why capitalism is here to stay
Today, in tough economic times, capitalism is getting a bum rap. It’s being blamed as an enabler of runaway consumerism and toxic greed and there are people pondering if the financial meltdown will be the end of capitalism as an all powerful force which is celebrated as the ultimate answer to how economies and societies should be run. To me, it seems that the current contradictions of our culture and our mistakes are being pinned to a villain in the guise of an “ism” which morphed from a savior into a convenient scapegoat.
There are certainly people out there who deem capitalism as an end in itself rather than just an efficient means to get where they want to go. To them, capitalism is like a deity that needs to be appeased. It likes tax cuts and zero regulation. It doesn’t like governments or dour critics who could slow down a rally with their pessimism. This market knows all and sees all, and if it’s allowed to run its course, all will be right with the world as it works its mysterious magics. People with this view of capitalism need to rethink why it works and realize that it’s a tool. It has to be wielded in ways that make it serve you, not put on a pedestal and revered by priests in Armani suits. That perception of an almighty capitalism took a major blow in this crisis and I hope it will be a while before we see it again.
But capitalism itself is still a very good and useful system because it emphasizes transparency, open markets and a free flow of goods and services. The financial problems we see today were a result of abuse in a single sector of the economy that spread throughout the financial system like a runaway cancer. Subprime lending degenerated from a cautious balancing act of risk management into a wild spree of giving away loans just to turn them into bonds which would be packaged as prime investments, on par with notes from the most blue chip of corporations. The real villains in all this are conflicts of interests, lack of transparent standards and runaway greed that would cause rampant lapses in logical thinking. We can’t blame a system by which we run our markets for our own mistakes and greed. We have to learn from our mistakes rather than just burning a faceless effigy of an “ism” to wash them away.
We can also say the same of excesses like runaway executive pay that doesn’t correspond with performance and indulgences like trying to get the government to step in and bail out massive corporations that made truly enormous blunders. We know that our markets would allow small companies to buy off lucrative chunks of failed corporate giants and turn them into brand new opportunities for growth and development. By putting shattered systems on life support at the request of the very same people who spent much of the last decade badmouthing regulations, slapping a socialist label on them, our lawmakers essentially prevent the market from cleansing itself as it was designed to do. Yes the process would be messy, but I don’t think it would be any worse than the current chaos we’re seeing with back and forth bailouts and indignant speeches about how the very companies in which we put our trust failed us.
It all comes down to who we choose to blame and vilify. At a time of crisis, we like to find some institution or system on which we can pin our blame. In a montage called IndigNation: Populist Uprising ’09, the host of the Daily Show, Jon Stewart showcased in just how many directions we can channel our fear, confusion and dissatisfaction. But all these blame games miss something very important. The current crisis was caused by recklessness and the idea that somehow, the act of declaring ourselves capitalistic made that recklessness more justified. Sure, we can turn around and blame capitalism but ultimately, the blame rests with how we did business and not a label for a system of running an economy. No economic system would really defend us from ourselves because as long as people overreact and overinvest without thinking things through, there will always be the potential for things to go terribly wrong.