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I imagine every time I type the word 'capitalism' the SnowBlog readership dips like the Dow, but in my defence, the question of which brand of capitalism is best seems to be at the heart of our current economic recession/depression/hiccup. Capitalism is powerful, but it's capable of doing as much harm as good. It can use up resources and leave all but a minority poor if we let it. Or it can be modified so that it tows the whole economy towards prosperity. It's a much slower journey, as we see in Socialist-leaning countries, where they make sure to keep their capitalism on a leash. Prosperity takes a lot longer that way than letting the beast off the leash, but now, just as in the Great Depression, we're surveying the damage that's caused when the beast runs wild. It's like one of those big trolls that pull open the gates of Mordor in the Lord of the Rings movies: very handy, but you don't want them getting drunk or throwing tantrums. And it's not just me who thinks like this. Naomi Klein has a little piece in the Guardian today about ordinary people in a smattering of recession-hit nations who are starting to care about these things, mainly as a result of watching their countries slide into debt and depression. As she points out, many of us would prefer the government bail out the victims of this crash and not its instigators. Yes, it's a bit socialist, but that doesn't seem like such a bad thing once the boom is over.
Comments: 4
Some of us do enjoy your more political posts, Rob. Don't stop 'em!
I'm currently re-reading J K Galbraith's "The Economics of Innocent Fraud"; it makes some interesting points on how our perception of capitalism is damaged by the 'fraud' that the markets are a fair system because they reflect demand when, of course, they're heavily manipulated by advertising, speculation, unregulated banking, etc. The system would probably work well if it wasn't being run by people, who have a tendency to make irrational decisions or serve solely their own interests.
(It's 55 pages, before you wonder why I'm inflicting an economics book on myself twice.)
Posted by: RobC on February 6, 2009 09:57 AM
Doood! A J.K.Galbraith fan. Excellent. Yes, I like his point that if supply really followed demand then channelling up to 50% of your company's expenditure into advertising would be a total waste of money. The truth is that companies work hard to create and control demand. Or course. J.K. Galbraith also has some wonderfully damning things to say about the myth of the all-knowledgeable captain of industry.
Posted by: Rob on February 6, 2009 12:46 PM
I have a hard time disagreeing with some (not all) of the bailouts over here. GM employs too many people for me to be happy to see it go under. And I think bailing out the victims, the people who've lost their jobs or homes, would be difficult to implement. The solution our new President has come up with - putting some practical restrictions on bailees - is a good one, I think. But I am not clear on why banks that own too many foreclosed properties need bailing out. It's their fault for letting go the leash, and other than the folks foreclosed upon (who are out of the equation anyway), who are the ordinary folks who suffer? (An answer would be fine. I know I am ignorant about these things.)
I like your troll metaphor. A lot.
Posted by: KatharineC on February 6, 2009 01:10 PM
Well, Katharine, depending on what kind of economics you believe in you might be more or less worried about the supply of credit contracting. I like the idea of a state bank lending to people who need credit for non-ditzy things (first-home mortgages, college loans, etc;). Once the private banking sector regenerates it can steal that business back. I like that idea a lot more than 'give money to banks and hope they'll pass it along as new loans'. And I love the fact that Nice President Obama seems to be a bit of a Keynesian (which means he's prepared to pay people to work on big social projects, which Keynes says shortens a recession, rather than just offering tax breaks and corporate bailouts).
My favourite Detroit bail-out idea, though, was the one about putting Apple's Steve Jobs in charge (assuming he's well enough). America would lead the world in something as a result, you just wouldn't know what until you saw what he'd cooked up.
Posted by: Rob on February 6, 2009 01:27 PM