Das Kapital

Fareed Zakaria argues that Capitalism is not dead.  It's an odd argument, because he doesn't give one any idea of the alternative.  To my mind, it's one big equivocation between market innovation (a feature of capitalism for sure) and deregulation.  Who is not for market innovation?  No one really.  Who is for more deregulation of the kind that brought us the housing bubble?  That's a different question.  He writes:

In a few years we might actually find that we are hungry for more capitalism, not less. An economic crisis slows growth, and when countries need growth, they turn to markets. After the Mexican and East Asian currency crises — which were far more painful in those countries than the current downturn has been here — the pace of market-oriented reform speeded up. If, in the years ahead, the American consumer remains reluctant to spend, if federal and state governments groan under their debt loads, if government-owned companies remain expensive burdens, then private-sector activity will become the only path to creating jobs.

As I said, it's just hard to see what he's arguing against.  The argument today seems to be what kind of thing the government ought to do in a financial crisis (tax cuts? cash injection? temporary nationalization of banks?) not what broad economic theory it ought to have under ideal conditions.  But, if Zakaria is arguing for deregulation (or even privatization), then that is a completely different subject.

One thought on “Das Kapital”

  1. One of the most toxic equivocations in all economic and economically oriented discourse is the equivocation between “capitalism” and “market economy.” “Capitalism” is a legal system in which the laws favor the holders of property and wealth; “market economy” is an economic one in which prices and availability of goods and services are determined by market forces. We know as a matter of empirical fact that these are not the same things, because there have been and continue to be systems in which they are clearly separated. Thus, Nazi Germany was a non-market (“command”) capitalism, as have been (and, perhaps still are) some of the “tigers” of East Asia. By the same token, there have been non-capitalist (one kind of “socialist”) market systems: the former Yugoslavia, Sweden today. There are varying degrees of each of these.

    It is worth noting that Adam Smith in his classic The Wealth of Nations from 1776 reserved his harshest criticisms for the people we would call capitalists. Indeed, one would be extremely hard pressed to find any kind words from Smith toward such folks in any of his publications. (Smith did not use the term: “capitalism” did not appear until some 14 years after the publication of Wealth. But it is clear who Smith is talking about when he refers to “merchants and manufacturers.”

    By equivocating on the two ideas — capitalism vs. market economy — we lose the ability to intelligently manage either, and leave the opperation of the market in the hands of those with wealth and power whose only insterest is in serving themselves. This, again, is a point that Smith had already made in 1776: the natural and habitual activity of capitalists is to manipulate the market away from its free operation. It is no more possible to have a free market in the absence of regulation than it is possible to have a free society in the absence of law.

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