Thursday, December 4, 2008

Capitalism: The Remix?

On December 4, 2008 Sebastian Mallaby wrote in the Washington Post:
The nastier this recession gets, the more people will talk about the discrediting of markets and the failure of deregulation. So the next time the Dow dives off a cliff, splash your face with ice water and remember two things: This end-of-capitalism talk is bunk, and it distracts us from the debate we should be having. The real question is how to manage the necessary shift in the balance of our mixed economy. Outlandish though it may sound now, red-blooded capitalism must be part of the answer.

My comment is:
Capitalism must be more than just a (small) part of the economy. Capitalism’s base are the small entrepreneurs who are willing to take risks and go into business. This becomes very difficult when huge corporations are propped up by governments using taxpayers’ money. When the government becomes the owner or part owner of these huge entities, competition is stifled. This is socialism, a system that does not allow capitalism and is doomed to failure. The production of unwanted/unneeded products or service just consumes. An economy based on consumption can not survive.

All these CEO’s begging the government for bailouts are not capitalists. They have no capital invested in these businesses. They are just trying to protect their enormous salaries and bonuses. They are like government bureaucrats doing all they can to feed an enormous beast at the expense of the taxpayer.

Under a capitalist system people are allowed to succeed and to fail. If the product is needed by the consumer and is affordable the enterprise succeeds. If there is no demand for the product it fails; no matter how much money is infused. In this case it deserves to fail. Only in a socialist system are businesses artificially propped up to keep them going.

The only interference that should be allowed in a capitalist system is not to allow any one business to become so big (a monopoly of sorts) that “it can not be afforded to fail”. In a society with 100 banks, when one fails the impact is small. If there is only one bank and it fails, the impact becomes a calamity.

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