Tuesday, February 24, 2009

Capitalism and Historical Revisionism

I really like this; revisionists are already coming out of the woodwork to suggest that this crisis in capitalism (the depth of which is not yet clear), is not the fault of capitalists. Note the comment left by ‘Anonymous’ to my last entry. “What capitalist supports letting people buy things (houses in this case) that they can't actually afford?” Well … most of them! I guarantee that every person in every bank that gave a bad, or predatory, loan was a capitalist. It is not real complicated folks. The more you deregulate the bigger the mess will become.

Now all of this begs the question “what is capitalism?” This is of course a more complex question . Some people will claim that only a completely deregulated economic system in which the state only functions in extremely limited ways is true capitalism. There is no historical case for such a position. Adam Smith made a clear distinction between the ‘market’ and capitalism. The market is literally a place where people go to buy and sell goods. Capitalism is an economic system in which the government creates the best conditions for individual capitalist enterprises to be profitable, and (according to Smith) it should do so in the national interests. The idea of a completely deregulated system is not really in the Smithian agenda. It is no coincidence that the modern capitalist and banking system grew directly out of people who claimed to be capitalists. It is because they were, and are, Capitalists! These people will often pay lip service to the idea of the ‘free market’ but they seldom act on genuine deregulation because they know what a nightmare would ensue. Of, course Alan Greenspan never really followed Ayn Rand, if he had he would certainly not been the head of a Federal Reserve bank. But then Ayn Rand was not a follower of Ayn Rand, if she had been she would not have spent any time telling people about what she thought was the best kind of social economic system, such an effort smacks of altruism and is a performative contradiction. (And the argument that this effort was in her ‘self’ interest because if society reformed  in this way it would be better for her too, is nonsense because as any (even right-wing) game theorist will tell you such effort is a zero sum game)

Anyone who actually advocates such a deregulated capitalist system is not really paying attention to much of anything. Greed does not make investors smarter or better, rather it blinds them to smart investment. Unchecked greed is an illness much like compulsive gambling. If you really tried to deregulate capitalism society would crumble before you could say Adam Smith. First of all Smith, even to the degree that he believed in laissez-faire, did not function in a context of potential environmental disaster, or red-dye 5 in the food. Shall we deregulate the production and trade of plutonium? Anyone who really thinks so is mentally challenged. And once you realize that you need to regulate this, you realize that at some level the entire system demands some form of control and regulation.

Unlike my ‘Anonymous’ commentator claims, this crisis was not caused by the American government propping up the banking system. This claim would be laughable if it were not so pathetic. The crisis was caused by greedy people who were functioning in a deregulated  credit system which allowed them not only to make predatory loans but to actually sell these loans like markers in a context that did not demand the proper kinds of disclosure and transparency.  Much of this was done by Wall Street firms that spent more money paying their executives than they did monitoring their credit.  Why, because they were greedy, and their greed blinded them not only to social responsibility but to good investment practices.

Selfishness will never be a virtue. I am not a capitalist,  but I admit that a strong argument can be made that capitalism, well regulated, can function successfully in some areas of society. However, the pursuit of profit does not belong in some areas of society because it will just lead to elitism and destroy society. 

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