Posts Tagged ‘Nouriel Roubini’

Nouriel Roubini asks: Is capitalism doomed?

August 23, 2011

Nouriel Roubini is a professor of economics at New York University’s Stern School of Business, and chair of Roubini Global Economics, a financial consulting firm.  He was nicknamed “Dr. Doom” for his predictions that the booming financial and real estate markets were going to crash.  But he proved to be right.  Now he is saying that the capitalist system itself is in crisis.  Here is what he wrote last week in his syndicated newspaper column.

Nouriel Roubini

Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proved wrong).  Firms are cutting jobs because there is not enough final demand.  But cutting jobs reduces labor income, increases inequality, and reduces final demand.

Recent popular demonstrations, from the Middle East to Israel to the United Kingdom, and rising popular anger in China—and soon enough in other advanced economies and emerging markets—are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness.  Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.

Unless governments act, he wrote, the world could be on the brink of another depression as bad as the Great Depression of the 1930s.

Over time, advanced economies will need to invest in human capital, skills, and social safety nets to increase productivity and enable workers to compete, be flexible, and thrive in a globalized economy.  The alternative is—like in the 1930s—unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability.

via Slate Magazine.

All this seems obvious to me.  Why is it not obvious to our political and business leaders?  It is partly because of the excessive power and influence of the wealthy elite, but I think it is also because of the excessive power and influence of financial institutions compared to goods-producing companies.

(more…)