Capitalism Eats Self, Contemplates Quickest Path To Eating Self Again

(Sad that it has come to this — posting a Dilbert.  Shux, my bad.)

The trust thing:  Capitalism requires it to operate, but it cannot create it, and in fact, when allowed to run amok, will devour trust until it chokes to death on it.

Social trust is built upon cultural institutions that lie outside the realm of money.  So when a culture starts to see all life through the lens of monetary exchange, the sources of trust wither.  And away with trust goes security and community cohesion — two qualities of life that are huge determinants of human well being.

Then we learn that people in most “socialist” European countries are happier than we are.  In these places, so it appears, capitalism is balanced with a strong belief in the common good, and the important role that government can play in maintaining that balance is widely understood.  Trust is preserved, and people thrive.

Which, of course, must be why so many wing nuts can’t utter the word “socialism” without a Cheney-eque sneer of contempt, some members of the Republican National Committee going so far as to propose that the GOP draft a resolution to rename the opposition the “Democratic Socialist Party.”  You want freedom fries with that?

All wing-nuttery aside, it’s encouraging that the financial meltdown has led many to reassess our little experiment with trust-crushing, extreme free-market capitalism.  Although others, apparently not so much:  Last week Paul Krugman wrote:  “Wall Street insiders are taking the mildness of bank policy so far as a sign that they’ll soon be able to go back to playing the same games as before.”  Not that you should trust that liberal elitist Krugman…

8 Responses to “Capitalism Eats Self, Contemplates Quickest Path To Eating Self Again”

  1. jcdk

    It appears that European voters (particularly youth) are starting to move to the Right. Austria recently lowered their voting age to 16 and support for the political Right shot up. Can we be more optimistic that American youth will and are moving to the Left?

  2. Chris

    Easy, now. Bad government policy played a huge role in the meltdown. Exhbit 1a: the Federal Reserve, created through government regulation, allows the manipulation of the money supply. A “hard money” system, as advocated by Ron Paul, et al, would eliminate the fiat money system we presently have that allows so many of the under the table bailouts that are going on now to occur. The treasury is supposed to be the sole insurer of government spending, but the Fed is literally printing trillions to lend to the banking system to increase “capital.” What a sham.

    The GSE’s implicit backing by government created much of the problem associated with various MBS buyers purchasing of seemingly “safe” investments at illogical prices. If the government had not been implicitly backing GSE debt and had not set the “too big to fail” precedent with LTCM bailout, the intervention in the Mexican Peso prior to that, the appetite for risk would have been substantially less…and the boosterism of home ownership as public policy didn’t help the situation.

    Anyways, the point is that the system can operate absent much regulation or with substantial regulation, but the rules of the game, if you will, need to be transparent. This has not been the case, which has caused much of the problem.

  3. WB

    Tee hee…Dilbert.

  4. Joshua Daniel Franklin

    Oh please, Chris, “hard money” economies are hardly immune to financial problems. They just move risk (i.e., speculation) into non-monetary instruments, such as my personal favorite.

  5. Chris

    @4 I didn’t say it would end financial problems, as speculative bubbles have occurred through modern history. Its just that its severely hampering or ability to emerge from the decline with any semblance of reform, as its clear the plan – plan that may not work for a long time – is to inflate our way out of excessive debt rather than reducing it via default or paying it off.

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