July 1, 2007

On Economic Systems

Ever since the invention of both capitalism and communism, the two ideologies have been in serious conflict. Although in this modern day and age it would appear that capitalism has won out decisively with the fall of the Soviet Union and the opening of China, and that free markets would rule the day. Key exceptions arose, however. While most countries continued on their path of freedom in the marketplace, Latin American nations like Venezuela managed to maintain socialism. Others, like Norway, have continued without opening their markets any more extensively than since the end of World War II. How can countries all across the world still manage to defy free markets, and how can countries that have indeed opened up their markets also fail to see sustained consistent economic growth?

The short answer is oil.

The long answer is much more sophisticated, and the truth of the matter is that a country's internal economy no longer matters. Almost all of your industries could be non-profit or unprofitable, or inefficient, or otherwise nonexistent. Because of the nature of globalisation, all of that doesn't matter. Your political regime and economic system just has to meet three requirements:

1. You can buy goods from other countries easily.
2. You can sell goods to other countries easily.
3. You have a resource (any resource) that is rare, expensive, or otherwise necessary for the world economy.

Oil is a clear example resource, and Venezuela a clear example country. Crude oil is rare, expensive, and necessary for the world economy. The only things that Hugo Chavez has to do are to allow the oil to go out of the country and buy stuff from abroad. This has fueled his country's economic growth, allowed him to suppress freedom, and otherwise implement his ideal nation.

Keep in mind that a global economy means that the free market has already "won" in a sense. It's just that globalisation has created a vast free market on the biggest level possible (i.e. that of
trade between nations). Individual nations can thus act as essentially vendors of a single "product" or a variety of products.

This explains why nations that would otherwise be unable to support themselves without oil are still afloat, and why simply opening up a country's markets doesn't lead to instant better lifestyles or countries.

Capitalism in effect has destroyed the concept of nationhood and reinforced it at the same time. Globalisation makes it entirely possible for the most anti-capitalistic governments to succeed incredibly as well as allow free markets inside of other countries to fail. The world can take two paths, one more likely than the other. The world's governments could slowly dissolve away into nothingness as the market makes them irrelevant. Or those governments could become reactionaries and seize more power for themselves and return the world to nationalism. Most likely, though, would be a world where some of the nations lost their governments to the market while others maintained nationalism. Either way, the world economy will soon enough bring about yet another ideological clash that will rival that of the World Wars once again.

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