Is Capitalism Dead?

Remember that feeling? When you were a kid and you were walking on the edge -- of a swimming pool, a garden wall -- and you lost your balance? For half a moment you’d hang in there, arms pinwheeling, but you knew you were going over.

That’s pretty much where the economy is today, say experts who understand the numbers. And say small-business owners who understand that, well -- things just suck right now.

So they reported in the new Small Business Index from Office Depot. Of the SMBs surveyed for the monthly index, more than 40 percent said their profits are down compared to this time last year. Of those, 20 percent have seen profits drop more than 10 percent and 21 percent have seen declines of more than 25 percent.

And the upshot of this new downturn will be...more downturn. Seventy-nine percent of SMBs surveyed said they won’t be hiring new workers.

Is capitalism dead? Yes, unless some tectonic changes are made, predicts NYU economics professor Nouriel Roubini. “Dr. Doom” Roubini, the guy who famously foresaw the worldwide financial crisis four years ago, wrote recently that social unrest will spread and capitalism will be seriously threatened as a system -- unless fundamental imbalances are corrected.

“Recent popular demonstrations, from the Middle East to Israel to the UK, 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,” Roubini said. “Growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.”

Roubini’s fix consists of measures to slow the accelerating upload of capital to the world’s already-wealthy. It includes steps like government investment in productive infrastructure to create jobs, tighter regulation of the financial industry, and higher taxes on the rich.

Sounds reasonable. But of course, since there’s an election coming up, the President and Congress are instead proposing to loosen business regulations and keep taxes at historic lows for the wealthiest Americans.

Something else to fear: fear itself. Is your company stuck in neutral? The problem could be fear, says Tom Rieger, author of the new book Breaking the Fear Barrier: How Fear Destroys Companies from the Inside Out and What to Do About It.

Rieger is a business-management expert at Gallup who’s worked with numerous companies that seem as if they should be doing well but aren’t. He’s noticed that, while they operate in many different industries, all of these “stuck” companies have something in common: fear.

Fear among managers who are scared of losing what they have -- power, budget, a bonus -- and who deal with their fear by putting up barriers to protect what they have. These barriers between departments make it harder for the company to reach its goals and eventually drag it down.

But Rieger says there are steps management can take to ease fear and remove the barriers. “Leaders need to create an environment where what’s best for the individual is in perfect alignment with what’s best for the organization. Your goals, your systems, your performance, your recognition all should tie back to the overall mission.”

In other words, those who have hoarded some capital should stop fondling it and refocus on the greater good -- before the whole enterprise collapses and everyone suffers. Kind of the same prescription the world economy needs right now.

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