Making The Switch From Gucci Capitalism To Cooperative Capitalism

Noreena Hertz MetroplusMy good friend, Cambridge University economics professor and celebrity Noreena Hertz, has given an interesting interview to German news service Spiegel Online in which she says capitalism is about to change:

Hertz: I am convinced that we are at a turning point in capitalism. The financial crisis could only come about because people were too focused on growth without asking where this growth comes from and at what cost. The crisis was a wake-up call for many people who accepted the rules of the old system. And many people — from policymakers to academics to economists to politicians, but also the man on the street — are starting to question whether the old rules were actually fair, just or right.

SPIEGEL ONLINE: You call it the switch from Gucci capitalism to cooperative capitalism.

Hertz: In Gucci capitalism, people believed that the markets were absolutely rational and reliable. Economists created models with cartoon-like assumptions about people as super-rational profit maximizers. They tried to describe a complex world without paying attention to politics, economics and history. They ignored all of that. But, now, these economists are starting to question all of this. It is interesting that the Nobel Prize was not given to a traditional economist but, rather, to Elinor Ostrom, who questions the fundamental assumptions of the classical economy.

SPIEGEL ONLINE: What form would companies take in cooperative capitalism?

Hertz: There are already companies that have a cooperative business model. Start-ups in Silicon Valley or the suppliers of open-source software are just some examples. These industries are not driven by Gucci capitalism. They work on principles that explicitly value collaboration, partnership, networking, relationships and social forces — values that were not really seen as having any economic worth. But we have seen that sometimes they can be far more successful than the old models.

SPIEGEL ONLINE: About a year ago, you wrote an essay about the change to a cooperative capitalism. But, since then, nothing has changed, and bankers are pulling in huge bonuses again.

Hertz: There are two parallel realities going on at the moment. The bankers, many of whom do not understand the concerns of ordinary people, live in one reality. The rest of the economy — the rest of us — lives in the other one. To say that nothing has changed underestimates the many new innovations we are seeing in thinking, doing and acting…

[continues at Spiegel Online]

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  • prose_stylist

    “And many people — from policymakers to academics to economists to politicians, but also the man on the street — are starting to question whether the old rules were actually fair, just or right.”

    Starting? There has been ongoing scholarly challenges between the different schools of economic thought since their very inception, certainly well before the crisis began. If you follow economic history, it's very much one school usurping another in popularity and influence, while the defeated variant comes back in a new form later. This crisis has caused a resurgence of old arguments (they are certainly not new) and constitutes nothing more than a new round in the cycle.

  • Hadrian999

    fairness doesn't work in capitalism,
    only those who are strongest deserve to exist,
    any business that needs fairness to avoid being crushed should be crushed.
    I think it's funny soo many “liberals” believe in evolution and natural selection yet never want to let it work.

    • ebwolf

      By that reasoning, shouldn't we eliminate all laws against theft, armed robbery, narcotics trafficking, and fraud?
      If natural selection is to truly be employed in matters of business and profit, then shouldn't the ends justify any and all means? After all, the the potential for profit in smuggling children as sex slaves can make it an enormously lucrative business strategy. So can getting them hooked on crystal meth.
      If I can break into your home, or hack your bank accounts, and sneak away with everything worth anything; don't you “deserve to be crushed”?
      If we're completely doing away with the concept of fairness, there's no point in doing it half-assed.

      • Hadrian999

        there are rules to be followed,
        certain things that are off the table,
        but outside of the legal rules ideas like fairness just don't work in a competition,
        it would be like expecting a boxer to go easy on a weaker opponent. in the ring, as long as he abides the agreed upon rules, he should do everything he can to destroy an opponent, outside of the competition,
        normal rules and standards should apply.
        but to be honest for this sort of thing to work and be equitable we would also have to strip corporations of any special support they get from government, no bail outs no government low interest loans, no government pressure on other nations businesses that are “unfair”

        • ebwolf

          RE “No special support, no bailouts, no low-interest loans”
          Now you're speaking my language.
          I would also agree that an adult should be able to consume any substance they choose.

          But with regards to eliminating pressure on “unfair” foreign businesses, I remain conflicted. I subscribe to the opinion that a nation should ensure that it does not allow itself to become dependent on a foreign power, be they GOs or NGOs, for basic necessities (food, clothing,etc) if it is possible to be self sufficient.

          I am not necessarily arguing against capitalism.
          But when the only thing superior about a company is its salesmanship, we end up with the “race to the bottom” mentality that favors the illusion of superiority for the real thing.

          Take your boxing analogy for example.
          While I wouldn't presume to say a stronger boxer shouldn't do everything in their power to destroy the opponent, superior boxers only become so by facing other formidable boxers in “fair” competition.
          Maybe you see the word “fairness” different than I do, but in this sense I take it to mean that both fighters are subject to the same rule set, and are wearing the same size gloves.

          I think far too many of today's businesses look so superior because they are fighting bare-knuckled against opponents who are shackled with 18-ounce training gloves.
          Perhaps we could agree that gov't subsidies and bailouts are the financial equivalent of steroids. Either they should be fair game for all competitors, or none.

          I'm glad you used boxing in your argument, because I'm a life long fan.
          But the champions of the modern economy sound a lot more like Hulk Hogan than Mohammed Ali to me.

    • GoodDoktorBad

      Yeah, OK “Crusher”. Fairness and capitalism are not very compatible, are they? Perhaps we should throw out all concepts of fairness for the superior concept of capitalism? Oh yeah, thats already happened.
      Who needs fairness when you can be a “crusher capitalist”?

      • Hadrian999

        letting uncompetitive business continue out of ideas like fairness or mercy is a waste of resources.

        • GoodDoktorBad

          That's like saying “sorry, its just business, nothing personal”. A load of crap of monumental proportions. All actions effect some people personally, period. Business and people are not separate. Cause and effect is not a debatable theory. One thing leads to another. As in: “Shit Happens”

          Just exactly who is “letting” uncompetitive business continue? If your talking about the government bailouts for the financial sector, I agree they should have let them fail, although I'm not sure how much better the situation would be at this point if they had let them fail.

          If fairness or mercy were actually employed, we wouldn't have this crisis in the first place. Despite your take on it, fairness and mercy ARE basic virtues worth pursuing, even if you don't think so….
          Maybe I just don't get what your trying to say…..

          • Hadrian999

            what I'm trying to say is if you are using the capitalist model only the strongest and most competitive
            are viable businesses, letting any but the most efficient and productive continue out of artificial concepts like fairness and mercy is a drain on the system and it won't act properly, only the pure rules of the game can apply, yes people will lose, people will be hurt, that is life, if there is no failure then success becomes meaningless. for capialism to work it has to be pure capitalism not the state supported half capitalism boys club it is today, if it isn't going to be real capitalism might as well scrap the whole thing and start something new.

  • ebwolf

    I believe Casino Capitalism or Three-Card Monte Capitalism are far more accurate terms yo describe our current economic model.

  • E.B. Wolf

    RE “No special support, no bailouts, no low-interest loans”
    Now you’re speaking my language.
    I would also agree that an adult should be able to consume any substance they choose.

    But with regards to eliminating pressure on “unfair” foreign businesses, I remain conflicted. I subscribe to the opinion that a nation should ensure that it does not allow itself to become dependent on a foreign power, be they GOs or NGOs, for basic necessities (food, clothing,etc) if it is possible to be self sufficient.

    I am not necessarily arguing against capitalism.
    But when the only thing superior about a company is its salesmanship, we end up with the “race to the bottom” mentality that favors the illusion of superiority for the real thing.

    Take your boxing analogy for example.
    While I wouldn’t presume to say a stronger boxer shouldn’t do everything in their power to destroy the opponent, superior boxers only become so by facing other formidable boxers in “fair” competition.
    Maybe you see the word “fairness” different than I do, but in this sense I take it to mean that both fighters are subject to the same rule set, and are wearing the same size gloves.

    I think far too many of today’s businesses look so superior because they are fighting bare-knuckled against opponents who are shackled with 18-ounce training gloves.
    Perhaps we could agree that gov’t subsidies and bailouts are the financial equivalent of steroids. Either they should be fair game for all competitors, or none.

    I’m glad you used boxing in your argument, because I’m a life long fan.
    But the champions of the modern economy sound a lot more like Hulk Hogan than Mohammed Ali to me.

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