Fred Block, Research Professor, University of California, Davis. Origins of the Current Crisis of Global Modernity Miwon Lecture, Kyung-Hee University, September 26, 2011 Fred Block, Research Professor, University of California, Davis.

Outline 1. The Crisis of the 1930’s. 2. Collective Amnesia: The Return of the Binary. 3. What is the Matter with “Capitalism”. 4. The Way Forward.

1. The Crisis of the 1930’s.

John Maynard Keynes, The New Statesman, January 28, 1939. The question is whether we are prepared to move out of the nineteenth century laissez-faire state into an era of liberal socialism, by which I mean a system where we can act as an organized community for common purposes and to promote social and economic justice, whilst respecting and protecting the individual—his freedom of choice, his faith, his mind, and its expression, his enterprise and his property. John Maynard Keynes, The New Statesman, January 28, 1939.

2. Collective Amnesia: The Return of the Binary.

Many European countries have long practiced something resembling social democracy: but they have forgotten how to preach it. Social democrats today are defensive and apologetic. Critics who claim that the European model is too expensive or economically inefficient have been allowed to pass unchallenged. And yet, the welfare state is as popular as ever apologetic. Critics who claim that the European model is too expensive or economically inefficient have been allowed to pass unchallenged. And yet, the welfare state is as popular as ever with its beneficiaries: nowhere in Europe is there a constituency for abolishing public health services, ending free or subsidized education or reducing public provision of transport and other essential services. Tony Judt, Ill Fares the Land, 2010.

3. What is Wrong with “Capitalism”?

Autonomous Economy Product markets Capital market Labor market

Embedded Markets

Democracy vs. Capitalism Voters demand unsustainable benefits and regulations. Economic policies must be insulated from politics. Governments must sometimes impose austerity whether the voters like it or not.

Democracy is critical for a Dynamic Market Economy Strong regulations, welfare measures, and public infrastructure drive economic growth. Democratic institutions discourage cronyism and corruption. Democratic citizens are able to press new needs that generate economic dynamism.

Welfare institutions are economically productive. They support demand and reduce uncertainty. They improve the quality and motivation of the labor force. A strong safety net encourages productive risk taking.

You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time. Abraham Lincoln.

The Way Forward.

Multiple Global Funds Issue bonds on global markets. Reloan funds to national and regional nonprofit intermediaries. Intermediate funds finance local governments, nonprofits, cooperatives to provide infrastructure, clean energy, and health and education services.

Multiple Global Funds Recycle “global saving glut”. Finance significant expansion of global demand. Accelerate action on climate change. Augment human and community capacities. Facilitate decentralized development.