Professor Klaus Schwab, the founder of the World Economic Forum, says there must be a change on how capitalism works. Muhammad Hamed / Reuters
Professor Klaus Schwab, the founder of the World Economic Forum, says there must be a change on how capitalism works. Muhammad Hamed / Reuters

Capitalism saw off USSR, now it needs to change or die



One of Dubai's most eminent bankers recently put it to me like this: "Capitalism has won the war, now it has to show it can manage the peace."

The war he referred to was the ideological confrontation between the capitalist system and the socialist or communist alternatives that raged for most of the 20th century.

Capitalism "won" when the Soviet Union, the biggest proponent of the communist idea, collapsed in 1991.

The peace that followed has not been an easy one. In politics, new ideologies arose to take the place of communism, such as militancy and nationalism.

In economics, the post-Soviet era has been characterised by a succession of ever deepening crises: the dotcom bust of 2001, the credit crunch of 2008 and the near-collapse of the global financial system of the following year. Now, the world is suffering a sovereign debt crisis spawned in Europe but with potentially catastrophic implications for the whole world.

Capitalism has so far not been able to solve this succession of problems. Can it get itself out of the mess it has created? That is the question that will be on the minds of the 2,600 movers and shakers who gather today in the Alpine resort of Davos for the World Economic Forum. There is no easy answer.

On this page today, Klaus Schwab says there has to be a "transformation" in the way "outdated" capitalism works if it is to solve the complex problems of the world. That might sound a bit rich coming from the man who, his anti-capitalist critics allege, has made a career and a fortune out of the elite club of "masters of the universe" he founded 42 years ago.

But the fact a man of his impeccably capitalist credentials is talking of the need for radical reform proves there is a crisis of confidence in the prevailing economic ideology.

You do not have to be living in a tent outside St Paul's Cathedral in London, or an igloo in Davos, to see that capitalism has gone wrong. Fear of economic recession, growing inequalities of wealth, and the "moral hazard" of the cycle of busts, bail-outs and bonuses, show that the great wealth-creating machine has developed a potentially fatal defect.

In particular, as Mr Schwab points out, young people have lost faith in the system that should ensure their future. When the next generation sees no hope (one of the characteristics of the Arab Spring) it can lead to large-scale societal breakdown.

So what must capitalism do to fix itself? Some economic theorists believe it must achieve seven goals: return to economic stability; repair the failing international financial system; reduce blatant inequalities; reinforce corporate governance standards; develop fair taxation systems; avoid political interference; and construct effective global regulatory frameworks.

Each one of those tasks is a serious challenge; together, they seem to form an insuperable barrier to the kind of transformation Davos envisages.

Others believe that the system, which has proved remarkably resilient and adaptable in the past, is already in the process of changing. The old free-market variety of capitalism, which worked for the western world for two centuries, is already giving way to a new system of state-directed capitalism.

This is the economic model that has made China the fastest growing economy in the world; it is also the system embraced by most Middle East countries, where governments have ownership or control of most aspects of business life.

But it is also the system that has led to corruption, graft and inefficiency in Russia, the former Soviet republics of central Asia, and in India. It is still too early to hold up Chinese-style "totalitarian capitalism" as the way forward.

In previous years, I doubt the grandees gathering in Davos would want anything to do with state capitalism. Most of them were brought up in the western school where the invisible hand of the free market ruled supreme.

Now, with western capitalism in disrepute as a result of the financial and sovereign debt crises, and with an increasing number of the event's participants coming from China and other non-western countries, the debate will be all the keener.

Capitalism saw off the Soviets, but now it has to change or die. Davos 2012 will give some indication whether it can survive.

The specs

AT4 Ultimate, as tested

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The Outsider

Stephen King, Penguin

COMPANY%20PROFILE
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BULKWHIZ PROFILE

Date started: February 2017

Founders: Amira Rashad (CEO), Yusuf Saber (CTO), Mahmoud Sayedahmed (adviser), Reda Bouraoui (adviser)

Based: Dubai, UAE

Sector: E-commerce 

Size: 50 employees

Funding: approximately $6m

Investors: Beco Capital, Enabling Future and Wain in the UAE; China's MSA Capital; 500 Startups; Faith Capital and Savour Ventures in Kuwait

Day 2, stumps

Pakistan 482

Australia 30/0 (13 ov)

Australia trail by 452 runs with 10 wickets remaining in the innings

Is it worth it? We put cheesecake frap to the test.

The verdict from the nutritionists is damning. But does a cheesecake frappuccino taste good enough to merit the indulgence?

My advice is to only go there if you have unusually sweet tooth. I like my puddings, but this was a bit much even for me. The first hit is a winner, but it's downhill, slowly, from there. Each sip is a little less satisfying than the last, and maybe it was just all that sugar, but it isn't long before the rush is replaced by a creeping remorse. And half of the thing is still left.

The caramel version is far superior to the blueberry, too. If someone put a full caramel cheesecake through a liquidiser and scooped out the contents, it would probably taste something like this. Blueberry, on the other hand, has more of an artificial taste. It's like someone has tried to invent this drink in a lab, and while early results were promising, they're still in the testing phase. It isn't terrible, but something isn't quite right either.

So if you want an experience, go for a small, and opt for the caramel. But if you want a cheesecake, it's probably more satisfying, and not quite as unhealthy, to just order the real thing.

 

 

Arrogate's winning run

1. Maiden Special Weight, Santa Anita Park, June 5, 2016

2. Allowance Optional Claiming, Santa Anita Park, June 24, 2016

3. Allowance Optional Claiming, Del Mar, August 4, 2016

4. Travers Stakes, Saratoga, August 27, 2016

5. Breeders' Cup Classic, Santa Anita Park, November 5, 2016

6. Pegasus World Cup, Gulfstream Park, January 28, 2017

7. Dubai World Cup, Meydan Racecourse, March 25, 2017

COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%3A%3C%2Fstrong%3E%20Vault%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3EJune%202023%3Cbr%3E%3Cstrong%3ECo-founders%3A%20%3C%2Fstrong%3EBilal%20Abou-Diab%20and%20Sami%20Abdul%20Hadi%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EAbu%20Dhabi%3Cbr%3E%3Cstrong%3ELicensed%20by%3A%3C%2Fstrong%3E%20Abu%20Dhabi%20Global%20Market%3Cbr%3E%3Cstrong%3EIndustry%3A%20%3C%2Fstrong%3EInvestment%20and%20wealth%20advisory%3Cbr%3E%3Cstrong%3EFunding%3A%20%3C%2Fstrong%3E%241%20million%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EOutliers%20VC%20and%20angel%20investors%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%20%3C%2Fstrong%3E14%3Cbr%3E%3C%2Fp%3E%0A
Tuesday's fixtures
Group A
Kyrgyzstan v Qatar, 5.45pm
Iran v Uzbekistan, 8pm
N Korea v UAE, 10.15pm
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Neymar's bio

Total club appearances 411

Total goals scored 241

Appearances for Barca 186

Goals scored for Barca 105