http://www.washingtonpost.com/wp-dyn/content/article/2009/06/15/AR2009061502733.html?referrer=emailarticle
Fareed Zakaria has written a very extensive article on capitalism for Newsweek this week that he has condensed for the Washington Post (copy attached). I recommend it. His perspective is quite direct and historically informing. Basically, he's saying that this "crisis" is not the end of life on the planet as we know it. He quotes many, including Krugman who thought the 1997 East Asian crisis would be as bad as the Great Depression unless "they" put in "currency controls". One Asian country put in partial currency controls and all rebounded within two years. His reference to Robert Shiller (one of the few who predicted the current crash and the dot com bust as well) argues that we in fact will need more derivatives to make markets more stable. So, Zakaria's perspective is that, in a few years, we might need more capitalism! He says capitalism is being rebalanced, regulated and restored: "with all its flaws, capitalism remains the most productive economic engine we have yet invented. Capitalism means growth but also instability. The system is dynamic and inherently prone to crashes that cause...damage along the way."
As I look at it, Zakaria has a point: capitalism didn't fail. Regulators and regulations that didn't keep up with the sophistication of markets failed. I still think about Greenspan's quote that our financial markets are "self regulating". Really, not on this planet.
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I am so glad that you chose this as a discussion point. I just read his Newsweek version tonight and thought that it was very interesting. I especially like the distinction that he makes between capitalism as a system (which is doing okay) and capitalists who were greedy (who led to our problems). Now how are we going to "fix" human behavior?
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ReplyDelete[How are we going to "Fix" human behavior?], let the ideals of capitalism work... let companies fail. This is part of the "Creative Destruction." Companies that get too big and are unable to adapt to the current economy should learn to fail and not have the government bail them out. Their failure will mean opportunity for smaller, more innovative companies to grow. That being said, companies will think twice about cheating the system.
ReplyDeleteSorry, just one more thing. I really feel that Americans are the most dynamic society and skilled in adapting to change. Although we don't like to admit it, we thrive on turmoil. During difficult times, we have learned to survive during these difficult times (space race, 9/11, Great Depression, the '70s).
ReplyDeleteUnfortunately, I feel that now we've become the "old guys" not willing to change, trying to maintain the status quo. We need the turmoil to fuel the people.
Communism has all decisions made by a small group. Capitalism has all decisions made by the entire population of a society. The wisdom of the crowd simply messed up this time. I would say it is more of a leadership problem. Many people in top positions failed repeatedly to take this situation seriously. The problems we face today grew roots more than a decade ago and now have bloomed into the gloom we carry on through today.
ReplyDeleteSkeptics and opponents of capitalism just use its failures as a means to criticize it, but they fail to see the simple logic described in the beginning of this comment nor the history of folly overcentralized decision making creates.
Unfortunately, the U.S. regulators and the government alike moving slowly undeniably reveals the flaws of these organizations. This could be avoided if people took the politics out of government and treated it like a business. Business holds a negative connotation in the nonprofit sense probably because of dark history from which business originates. However, the past couple of decades convey a clear improvement in both ethics and business practices, which increase benefits to both society and businesses. Nonprofits would be childish to not look upon "Good to Great" companies at least to discover benefits business offers. Otherwise, the government and regulators will simply always lag behind the rest the economy in a futile attempt at doing their job.