In a field dominated by men, she is a woman who has stood out for her far-sighted views. She predicted that unregulated markets and massive financial institutions would have serious global consequences in her 2002 bestseller, The Silent Takeover. Three years later, in 2005, she predicted the 2008 financial crisis in IOU: The Debt Threat. Meet Noreena Hertz, one of the most influential economists on the international stage. Hertz is the Duisenberg Professor of Globalization, Sustainability and Finance based at Duisenberg School of Finance, RSM, Erasmus University and University of Cambridge. In this interview with CD, she talks about the death of capitalism as it was and the birth of a new form of capitalism, she calls ‘co-op capitalism’.
What is Gucci capitalism?
Gucci capitalism is the brand of capitalism which really began with Ronald Reagan and Margaret Thatcher about thirty years ago. It believed that the market really could be left to make all decisions on its own and the government should stay away. It also believed that wealth would just trickle down. It was a form of the capitalism that put much more emphasis on what we owned, on whether we had a Gucci handbag for example, than on things like the quality of our environment, the quality of the air we breathe, the kind of healthcare we have, what makes us content and happy.
You have said in the past that Gucci capitalism is dead…
It’s dying. It’s probably going through a moment of change. The financial crisis put in motion a set of events that got people, especially here in Western countries, questioning the status quo. People saw that the current situation had delivered unfair outcomes. They saw the bankers had been going home with multi-million pound/dollar/euro bonuses, yet poverty in the United Kingdom, for example, was in a terrible situation, with one in eight children living in extreme poverty. It brought in questions about ‘what happens if companies – in this case banks – are pretty much allowed to do what they want to do?’
So what has changed?
When I first wrote the article on Gucci capitalism, I thought that it would die quicker. It’s taken time. However, during the last three years, we have seen various measures at the government level to reign in the behaviour of banks. Some countries are putting restrictions on bankers’ pay and bonuses. The Danish government has put in an obesity tax on fast food companies, which is essentially saying that businesses have to take responsibility for the negative impact of the things they do. We have also been seeing this increasing grassroots uprising, most exemplified by the Occupy movement – Occupy Wall Street, Occupy London movement, etc.
What is the next phase of capitalism is going to be called?
I would call it co-op capitalism. Most past capitalism valued the individual over the community; competition over co-operation. The idea of co-opt capitalism is that the community does matter. That co-operation is a wining economic strategy and that the focus on economic gain must be balanced with a focus on social justice and environmental justice. Co-opt capitalism is about recognising that in a global world, we are inextricably side by side. It is about recognising that capitalism was putting almost religious faith in a market that never would able to be deliver. It is about bringing the balance back.
Some of the ideas are at odds with the tenets of Gucci capitalism. The idea that collaboration may be a better organising principle than competition is a new economic idea, but as we learn more about what makes successful companies and economies succeed, we have been learning that collaboration is an incredible organising tool. Pretty much all the successes in technology over the past decade – from Wikipedia to group purchasing via the Internet to open source – are all collaborative models.
Link to the article here.