Free enterprise capitalism can work if ethics are in control.
No it can’t.
Set aside the meaninglessness of “if ethics are in control.” Which ethics, and in whose control, are crucial issues this statement completely avoids, not to mention, “in control by what means?”
“Ethics in control” by means of a coercive state whose first principle is to defend corporate capitalism is a long way of saying “fascism.”
“Ethics in control” of each person’s sudden and unwavering devotion to the free market suggests some sort of free-market rapture, in which the unemployed by virtue of insufficient productive capacity to utilize the labor power of all citizens, or by virtue of some physical disability, starve to death in uncomplaining silence rather than rock the free-market boat.
But even if through mass lobotomies or otherwise, everyone bought into the free-market myth, it still wouldn’t work.
Two things would happen.
1. As some businesses were more successful at making profits than others, and began concentrating capital, they would be able to use their capital advantage to drive competitors out of business, and take out a monopoly position. This has been true of the railroad trusts of the 19th century through Walmart and Citibank today. These monopolies have formed in the face of regulation; imagine the field day these corporations would have if they were unfettered by “regulation,” such as it has been since Reagan became president. Once the few surviving corporations staked out their monopoly positions, they would charge what it pleased them for providing such goods and services as it pleased them to offer. But that’s not even the worst of it …
2. Capitalism is an inherently unstable system, which inevitably lurches from crisis to crisis. Yes, Marx said that, but let’s hear from two of the most outspoken and “respected” devotees of free-market capitalism.
First, alan greenspan, an unabashed acolyte of Ayn Rand:
REP. HENRY WAXMAN: The question I have for you is, you had an ideology, you had a belief that free, competitive—and this is your statement—“I do have an ideology. My judgment is that free, competitive markets are by far the unrivaled way to organize economies. We’ve tried regulation. None meaningfully worked.” That was your quote.
You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price.
Do you feel that your ideology pushed you to make decisions that you wish you had not made?
ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to—to exist, you need an ideology. The question is whether it is accurate or not.
And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.
REP. HENRY WAXMAN: You found a flaw in the reality…
ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?
ALAN GREENSPAN: That is—precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
Now, Richard A. Posner, whose new book, A Failure of Capitalism, was reviewed by the NY Times. from that review:
“This recession,” President Obama said recently, “was not caused by a normal downturn in the business cycle. It was caused by a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street.” Richard A. Posner is having none of it. A perfect storm, yes: but a storm of responsibility and reasonable decision-making. The Crash of ’08 happened because businesspeople and consumers did what markets and society expect them to do. Don’t blame capitalists or, for the most part, government. Blame capitalism.
It comes as something of a surprise that Posner, a doyen of the market-oriented law-and-economics movement, should deliver a roundhouse punch to the proposition that
markets are self-correcting.
[…]A typical recession is a market correction, usually of inflation or other economic imbalances; a depression is a market failure. And it is a failure (here is grenade No. 2) that the market is powerless to prevent. “An interrelated system of financial intermediaries” — a banking system, broadly defined — “is inherently unstable,” Posner writes. Think of it as “a kind of epileptic, subject to unpredictable, strange seizures.”
Populists and libertarians will hate this book, though I wouldn’t want to predict which group will hate it more. A perfect storm of irresponsibility? Hardly. The crisis came about precisely because intelligent businesses and consumers followed market signals. “The mistakes were systemic — the product of the nature of the banking business in an environment shaped by low interest rates and deregulation rather than the antics of crooks and fools.”
When Posner and Greenspan admit that “free-market capitalism” is fantasy with a fatal flaw, I hope the rest of Aynheads will give up on this nonsense.