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09/16/2013

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Gordon Longhouse

I agree with everything that is said in this and Becker's post but am dismayed at the triumphalist tone, especially in Beckers piece.
I am reminded of hubris evident in the photo of George W Bush on the aircraft carrier "Mission Accomplished" when I read this stuff. It was hubris like this about capitalism and markets that was fundamentally responsible for the crisis.
Yes capitalism survived and will survive but surviving (and in the US and Western Europe it can be put no higher than that) hardly merits the congratulatory "high 5s" of this piece. Also capitalism has little to do with the survival of big US banks.
Given the position that the authors hold as well informed economics commentators, a more critical stance towards the failings revealed by the crisis might be of more value.

kevin

Agreed. The financial crisis was one of the most amazing debacles in capitalism and all you have to do is look at the fact that Larry Summers had to withdraw from the Fed Chief running. If Too Big Too Fail doesn't make you think that our country is run by a bunch of buffoons, I don't know what will. They didn't understand the reprecussions of letting Lehman fail - come on?

Terry Bennett

"Capitalism is the economic system in which the assets used to produce goods and services are privately owned,..." Is anybody seriously arguing that we should / can / will change that??

One working definition of fascism is an economic system in which the assets used to produce goods and services are privately owned, but controlled by the government. What we are really considering here is the appropriate degree of fascism with which we should regulate our underlying capitalism.

As I have opined previously, 2008 was not a failure of capitalism; it was a failure of law. There was a massive conspiracy of fraud, and everybody was in on it, even millions of the same tax payers who are now collectively confronted with the costs. (Note that those who cheated still came out ahead, because they are now sharing the costs with those who did not.)

I continue to think generally that a more capitalist system is to be preferred over a less capitalist system, because the government is just not very good at these kinds of things and its interference creates perverse incentives from which inevitably flow unintended consequences, which are, far more often than not, negative.

Ryan K

Capitalism, as a whole, has no remaining challengers. Cuba cannot export its communism; no one wants to be North Korea, and China has generally embraced capitalist ideals.
The current conflict is between capitalism and democracy. Capitalism, at its base, relies on the power of money. A person positioned right, with ownership and either innovative new products or rents, will accumulate wealth, and with money being fungible, can purchase practically anything. With no regulations, they can also increase wealth through seizure of free externalities (pollution, etc.). Without a regulation of labor, they can also impose significant arbitrary burdens on workers - such as long shifts, no breaks, company stores, sexual favors.
These impositions are generally seen as affronts to human dignity, while the externalities harm those who don't reap the benefits of production. In the second half of the century, the democratic west has responded by significantly regulating these issues. With the greater potential to damage the commons, government regulation becomes even more important.
But in general, we are only tinkering with the machine: regulations here and there to correct market distortions or power imbalances that lead to unacceptable affronts to human dignity.
Even the increase in the welfare state, in the US, comes cloaked in market solutions and private business (i.e. Obamacare), rather than more direct intervention of single payer or the actual socialism of the British national healthcare system. There will likely be additional taxes in the future as well, especially on higher earners, to both pay for the welfare state and curb the accumulation of power and privilege among the economic .1%, so that they will direct their income streams towards investment and R&D, rather than personal accumulation in order to fund idle heirs.

Stephengbuck

Which is more dangerous: the post 2008 call for regulation or the pre-2008 government behavior of Fannie Mae and Freddie Mac to create a "homeownership society" ?

B Wilds

Capitalism may of survived but it is wounded and we again see its flaws when poorly administered. Over the last several decades we have created entitlement societies on the back of the industrial revolution, technological advantages, capital accumulated from the colonial era, and the domination of global finances. They were built on the assumption that those advantages would continue in both Europe and US, and that ever greater prosperity and entitlements would be sustained through debt financed consumption growth. In that eerie fantasy world, debt fueled consumption was to be the catalyst to bring about ever more growth. Now reality has begun to come into focus and it is becoming apparent that this is unsustainable.

The entitlements and promises that have piled up have become overwhelming. The populations of the worlds most advanced nations were led to believe the good times would never end, but suddenly their core advantages in technology, capital, and productivity have started to erode. Now they find they are lagging behind several emerging countries. Manufacturing jobs have steadily gone elsewhere, replaced by low skilled service jobs, this has removed the supports from our debt fueled prosperity showing it to be unsustainable and flawed. We are facing harsh adjustments ahead, more below,

http://brucewilds.blogspot.com/2013/11/the-crux-of-our-economic-woes.html

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