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Hooray for Capitalism

In the latest issue of the Atlantic, Clive Crook wonders why, even though capitalism has brought the United States to a level of prosperity unprecedented in world history, Americans still regard it with distrust. Traditionally conservatives have blamed liberals in Hollywood for consistently producing films in which businessmen are the villains, but Crook has his doubts:

In this...the culture is not really driving attitudes. It is expressing widely held (though not very closely examined) beliefs; it is itself responding to demand.

The problem, he claims, lies not with popular culture but rather with many of capitalism’s defenders. Economists, for instance, have become so concerned with "math, quantitative methods, and narrow specialization" that they have all but given up demonstrating that markets work (and, given their use of jargon, it’s questionable whether anyone would understand them if they took it up again). But the worst of all are the corporate leaders and conservative politicians who emerge as defenders of the free market:

They speak of capitalism’s virtues, then get down to the real business of subsidies, import protection, tax relief, and other favors. People see through it, and find their prejudices confirmed. The conflation of the interests of business with the interests of the nation is virtually an organizing principle of the Right. Yet in reality those interests are usually opposed--as Adam Smith again pointed out. What best serves a nation’s economic interests is competition--it’s why markets work, when they do. But competition hurts individual businesses, and most CEOs hate it. Don’t look there for intellectual enlightenment.

Discussions - 6 Comments

This reminds me of a conversation I once had with Ashbrook StafferDr. Mark Nadler, in which he said (paraphrasing):

Everyone’s a capitalist until the lose.

Losing hurts self-esteem, so we cannot have that. Losing in capitalism also means that some folks will not have equal condition to others. That doesn’t seem to pass muster either.

The problem is not that economists are caught up in the "quantitative methods" of economics; rather, that the wisdom imparted to humanity by the defenders of capitalism have largely been strewn aside, overcome by societal conditions foretold by Tocqueville:

Americans are so enamored of equality that they would rather be equal in slavery than unequal in freedom.

I consider myself a capitalist, though not a pure free market ideolouge. It is obvious that the free market, the real free market delivers greater wealth than state regulated economies.

However, it is also true that the market fails to deliver in situations where environmental costs are hidden or major "once off" capital investments are required.

The model that works most effectivley is a "mostly" free market, with occasional government intervention to curb the worst excesses of capitalism. You only need to look at the Nordic countries to see how brilliantly this works.

I also think that the need for some moderate redistribution of wealth to ensure basic health care, education, nutrition and housing for everyone is obvious to those with a modicum of sense, and should be seen as and act of enlightened self interest, rather than charity.

In the US, the government appears to have abdicated their responsibility by refusing to allow pharma companies be exposed to tough negotations to force down prices. The government standing in proxy as the peoples bargainer on one side, and the companies on the other strike as an obvious free market direction to take. Rather than the bizarre scenario of the Government taking the part of the stronger party.

The free market doesn’t seem to be working when it comes to health care because there is no free market in health care. Ultimately the consumer has little choice, as doctors have sole power to prescribe pharmaceuticals. Moreover, consumers bear very little of the cost (at least directly--they pay for it ultimately in the form of higher insurance premiums) thanks to third-party insurance.

Can you imagine the result if we were required to have a physician prescribe a type of soda, then when we went to the supermarket to buy it the bill was sent off to a different company to pay? The price would skyrocket, just as the cost of pharmaceuticals (as well as health care in general) has in the past fifty years.

Unless something is done to restore consumer choice to health care--including recognizing the right of individuals to self-medicate--the demand for socialized medicine will eventually become too great to be resisted.

People have a vague distrust of capitalism because they still remember certain things like the Great Depression, the horrible abuses of the nineteenth century capitalists, and the power of the trusts. At least, people who think and read remember those things.

The marketplace is a fine thing, as long as it has boundaries and limitations to keep it from going too far, as it has more than once in our history.

"People who think and read" about economics--i.e., economists--have pretty thoroughly debunked the notion that free-market capitalism was the cause of the Great Depression.

"People who think and read" about economics--i.e., economists--have pretty thoroughly debunked the notion that free-market capitalism was the cause of the Great Depression.

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