This article, “Capitalists On The Way Up; Socialists on Way Down. During Crises, Balance Always Tilts Toward Gov’t.,” was posted on Carpe Diem:
Many are finding it hard to make merry in the aftermath of this year’s financial crisis. Collateral damage from the crisis is extensive—unemployment is rising in the US, exporters are hurting in emerging markets, global stock markets are depressed, and each day seemingly brings new cries for government help from struggling industries.
Some see these effects as proof of capitalism’s failure. After all, this year saw the crumbling of a financial nucleus under its own weight, necessitating the US government to rescue the few straggling survivors. Capitalism, it’s argued, encourages greed and self-interests above the public good (Madoff is a “shining” example), and the solution is government and regulation.
But will larger government and more regulation help? History shows regulation does little to curb excesses. This is because excesses exist not because of the capitalist system, but because they are perpetuated by the participants. No amount of tinkering can regulate innate human characteristics.
There’s an old saying: “Everyone’s a capitalist on the way up and a socialist on the way down.” People want it all—to reap the benefits of free markets, but be protected against any downside. Capitalism won’t abide. And that’s a good thing. It’s a system of inherent checks and balances, which can be swift and brutal during the pruning process. In rough times, we seem willing to sacrifice free markets’ benefits for perceived security from this process (investors accepting 0% return on Treasuries is a recent example). Still, if free markets were restricted, what would happen to those checks? Subprime problems (or Madoff’s) were not revealed by regulators, but by markets. Note, politicians are human, too.
Capitalism and free markets are not ever-stable. They work precisely because they compel folks to take risks and seek to create excess value out of existing capital, in whatever form that might be. They’re examples of constant change and innovation. Change isn’t always comfortable—and much of it will fail—but when it moves society in a more efficient direction, society certainly becomes more profitable.
During crises, the balance always tilts toward government and away from capitalism. This doesn’t mean capitalism is done. But such things are always said in times like these. For months now we’ve applauded coordinated government efforts to provide monetary and fiscal liquidity and stimulus to the shocked financial system and to provide much-needed confidence. We tend to draw the line, however, at government “ownership” of assets and/or direction of those funds. Government “solutions” can only carry the economy so far—it’s up to capitalism to drive real, sustained growth. That is, it’s up to the people who make an economy, not its turgid overseers.
John Markley comments:
It’s enormously common in history for people to believe that rulers are superhuman- the king is chosen by God, or descended from a god, or is a god himself. This is not surprising: The state by its nature routinely violates the moral norms that bind everyone else and make civilized life possible, and so would never be tolerated if people thought of their rulers as mere men like themselves.
Deep down, I don’t think people have really changed, except that traditional religious concepts have been partially replaced by secular mythical beings- the General Will, the social contract, the historical inevitability of communism, whatever. And, much as a king usually retained his divine right to rule even if his behavior was not terribly godly, even modern rulers who show no reverence towards the legitimating mythology of democracy do not lose their numinous character. Thus, foreign soldiers and civilians- mere mortals- can be killed, while rulers are sacrosanct. Whatever the jargon, the state’s supernatural character remains, and kings are still gods.
Well said. We always want to associate some superhuman ability with something corporeal, mythological, mystical or technical. The device changes, but the desire does not.
Most ideas, including that of the blog’s author, can be traced to religious or cultural assumptions.
In the west the cultural assumptions include the following: the technical modification of the material world to suit our ends, egalitarianism, and the belief that the purpose of power is to deny others power. Some of these vary depending upon one’s social class and heritage.
Most of the world, though, operates on avoidance or fear of the material world, familialism or tribalism, and the belief that the purpose of power is to place those in power for advantage.
We also are currently treating the properties of numbers, Newtonian time, the scientific method, and democracy as if they were deities, assuming that they possess wisdom that we did not place in them by our assumptions. This is a set of problems that is preventing economics from becoming the science that we wish it to be.