So Is Capitalism Working, Or Not?

It’s one of those days that could reinforce the skeptic’s view of the capitalist system. Four of the ten most-read articles today on the website of the Globe and Mail deal with white-collar crime in the U.S. and Canada:

1. Hundreds swept up in U.S. mortgage fraud arrests
2. RCMP charge former Nortel executives
3. Ex-Royal Group executives charged
4. Former Bear Stearns managers surrender

These reports come against the background of a slow-motion bailout of the U.S. financial sector, one bound to end up costing taxpayers billions of dollars while profits earned from creating the mess sit in the accounts of industry executives and equity stakeholders. Furthermore, no measures appear to have as yet been put into effect to alter the incentives to take wild gambles with “other people’s money,” so the socialization of loses and privatization of profits remains for now the North American brand of capitalism -- as Nandu Narayanan describes in his April commentary (Narayanan is a hedge-fund manager whose fund is up more than 130% over the year thanks to short sales on mortgage lenders etc.)

Yet, the optimists might be encouraged by the news reports of greed and skullduggery being exposed and brought before the courts. Capitalism is about seeking profits -- but within the rule of law. So enforcement actions tell us the system is functioning as it should (although Canada is still lagging the U.S. considerably when it comes to obtaining convictions).

As for the socialization of losses and privatization of gains, once the full extent of the financial-sector bailout unfolds, I believe it is unlikely Congress will abstain from placing curbs on the worse aspects of this inequitable and dysfunctional model.

Comments

[CLH:]

There is only one economic system. It corrects itself and works beautifully. Its called capitalism. Socialism is a religion and must be kept out of government.

There is nothing more evil then taking from the ambitious and giving to the lazy and worthless. Which is what socialism does.

2008 Jun 20 07:16 AM

[Things Come...:]

Capitalism only works if buyers and sellers trust each other hence the need for laws and government regulation many might call this socialism but has Laissez Faire been working these last seven years?
Your Freedom ends where my freedom begins.

2008 Jun 20 07:34 AM

[Nick Gogerty:]

define working and success metrics. are we all as happy and productive. on happiness metrics the US ranks #29 behind a few other countries.

www.nationmaster.com/g...

Just an interesting metric that changes a lot.

The US does have the highest per capita number of adults acquitted. www.nationmaster.com/g...

just food for thought.

2008 Jun 20 08:47 AM

[Nick Gogerty:]

woops that was "prosecuted."

2008 Jun 20 08:48 AM

[tinman:]

Socialism failed because it could not recognize the economic truth.
Capitalism is failing because it can not recognize the ecologic truth.

2008 Jun 20 09:37 AM

[tinman:]

Socialism failed because it could not recognize the economic truth.

Capitalism is failing because it can not recognize the ecologic truth.

Just sayin is all

2008 Jun 20 09:38 AM

[nukldrager:]

GOLD good comment. I'm opptimesstic too. Or pessomoptic, depending on the day. Capitalism is still a class system with arguably more freedom than past, or other systems. The greatest freedoms go to the capitalists, the owners or capital. The non owners of capital are servants in one form or another. The odds people with little or no money have of becoming rich with luck, brains, and hard work, are better with capitalism than with the lottery. That's as good as it has gotten so far. Then there's group survival theory... the owners of capital are surviving pretty well.

2008 Jun 20 10:05 AM

[nukldrager:]

owners OF capital... mb

2008 Jun 20 10:07 AM

[David Roskoph:]

Capitalism only works if you convince the lowest common denominator he's getting a fair shake. Now our middle class is evaporating and we are headed toward the capitalism-gone-bad models where little wealth is shared or redistributed. Pushed harder we may find the veil of civility not as sturdy as we had hoped.

2008 Jun 20 11:43 AM

[Alphameister:]

Capitalism is not a cure for the human condition, but it disciplines immoral and incompetent behavior more effectively than any other system when courts and legislatures function effectively. Nobody can indict laissez-faire capitalism because it's never been tried. By coming closer than any other country to the ideal, the US has acquired wealth and influence without parallel. Bill Gates and Sam Walton and their ilk are the true "servants" in our flawed capitalist system and they have been rewarded approriately for serving their fellow men infinitely more effectively than others have done.

2008 Jun 20 11:58 AM

[moonbat1775:]

Central fractional reserve banking loots those who do not receive the newly created money first via the process of inflation. It transfers wealth from the poor to the rich.

It also CAUSES the boom/bust cycle.

When this happens long enough, a revolution can result.

2008 Jun 20 01:19 PM

[kurt walter:]

Libertarian capitalism has never been given a full shot. Obama talks about change. Obama is LBJ welfare state thinking. That doesn't work. Real change is libertarian capitalism.

2008 Jun 20 02:54 PM

[huangjin:]

Capitalism isn't perfect because humans are not perfect, but it is better than everything else. There are always criminals, greedy people, corrupt people, etc, and in capitalism they are more likely to be punished. Almost every example of abuse cited by people is the result of businessmen using government to gain unfair advantage against competitors, sweetheart deals, or special tax breaks. There is no laissez-faire system anywhere. In fact, the current crisis was caused by the Federal Reserve. If you ask for more regulation, you will get more corruption, more crime, more losses, and less wealth. I don't think the Soviet Union ever had a banking scandal.

2008 Jun 20 03:01 PM

[Moneylender:]

Actually you all dreamers, result of being enslaved from cradle to grave by the creation of money out of NOTHING as an interest bearing DEBT. As long as this basic corrupt practice exists nothing will survive 'capitalism, socialism except socialism exists for the rich, as pointed out earlier.
Unless we get rid rid of this evil practice of interest bearing debt we can all happily or otherwise settle for enslavement, and bring forth the future to continue as your previous generations did and be willing to be cannon fodder

2008 Jun 20 04:35 PM

[nukldrager:]

Want to see capitalism working?

"Multinational Corporations Step Up the Search for the Next China"
SA June 19

“We found more ready availability of both land and labor in both Vietnam and Thailand,” Gerald Evans, president of Asia business development at Hanesbrands, told The Times.

Where as unskilled Chinese workers now earn $120 a month for a standard 40-hour workweek, factory workers in Vietnam make as little as $50 a month for a 48-hour workweek that includes a full day on Saturdays, the paper said."

2008 Jun 20 05:01 PM

[rbblum:]

Author (Larry MacDonald) failed to mention the system (US Congress) is slightly broken, having abrogated one of their primary functions of interactive oversight.

2008 Jun 20 05:32 PM

[David Roskoph:]

statePoet1775

Bingo!

2008 Jun 21 12:42 AM

[Kennedykid:]

This is the worst collection of letters have had had the misfortune to lay my sad eyes upon in some time. The US is a nation of adolescents with a beer party of an economy to match. If this economy works, it works for a few greedy, evil geniuses who know nothing of the heightened ethical responsibility that comes with inordinate wealth and intelligence. This 25 year binge of selfishness has bankrupted our nation, eroded our infrastructure, exposed our worst to the world and threatened our children's futures. What combination of narcissism and ignorance produced this self serving clap trap? How can a sane person suggest America's brand of unbriddled capitalism works? I mean really, what share of the evil doers will ever come near Justice? And what share of their ill gotten gains will ever be returned? And finally, what gang of well purchased politicians will ever pass effective market regulation?

No, the sad truth is it is already over. All of this is just the rats eating the last of the rotting corps of the American economic empire. China has already won. All that remains is for them to collect. And for the rest of us to decide if we Americans will go out like the Romans or like the Brits.

2008 Jun 21 11:53 AM

[Moneylender:]

Interest is nor necessary or inevitable.
The US is bankrupt living on a daily overdraft of US$ 2 billion from the new citadel of capitalism China.Despite North having WMD which can region on the US and other major cities of the West within 45 minutes.
So you enslaved watch it or Uncle Chinaman will cut your B---ls off

2008 Jun 21 01:27 PM

[golds:]

At it's root we are talking about tribal power. Change the name change the face given enough time it is the same thing. Power has a natural way of organizes itself. It's an interesting but worthless debate. You can point your finger at the FED, BIS the Global Corporations, OPEC or one of many power structures that you are not a member of. It was not long ago that most of us had to bow to the king and in many places in the world (Africa) the warlord is still the norm. If you find a small enough country and get to know the players you will see this to be as true today as it has ever been. Our large national debt will be settled one way or another - inflation, war or by ever increasing GPD based upon immigration and world growth. Nationalism no longer serves as the best model for our time. It creates wars where non need exist. Most people just want life, some liberty and the pursuit of some happiness. Worldwide the rest are either beaten into dispair or are struggling for survival. Live in an emerging market (3rd world) for a couple years and you will see this to be true. However, many of these emerging markets are improving and seeing portions of their poor become middle class and the middle class increasing their quality of life. We humans are not doomed to a hellish existence, however, evolution takes time. Over the next 20 years we will see technologies come into the market place that will improve the lives of everyone on the planet.

Best Regards,

Optimistic Pessimist

2008 Jun 23 09:55 AM