are separated, and where governments do not usurp the role of the price system altogether.

Although the degree of government intervention is a matter of politics, the nature of this intervention is largely a matter of economics.

Under a command economy, as in the feudal system, politics and economics combine to manipulate resources in the light of ideological considerations.

Private ownership is often associated with liberal capitalism, but control matters more than ownership. In other words, ownership does not guarantee control.

The invisible hand

Another feature of the market system which flourishes when economics and politics are kept apart, is that decisions about the allocation of resources are highly decentralised.

The economy revolves on spontaneous acts of enterprise and on business decisions – the invisible hand. Competition takes the place of planned or regimented activity. Because decisions are decentralised and competitive, the market is innovative and capable of taking risks.

It has become increasingly unthinkable that democratic governments will jettison the market system, as a deliberate act of policy

If the market system were to be abolished, the likely reason is the possibility of its being unable to deliver what it has been capable of delivering in a free environment.

It can lose credibility if it fails to meet expectations of rising living standards. It can be shipwrecked on the rocks of long-lasting recession or stagnation. It can be overthrown by violent means. But the market system could generate and muster sufficient resources to stand up to aggression from without.

It is, on the other hand, vulnerable to the rot that could start from within. It is susceptible to internal contradictions. It must ensure that the environment in which it thrives is sanitised.

Dilemmas of the modern world

While the market system is geared to stimulate and promote change, it must show a high sensitivity to the dilemmas of the modern world and their implications for orthodoxy.

These dilemmas seem to increase and multiply as the market system is progressively being driven by the demons of globalisation.

Large public and private enterprises must not be allowed to assume positions of dominance bordering on monopoly. Business-men must know how to distinguish between profit-making and profiteering and, what is more, they must translate that knowledge into practice.

Profit is not a dirty word. It invigorates the spirit of enterprise. On the other hand, profiteering is the scourge that saps the strength of the economy. Institutional advertising should not be permitted to assume the nature of an ego trip on the part of chief executives.

Democratic environment

Above all, a healthy market system needs a democratic environment that restrains the economically powerful, and particularly the newly-rich, from imposing their own value systems on others, and their schedules on the common people.

A democratic market system has no place for people whose objective is power rather than economic welfare.

An authentic, liberal market system values the simple virtues of prudence, dili-

gence, trustworthiness and the “ambition to better one’s condition” through industriousness and thrift. Reasonable, economic performance ultimately rests on these virtues.

This is a sensible way of running the

market system: a frank commitment to self-interest, and the behavioural virtues on which this rests, constitutes a clear distinction from the search for power and greed that motivates unscrupulous businessmen.

More than any other system, a democratic social market system shields the private life of the citizen from the intrusions of arbitrary economic power.

Social obligation

But this is not all. “Democratic capitalism” has a social obligation and presents a human and acceptable face only when it is reinforced by the spirit of solidarity and the ethical qualities that give it its soul.

Efficiency and profitability are not enough. Alone, they will not work as an ethos. A dedication to something larger is a necessity of life.

The affluence and liberty provided by “capitalism” do not exhaust social need. There remains a need for recognising the dignity, and the fostering of the brotherhood of man.

An enlightened market system is not all about accumulation. It is also about distribution.

A virtuous environment and a just society, as well as morally meaningful criteria in the distribution of power, property and privilege, are important considerations if democratic capitalism is to vibrate with a genuinely liberal and radical impulse, and become an enduring institution commanding broad-based loyalties.

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