Why isn’t capitalism working?
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Americans have traditionally been the most enthusiastic champions of capitalism. Yet a recent American public opinion survey found that just 50 per cent of people had a positive opinion of capitalism while 40 per cent did not. The disillusionment was particularly marked among young people 18-29, African Americans and Hispanics, those with incomes under $30,000 and self-described Democrats.
Three elections in a row in the U.S. have been bloodbaths by recent standards for incumbents, with the left side doing well in 2006 and 2008 and the right winning comprehensively in 2010. With the rise of the Tea Party on the right, and the Occupy movement on the left, this suggests far more is up for grabs than usual in this election year.
So how justified is disillusionment with market capitalism? This depends on the answer to two critical questions. Do today’s problems inhere in today’s form of market capitalism or are they subject to more direct solution? Are there imaginable better alternatives?
The spread of stagnation and abnormal unemployment from Japan to the rest of the industrialized world does raise doubts about capitalism’s efficacy as a promoter of employment and rising living standards for a broad middle class. This problem is genuine. Few would confidently bet that the U.S. or Europe will see a return to full employment as previously defined within the next 5 years. The economies of both are likely to be constrained by demand for a long time.
But does this reflect an inherent flaw in capitalism or, as Keynes suggested, a “magneto” problem (like the failure of a car alternator) that can be addressed with proper fiscal and monetary policies, and which will not benefit from large scale structural measures? I believe the evidence overwhelmingly supports the latter. Efforts to reform capitalism are more likely to divert from the steps needed to promote demand than to contribute to putting people back to work. I suspect that if and when macroeconomic policies are appropriately adjusted, much of the contemporary concern will fade away.
That said, sharp increases in unemployment beyond the business cycle—one in six American men between 25 and 54 are likely to be out of work even after the U.S. economy recovers—along with dramatic rises in the share of income going to the top 1 and even the top .01 per cent of the population and declining social mobility do raise serious questions about the fairness of capitalism. The problem is real and profound and seems very unlikely to correct itself untended. Unlike cyclical concerns there is no obvious solution at hand. Indeed the observation that even Chinese manufacturing employment appears well below the level of 15 years ago suggests that the problem’s roots lie deep with the evolution of technology.
The agricultural economy gave way to the industrial economy because progress enabled demands for food to be met by only a small fraction of the population, freeing large numbers of people to work outside agriculture. The same process is underway today with respect to manufacturing and a substantial range of services reducing employment prospects for most citizens. At the same time, just as in the early days of the industrial era, the combination of substantial dislocations and greater ability to produce at scale is enabling a lucky few to acquire great fortunes.
The nature of the transformation is highlighted by the 50-fold change in the relative price of a television set of a constant quality and a day in a hospital over the last generation. While it is often observed that wages for median workers have stagnated, this obscures an important aspect of what is occurring. Measured via items such as appliances or clothing or telephone service where productivity growth has been rapid, wages have actually risen rapidly over the last generation. The problem is that they have stagnated or fallen measured relative to the price of housing, health care, food and energy or education. As fewer and fewer people are needed to meet the population’s demand for goods like appliances and clothing, it is natural that more and more people work in producing goods like health care and education where outcomes are manifestly unsatisfactory. Indeed as the economist Michael Spence has documented, a process of this kind is underway; essentially all employment growth in the U.S. over the last generation has come in non-traded goods.
The difficulty is that in many of these areas the traditional case for market capitalism is weaker. It is surely not an accident that in almost every society the production of health care and education is much more involved with the public sector than the production of manufactured goods. There is an imperative to move workers from activities like producing steel to activities like taking care of the aged. At the same time there is the imperative of shrinking or least slowing the growth of the public sector.
This brings us to the charge that the governments of industrial market capitalist societies are bankrupt. Even as market outcomes seem increasingly unsatisfactory, budget pressures have constrained the ability of the public sector to respond. How and when–and not whether–basic programs of social protection will be cut back, is now back on the table. The basic solvency of too many capitalist states seems in question.
Again the problems are very real. While I believe more than most that the U.S. government will be able to borrow on very attractive terms for a long time, if as I fear private borrowing remains depressed, there is no denying that the current path of planned spending and planned revenue collection are inconsistent. And Europe is teaching us that markets can take significant fiscal problems and make them catastrophic by becoming too alarmed too rapidly.
At one level the answer here is simply to insist on more political will and courage. But at a deeper level, citizens of the industrial world who believe that they live in progressive societies are right to wonder why increasingly affluent societies need to roll back levels of social protection. Paradoxically, the answer lies in the very success of capitalism which has made the opportunity-cost of an individual teaching or nursing or administering that much more expensive.
When outcomes are unsatisfactory, as they surely are at present, there is always a debate between those who believe that the current course needs to be pursued with increased vigor and those who argue for a radical change in direction. That debate is somewhat beside the point in the case of market capitalism. Where it has been applied it has been an enormous success. The challenge for the next generation is that while that success will increasingly be taken for granted and indeed will become an increasing source of frustration in these pinched times, its success cannot be matched outside the market’s natural domain. It is not so much the most capitalist parts of the contemporary economy but the least—those concerned with health, education and social protection–that are in most need of reinvention.
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Capitalism, by its nature, requires the free market pricing mechanism to function properly. It is disingenuous to criticize capitalism as flawed due to the problems the United States is experiencing when this depression is arguably the result of the LACK of a free market.
At its core, a free market requires price discovery. The marketplace must be allowed to clear all prices. However, the most important price in the market… the price of money… has been manipulated for decades by central banks. This distortion generates ripple effects throughout every decision-making process… every industry… which can only result in misappropriated resources, which then must inevitably result in depression.
The response, unfortunately, has been more central planning to try to avoid the symptoms of central planning. Please restore free market capitalism and give it a chance to work before dismissing the concept.
Solemn and sagacious words from one of America’s most serious people. Words that betray a shallow intellect, a failure to apply even the most basic macroeconomic theory and no attempt to provide a plan or program to address the malaise afflicting our great nation. We are being led by a group of brilliant, energetic, facile dance instructors, forward, backward, side to side.
KIT
Summers completely ignores 3 basic issues with the health of capitalism in the US (and world): Overuse of Leverage, Tax Structure that favors Speculation, and Subsidized Industries (oil, real estate, big agri).
Overuse of leverage is the main culprit of the 2008 Great Recession, as it has been in any great collapse. Any investor knows the dangers of a margin call, and we have just seen a major margin call worldwide. Summers also ignores how the huge growth of derivatives since 1980s (an extension of credit and leverage) have turned investment markets into speculators’ roulette wheel.
The US Tax Structure since the 1980s has reduced short term capital gains and derivative income/gains by more than 70% while at the same time tripled the payroll tax on middle income AMericans. The “carried interest” use by hedge funds and private equity, plus off-shore tax havens have allowed speculators to pay extremely low tax rates, thus pushing out the traditional long term investor which is vital to capitalism. Summers can take direct credit for this trend.
Finally, the US government subsidizes through low tax rates, outright cash grants and extremely low regulations the very industries that have not provided any growth to the US labor force for over 30 years: oil/gas, agriculture and real estate. Depletion allowance, 1031 exchanges, crop subsidies, etc. all distort the market economy and shift resources away from viable industries. Of course, this policy is only in place because of the huge dollars political campaigns receive from these industries.
Capitalism would work if we control speculation, promote a fair tax policy and do not subsidize healthy industries.
There a several comments about the system’s not ‘fair’ and the bailout rigged the system. But you have to remember why the government bailed out the banks…because the banks threatened to take down the entire system.
It’s not so much about unfairness, as it is about a system that’s so corrupt, so powerful, so entrenched, that they can literally blackmail the entire capitalist system…because they have that ability.
The deregulation of capital markets created a monster that’s eating up all the money and making any government checks ineffective. These out-of-control powers may fail under their own corrupt weight…but when they do, it will collapse on top of all of us.
The biggest problem is, as I see it, is trying to integrate capitalism betweem countries that use it and those who don’t. If you have true competitive markets things work, but to make it work requires a country with a strong government with backbone. The US does not have a strong government and by allowing hoarding of commodities and stock manipulation it works poorly.
Where is the mention of the government subsidies, transparent and fraudelent dealings with Wall Street and banking institutions, greed, and lack of the very source of financial stability in a capitalistic society……..TAXES, monitoring of instuitutions to limit greed and fraud and the lobbying of big corporate entities to continue on their quest for profits where greed and fraud are commonplace?
Capitalism cannot survive without the working man to keep the cycle of invention and consumption working. But the greedy have forgotten that in their quest. They are high on $14 billion in profits for one quarter and the fact that a politician stated that “corporations are people too.”
We are becoming laughable to every progressive nation because of our hatred, ineptness and lack of compassion for our own people. Yet we have stepped into the shoes of the “savior” of all nations from people just like us.
Capitalism that is well regulated and offers severe penalties for those who go outside those regulations or boundaries works best for the masses and the countries in general. Greedy unregulated capitalism just breeds avarice uncaring screw-you-it’s-all-mine CEOS and Wall Street jerks who think they are gods and everyone is just dumb serfs. Greedy capitalism offers countless opportunties for the unscrupulous and scam artists to take over and everyone gets hurt. Tell Phil and Wendy Graham to take a hike and reverse Glass-Steagall now.
I have been thinking about plunder lately. I am beginning to believe that capitalism works only while plunder is viable. Where it begins to break down is when resources become limited or (as in the case of the environment) erroneously has no value at all assigned to it.
We have not had capitalism in this country for nearly 100 years. We have had corporatism. And it is working just fine. The 95% is increasingly improverished and politically impotent. The 5% is totally in control and totally global.
The first really big push toward corporatism was under Pres. Wilson who used WWI to push through government control of business. FDR used the Depression to extend controls. Now Democrats and Republicans are in bed together with the Boss and are making him happy.
We do not have a system of “market capitalism,” Summers, and so long as you keep beating that drum, your credibility is exactly zero. The system we bear is one of corrupt crony capitalism, wherein wealth is no longer based upon production, but upon the creation of fictional financial vehicles to prestidigitate “profits,” and the criminal bribery and control of public officials and distortion of public policy to ensure that real revenues are transferred to the corporate coffers, rather than to schools, bridges and water treatment plants.
Your propaganda above is nothing but an attempt to rationalize the continued dysfunctions of that system, while throwing a bone to the losers under that system; “Oh, maybe we should improve health care a bit for you all, and then maybe you will like us.”
You want real change? Then do away with the prison-industrial complex and the insane drug war. Stop killing people overseas, quit waging war on everyone, and eviscerate the military-industrial complex. Destroy the sick-care industry, with the enormously destructive partnership of destructive “foods” and destructive drugs and GMOs, the criminal FDA that attacks health and promotes the illnesses by which Big Pharma profits, and the perniciously subsidized Big Ag industry that is sealing our fate as we speak. Reject a political system that takes its bribes from the richest corporations and tailors its public policy accordingly, that treats corporations as natural persons under the Bill of Rights and elevates their status over natural persons, that maintains and accelerates the police state and destruction of personal liberties (of natural persons), and that cares nothing for the people who are their nominal constituency.
I don’t want chicken bones, Summers. I want heads to roll. Keep talking. Maybe you can convince yourself, but you are getting nowhere with us.
This is an outstanding article. Why couldn’t Summers articulate this when he was working for Obama? Obama’s economic plans are chaos. He’s changed advisers so often one is left thinking he can’t find anyone who agrees with his irrational and counterfactual theories.
We ought to adopt the equalize-now plan and then let the market do it’s thing with everyone starting out equal.
What does Govt. do better than than the private sector? Someone, please elaborate.
“The problem with socialism is that eventually you run out of other peoples’ money.” -Margaret Thatcher
“The problem with capitalism is that eventually you run out of your own money.” -Ken Lewis, Bank of America
Larry, I see your lips moving but ever since that portrayal of you as a callous, self-centered cretin in The Social Network I haven’t been able to hear a thing you say.
Why isn’t capitalism working?
Pretty Simple Larry, YOU DON”T HAVE CAPITALISM IN THE USA.
Quoting George Reisman:
“the politico-economic system of the United States today is so far removed from laissez-faire capitalism that it is closer to the system of a police state. The ability of the media to ignore all of the massive government interference that exists today and to characterize our present economic system as one of laissez faire and economic freedom marks it as, if not profoundly dishonest, then as nothing less than delusional.”
“That said, sharp increases in unemployment beyond the business cycle—one in six American men between 25 and 54 are likely to be out of work even after the U.S. economy recovers—along with dramatic rises in the share of income going to the top 1 and even the top .01 per cent of the population and declining social mobility do raise serious questions about the fairness of capitalism.”
I must have missed something. Where is it written that a quality of capitalism is “fairness”?
The mark of intellectual discourse contains these components: clarity, accuracy, precision, relevance, depth, breadth, logic, significance and fairness.
Unfortunately Larry, your article contained few of these intellectual components and is largely undecipherable because of this. No facts, no comparisons, no inferences, no history, no solid analysis…you are unbelievable because of this.
Capitalism since 1500 has a solid history which is knowable by reading, for example, Niall Ferguson’s Cash Nexus, or his Rothchilds books among others. And if you know that history you can use the intellectual components listed above and filter Niall’s history and something like Joseph Stiglitz or Ja Hoon Chang’s book, “The 23 Things They Didn’t Tell You About Capitalism.” For the untrained eye; the above readings are a right-wing economic historian with left-wing economics…something one must do to be unbiased, right?
But I digress, we all can see capitalism is a fail – or at best only a partial success. We can observe the gambling and cronisms and the largely unaccountable nature of banking and the investment community. We can observe a lack of fairness and ego-driven excess, too. But the real problem is that capitalism doesn’t solve all problems…and was never meant to.
Until people realize that chasing profit is, well, ultimately unprofitable because it requires unsustainable amounts of non-renewable natural resources pilfered from the various people and countries of the world. In short, capialistic wealth is created by socializing business costs and expenses while privitizing profits. And Larry, if you are ok with that, then we be good to move ahead. Otherwise, we need to rethink things.
Pure capitalism has never worked for the benefit of society as a whole. The golden age of the American middle class was during a period when capitalism was moderately constrained and controlled with systemic limits on monopoly and personal wealth. Remember anti-trust laws, regulated airlines, and taxes that prevented the uncontrolled concentration of wealth in ever fewer hands? Western capitalism was tempered by the very large presence of the competing political system of communism over a large part of the world, and professed (falsely, of course) to represent the true interests of working class people everywhere. When the USSR collapsed it was trumpeted as the victory of pure capitalism over all shades of socialism, when in reality it was the victory of a hybrid system of capitalism tempered with a moderate level of social engineering and significant formal limits on corporate power and personal wealth. Unfortunately, everyone drank the Kool-Aid of the “decisive victory of pure capitalism” myth, and we dismantled economic and social controls that had worked very well for a majority of Americans for many years. Now we’re back to essentially the same situation as the Gilded Age: disposable workers, wealth and information media concentrated in very few, very powerful hands, and corporations dictating the terms of their own “oversight” to government.
To clarify my position: Capitalism can still work in the 21st Century, perhaps better than all other systems. But Capitalism as it now operates needs some serious recalibration. If we are going to say that anything about 15% taxation as a proportion of GDP is “socialism”, then the USA was socialist during its best years yet. Oddly, we’re not running at 15% taxation and 25% spending… This isn’t socialism or capitalism: it’s running on empty, and it’s destroying the confidence of well-informed capitalists! No wonder the vehicle is still stalling…
I meant “Oddly, we’re now…” of course.
15% federal taxation, 25% federal spending on GDP (with additional taxation and spending at state level); is neither socialism nor capitalism. It’s mildly socialist spending coupled with radically capitalist revenues. It’s not going to work. The rich will just run for cover, convert all their assets into gold, and stay in their foxholes until the storm shows serious signs of receding…
There’s a difference between capitalism and the free market. The US is definitely capitalist but it’s markets are not free. With a handful of telco’s and a half dozen nation-wide banks, the natural course of capitalism is to grow, dominate, and create as much of a monopoly as possible. Smaller companies are bought by larger as the larger grows larger until competition, a necessary element of the free market is choked by the success of capitalism.
Of course the Government gets in the way of the free market too, but usually at the request of some capitalist looking to benefit from it.
But there is a fundamental problem with advocates of a purely free market and it isn’t an economic one, it’s political. It just won’t ever happen. As Summers points out, those who argue for modest reforms will never let the radicals have a clear go at it.
For a huge impact, one must take a conglomeration of moderate proposals and bundle them together. Fortunately that has been done very well. Check it out at: http://www.fiscalcommission.gov/sites/fi scalcommission.gov/files/documents/TheMo mentofTruth12_1_2010.pdf
America is fairing badly because of declining productivity since the oil crisis of 1974 since when its balance of payments has been negative.
That does not mean that capitalism has failed as of course global capitalism is working well for Brazil, China, India and the others.
The East refers to the current financial problems as the Western economic problem, not the World economic problem and certainly not the Capitalism problem.
Capitalism in the US is disliked because capitalism worldwide is on steroids. It has been and is still actively promoted by policies, people and entities disinterested in the broader welfare of society vs the health of The Investor. The basic premise is that The Investor reigns supreme over the legislator and his standing management instructions to the state are incorporated in the Washington Consensus.
Legislators are lobbied with boatloads of dollars to maintain pliant, docile attitude to the big business. Big banks are lauded, courted and worshipped as the pinacle of big business no matter how badly they behave. Corporate taxation is a patent sin and must be rolled back at any costs. Income inequality is seen as a positive sign of the success of the individual entrepreneur in a multifarious society (until very recently in any case).
Maintain this attitude long enough and history will invetably ensure that it will produce its own backlash. Alienate enough people for a sufficiently long time and they will one day start the pendulum swinging back against all-out capitalism.
Farfour
The problem is that corporations MUST die after a normal lifespan. Otherwise they will control everything. It’s that simple.
bable !
Do you think it’s possible it is working as intended?
Specifically, it is only supposed to get to a point that naturally erodes as it globalizes, to encourage Occupy Wall Street movements ‘by the people, for the people’ to come up with new solutions? The meek shall inherit the earth?
Just curious. Comments?
My blog is bgtoe.blogger.com
The most basic principle of free market system is that it is about efficiency.
Supply and demand mechanism in a free market serves the ultimate purpose of moving resources around in the economy in order to maximize efficiency. Anyone who understands completely (and remembers) ECO100 knows this.
This means it maximizes the output and minimizes the input. There are two types of input. Human resource input and material(other) input. Sooner or later the human resource part will be taken into the picture. The free market economy will flush the human resource if not needed leading to inevitably high unemployment for the group of people that cannot adapt and has no economic function.
So now back to Larry’s question. Why isn’t capitalism working?
Well, it’s working marvelously (in most sectors where anti free market forces like monopoly, organized labor, government interventions are not there) for the goal that it is designed for: ‘efficiency’.
The goal of ‘promoter of employment and rising living standards for a broad middle class’ was for something else, capitalism (free market) never has been never will be that something.
Sorry Larry, it has never been designed for your favourite teaching of ‘infinite diversity in infinite combination’ in which human keeps multiplying like Fibonacci sequence while constrained to this ‘small’ planet.
Things have to go in order, only until we can have space ships to break out of this planet, and reach infinity creating infinite purposes for the infinite mass, then we can start employing that.
Taken into account that we are constrained here with limited resources and creating limited purposes. (Many people on the right don’t even find purpose for their lives other than domination, killing, imposing things on people different from them. The same thing for people on the left having nothing but sex, drug, alcohol, party, etc.. which all have serious long term consequences)
Stop looking for the ultimate perfect solution, look for solution for the current situation/input instead.
The thing that is not working right now in this constrained situation is not our economy, but out breeding behaviors. The problem is that when it comes to procreation, it is such a taboo that almost nobody has the courage to debate about it.
Please fact check to see that the groups that are economically ‘unfortunate’, as discussed in this article, are the most active breeding groups in every country that I have checked the data.
The unfortunates go with the unfortunates creating more unfortunates. It keeps getting worse as it goes unchecked and even promoted by government policies.
If it were the super rich that have a lot of kids and then the fortunes get divided into smaller chunks for them, we wouldn’t have that massive gap, would we?
Or similarly, if it were the fortunates that create a lot of fortunates to divide the high paying job pie that only the fortunates can handle, we wouldn’t have that gap??
In the end, if we continue promoting the creation of a larger mass with no economic purpose for them. We are cooking up an economic nightmare which ultimately will lead to an apocalyptic social unrest chaos. Welcome 2012!
By ‘government interventions’ I meant ‘excessive government interventions’ with unrealistic and impractical ideology.
Some level of government interventions are needed for certain sectors dealing with certain things.
Nothing is perfectly good is just like the reverse nothing is perfectly bad.
We have no capitalism, only in the minds of progressives who need it as a scapegoat to blame for the huge problems progressives have created while destroying capitalism.
What we have is a purely American form of fascism and socialism and it is well on its way to destroying the middle class and prosperity in general.
Best regards, Ben
Unbridled, unfettered, unregulated, laissez faire capitalism has two ultimate goals: profit and the maximization of profit. To acheive those goals, every resource: everthing and everybody is exploitable to the maximum. Exploitable to the maximum, until the exploitation reaches a level or intensity which precipitates a reaction to the exploitation. Then responsible governments generate laws and regulations defining what levels of utilization of resources are acceptable in a civilized society.
@flyerbri
I would love to believe that the meeks inheriting the Earth would be a nice thing, but the meeks should understand reality and try to control at least themselves. Otherwise with the problem the way it is, no system, no politician, no magic can fix the impending problem.
Capitalism is simply a better economic system to provide better social mobility (ie equality of *opportunity*) and more accurate, civilized, humane selection compared to the ones that came before it. That should be the goal of any economic system, don’t force it to do something else.
Marx was wrong, he will always be. It has been proved repeatedly.
The saddest part of reality these days is that if one is to say an uncomfortable truth, he will be branded as a devil, bad, villain while the ones that say only sweet comforting words (knowing fully well that it is incomplete) will always be praised, loved, popularized and glorified.
@trevorth,
“In the end, if we continue promoting the creation of a larger mass with no economic purpose for them. We are cooking up an economic nightmare which ultimately will lead to an apocalyptic social unrest chaos.”
The observation is absolutely accurate. The “if”s” are not. The “we” is the evangelicals and the Catholic church and Muslims. Their numbers are sufficient to control many governments and confuse or terrify or confuse many others.
As always, the intelligent, thinking citizen that creates “net national wealth” (above mere subsistence) has little say in the ongoing train wreck of current events and demographics. The throttle is not controlled by those looking ahead!
Many great comments here.
The notion that capitalism is not working is absurd..because we do not HAVE capitalism. It has been slowly corrupted over the last 15 years. Failure is part of capitalism….it is central to capitalism.
The mainstream economic thinkers (NeoClassical economists…which includes Summers) fails to realize that the credit system, the credit cycle, is not a medium within which the economy functions..it IS the primary component OF the economy.
As such, the massive an unending credit expansion has been nothing but a massive subsidy of ‘financialism’, and unproductive allocation of capital. Once productive value adding uses for credit are exhausted, credit can only go to consumption and speculation. Neither of these are sustainable.
Alan Greenspan was such a proponent of “free” markets, yet his policy of burying the system in easy credit at every hiccup was the largest protracted intervention in free markets that the world has ever seen. Hands down, the worst central banker that has ever lived. AG is the man who destroyed America.
It’s interesting to see how the transition from agricultural to industrial based economy to unemployment and the same is happening with the current transition from industrial to a knowledge or services based economy. In such a transition if new jobs or occupations are not created to replace those that have been lost by transitional processes, unemployment will increase. It’s almost like a business cycle wherein a transition is like a down period with increased unemployment. Such transitions will occur in the future as well when we start to move from a knowledge based economy to some other form as society and economies progress. We should be prepared in our minds for such inevitable events.
On a very clear standing, even within a market based capitalistic economy, there are areas which are not capitalistic and tend more toward socialistic, education being one of them. For a mass-based education, dependency on a private sector alone would be less than helpful. For such a major task, we need the volunteers to be the people who are in control. We can have the private players in there, but they alone cannot be sufficient, especially when you look at a country as large as India with a 1.21 billion population. Capitalism in the near future, at least ,is set to more of a quasi-capitalism with a mixture of socialism thrown in the intangible goods and services related sectors.
The concept of a corporation, of releasing the individuals who are making the financial decisions, from any personal financial liability…. is a criminal concept to begin with. It is too much cover and it prevents bad decisions made by a few, from having true consequences. John Corzine steals a billion dollars and gets…. questioned? Fired maybe? Like he cares. He has a billion dollars now that he stole from investors and shareholders. Who needs a day job when you have that kind of money hidden in Dubai and the Cayman Islands? Personal responsibility is the opposite of incorporation. Until corporations are outlawed as envisioned by Thomas Jefferson, the problem will only get worse.
Capitalism has not failed.
The short sighted get me my bonus and who cares about the company captains of industry have failed.
Don’t confuse criminality and Socialism with Capitalism. Capitalism works every time it is tried.
I agree with Peteo except to say if there wasn’t for trillions of dollars of losses due to criminality, there would be little need for socialism.
In economic theory Mr Summers appears brilliant. In practical matters, an idiot.
Id say its because those 40% are people who expect EVERYTHING to be handed to them on a silver platter that they dont have to work for.
The answer is simple — get government, and their stupid policies (aka the Community Reinvestment Act and Fannie and Freddie), and other forms of Crony Capitalism, out of the way…
Summers and his Obama administration’s attempts to continue Johnson’s Great Society are still hoping for a Keynesian planned economy. Demand side doesn’t work, it’s supply, that’s the thing. What makes a capitalist system work? It’s blood, money, a mutually accepted means of exchanged. Disrupt that and it all goes to hell, in a blink. When the shinning lights of Washington DC threw out the banking regulations, Glass-Steagall, and all the rest, then vigorously refused to regulate derivatives, well human nature did the rest, and crash it all went. The dark side of human nature, avarice and greed; the reason we have always tried to establish social norms and rules, whether tribal, feudal, republic, or democratic. Basic rules and regulations to help mediate the excess we are all prone to. Same goes for our economic creations. Allowing the banking industry to wantonly gamble with capitalism’s life’s blood is fiscal suicide. It was in 1929, and again in 2007. More demand side planned economic policy won’t correct this, taxing the 1% into poverty won’t correct this, destroying the corporate entity won’t correct this, but Volker rules will. Protect the blood supply, the money supply, from idiots.
Reading prof. Summers is like listening to a wise man whose mouth is full of marbles. He seems to be saying important things, but you don’t have the foggiest idea of what he is saying.
I’m reasonably intelligent, but after reading the article and going over some of the parts three times, couldn’t find a *single* insightful statement. Go-ahead. Read the article. Look away. Now try and write down a single interesting insight …
Sadly I wonder if prof. Summers is more interested in lining-up his next job (head of World Bank?) than educating us about what he actually means or knows.
Why is this article still up?
Why hasn’t the great OZ fixed it yet?
Why isn’t capitalism working?
Because it’s thoroughly corrupt…
Because money and power want profits without risk…
Because the dice are loaded…
Because the gated community is closed…
Because the little guy (in the minds of the money and power) is a little person, from the little people with no bargaining power and no need for it.
…And the simple fact is, that when the game is rigged, the only winning move is not to play.
Yes. The “Medical Industrial Complex” (is guaranteed 15% of GDP – just ask the Board of Standards and Practices), and the “Educational Industrial Complex” is like funding Conestoga Wagons rather than high speed rail–meaning the system is way too old and out of date–see Khan Academy “online” for a refreshing difference. And we’re still buying books and writing on chalk/err marker boards. And the “Welfare Industrial Complex” is full of graft, especially from the Medical Industrial Complex (LOL) but then they do have a 15% of GDP guarantee. Then as Eisenhower warned us 50+ years ago… the Military Industrial Complex. Don’t let me forget to include the Legal Industrial Complex too… well, I’d say that if the “largess” of all the “complexes” above were accounted for, we’d probably have a “surplus” rather than deficit today?? And, Buffet recently said, I heard it myself, “2000 and the 400 richest families made $50M each and 2010 they made $350M each. Hmmmm ditch the Welfare complex and we can give the 400 another $100M each and I bet then they would be even more motivated to create less jobs??? This is really all too simple–the richer have gotten a lot richer (no trickle down) as the poor a lot poorer. But don’t you dare RAISE taxes, uh oh, except on the poor. RepubTEAlicans so do remind me of the “Keystone Cops” and I guess you know how old I am, but still recall when my corporate job was sent to India in 2001.
We need a flat tax, where everyone pays the same percentage.
Stop de-motivating the poor to work and instead strive for more. Why, for instance, are we subsidizing the rent that the poor pay to as low as $25.00 a month and giving food stamps and healthcare, while many of them sit home and do not work? This is not a structured society, but rather an experiment in irresponsibilty.
We also need to understand that it is an oxymoron to tell someone “get an education, work hard, be successful, then we will hate your guts because you achieved your goal and now make much more than we do. Not everyone is college material, but everyone (except the old and truly disabled) can bring something to the table.
We also need to school the 18-29 group that “you don’t start out making what mommy and daddy make and you don’t start out having everything they have worked for years to accumulate.”
Society will continue to disintegrate if we continue to permit lack of accountability.