Many people today, especially the under 30 crowd, look at the mess we are in and think "that is the result of your so called 'free markets.' Who wants THAT?" I don't blame them. They look at the theft, the corporations cozying up to politicians and getting preferable treatment, and the wasting of mountains of resources... yes, even the LOOTING of the entire USA, and they say, with justification, "Save us from 'capitalism.' "
And I agree... if what we have now is capitalism......, but it ain't. What we have is essentially what Adam Smith was arguing AGAINST, which is mercantilism, or governments lining up with big businesses to protect them, coddle them, use the power of the state to keep them running, and ultimately fight wars to keep them in power.
One wag I read calls this "Banksterism." The big money centers fund business, protect it, and are in turn protected by the state. As a result the most effective corrective to the accumulation of power - entrepreneurship - is presented with a set of structural, legal and financial impairments that prohibit competitors from doing the job they should do in a free market. They should be giant killers, keeping ossified and ustabe-successful companies constantly evolving or dying. Instead, we have creaky monstrosities like the customer service phone center at Bank of America who don't care because they don't HAVE to care, no one can touch them.
In reality, all fortune 500 companies are infected with this "I am immune from the market because I am big" thinking. As a result, there is no spirit of entrepreneurship, and not even a fear of entrepreneurship. Sometimes, they even swirl down the drain, too stupid, bloated and lazy to realize they are dying, until the lawyers arrive to cut up the dead cadaver. Remember Eastern Airlines?
This is more pronounced in Europe, of course, where the state and business have always hopped in and out of each other's beds. There, the big banks have always called the tune. Their strategy has always been to PRIVATIZE PROFITS and SOCIALIZE LOSSES. They have been seeking this and doing this for hundreds of years. As an aside, this is why, although there are rich people in Europe, society is MUCH more stratified. The rich STAY rich, and the poor STAY poor, and there is much less ability to move from one class to another.
This stratified situation, with the wealthy bankers calling the political tunes is EXACTLY what was done to Argentina in 2001. The bankers, in the person of the IMF, piled up monstrous line item losses, squeezed every dime they could out of the nation, and fobbed off bone crushing losses on a state stupid (corrupt?) enough to agree to pay them. Of course they passed these losses back down on the backs of the populace. Argentina still has not recovered and may not ever. The same song is being played today, in Portugal, Ireland, Greece, Italy, Spain, etc. The goal is TO KEEP THE PAYMENT OF INTEREST ON LOANS GOING AT ALL COSTS.
In a free society, when a small business folds, it folds. They cut up the producing assets, and the lending institution takes the loss, and someone comes up with a newer, more efficient, more profitable and spiffier product/system. Profits rise and people's standard of living goes up. Money is literally "made."
Destruction and bankruptcy are painful to individuals, including the lenders, but the overall process is good for everyone, as efficiency and productivity and wealth all come in higher on the second go-round.
With "banksterism," though, the process is aborted. Again, the goal of the banking thugs is to KEEP THE CASH FLOW ROLLING AND AVOID TAKING A LOSS. They do this initially by allowing the debtor to refinance the debt and borrow more money. When this becomes impossible to do, they encourage the state to step in and guarantee the debt, and when the state is in danger of default they encourage them to print the money to keep the cash running as long as possible. In the case of Argentina, even after they completely blew up the peso by inflating it out of existence, they insisted on the state paying back the IMF and found politicians they could buy off who would agree to it.
This model arrived full bore in the USA shepherded in by George W. Bush, whose entire summary of fitness to be president seemed to be that he could emote with people. He did what, if a Democrat had done, we would be calling "communist" and wound up getting tons of bible believing conservatives to swallow it without batting an eye.
The business model is no longer to find a product people want and need, produce it well at a competitive price, and let it sell itself. Rather, it is to get a government or legislative grant, franchise, subsidy or tax exemption. These things are worth more than Eli Whitney's cotton gin or Ford's Model T or the Comstock lode. What is better, they require no genius, no new ideas, no sweat, no dedication to labor or strategy or any of the characteristics we used to associate with business. What it requires is that you know someone who is powerful who can rig the market for you.
A great early example in the USA is John D. Rockefeller, the first owner of "big oil." He did not make his fortune by drilling for oil and meeting people's needs. Rather, he stirred up a bunch of emotional estrogen laden busybody shrews and let them do the work for him. He donated the eye popping sum (in its day) of 4 MILLION dollars to the Woman's Temperance Society to lobby against "demon rum." With prohibition, the possibility of an ethanol based internal combustion engine was dead, and petroleum was not only the way to go, it was the ONLY way to go! He was a genius, a schemer, a strategist and an amazingly foresighted man, but he was decidedly NOT a "capitalist." He managed to let the U.S. government kill his competition. After that, making a fortune was easy.
We have this exact scenario in every business sector today, but expressed most perfectly in the area of big banks, and their government henchman, the Federal Reserve. There is a three way triumvirate between the Fed, the big Wall Street Banks, and the US Treasury. In fact, it is such an incestuous triangle that it is difficult to remember who is working with which branch, they move so fluidly in and out and between these three.
There have been three big "bubbles" recently caused by the insistence that we float new loans to troubled financial sectors and institutions. The first came with the Y2K fears, when the increase of the money supply by 20% caused an artificial boom in the tech markets. When this collapsed, the money rolled into the housing market, which pretty much began tanking in 2006, but spectacularly imploded in 2008.
The final, or "next to the final" bubble, has been the credit markets themselves or the treasury bond markets. The desperation to keep that inflated has been most panicked and intense, because the collapse of that bubble drags the whole system down with it, which only leaves the final bubble...... a nuclear one.
When empires suffer economic and financial collapses, they always wage wars.
War will always pull the failed state out of the doldrums, because it does the job of "creative destruction" that the market would have done if you had let it do its work. Only it is not so "creative" in its destruction.
Me? I am looking for a place to move. Our country is run by fools.