Capitalism: the problem or the solution?

October 16, 2008

Karl Marx

You know you’re living in unusual times when Karl Marx makes the headlines not once but twice in one day. Marx’s 1867 critical analysis of capitalism, “Das Kapital,” has risen from the publishing graveyard to become a best-seller in eastern Germany, Erik Kirschbaum reported on

The second headline came from our columnist Bernd Debusman, who argued that Marx’s thinking on banks seems oddly contemporary these days. Debusman’s statement that “capitalism as we used to know it is on its deathbed” was disputed by many, including Diana Furchtgott-Roth, a senior fellow at the Hudson Institute.

In a commentary for, Furchtgott-Roth wrote that “the present crisis started not because capitalism was allowed to run its selfish course, but because the government interfered with the operation of private businesses and allowed excessive growth of money and credit.”

So is capitalism as we know it dead or merely resting? Is it the problem or the solution? And if there are hopes for a Capitalism 2.0, as Debusman says, how should it differ from the old model?


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If Capitalism 1.0, complete with toxic derivatives instruments and CEO bonuses of $50 or $100 or $500 million, was in such good shape (as Furchtgott-Roth seems to think) why would there be a need for an international meeting to try and overhaul it? The idea that not all is well has some eminent proponents:

French president Nicolas Sarkozy: “A certain idea of globalization is dying with the end of a financial capitalism that had imposed its logic on the whole economy and contributed to perverting it.The idea of the all-powerful market that could not be contradicted by any rules, by any political intervention is a crazy idea..The idea that the market is always right is a crazy idea.”

German chancellor Angela Merkel:
“It was said for a long time ‘let the markets take care of themselves’ and that there is ‘no need for more transparency’.Today we are a step further because even America and Britain are saying ‘Yes, we need more transparency, we need better standards for the ratings agencies’.”

British Prime Minister Gordon Brown:”We need an effective global early-warning system for the world economy to alert us to the risks ahead. We need globally accepted and supervised standards of regulation applied equally in all countries. We need stronger arrangements for cross-border supervision of global firms…We now have global financial markets, global corporations, global financial flows. But what we do not have is anything other than national and regional regulation and supervision. We need a global way of supervising our financial system.”

If that’s not a call for an overhaul of capitalism as we know it, what is?

Posted by C Badillo | Report as abusive

Diana Furchtgott-Roth is right it was the Western Governments who caused the financial crisis by imposing none capitalist on a capitalist system. Having interfered with the system I do not think it would have been responsible or realistic for the same Western Governments could to then seat back and let the capitalist forces work themselves out. Many, many Banks and Financial Institution would have gone down the tube; with real catastrophic consequences. That would have sounded the death knell for Capitalism, for sure!

They had to interfere and impose, again, with a typically none capitalism solution. There was nothing else.

People will debate and dispute the cause(s) and the proposed solution(s) of the current financial crisis in the West for many, many years to come. But the one thing they will agree on is capitalism emerged out of the crisis leaner, meaner and stronger. It always does!

Capitalism, like the political system that spawned it, Democracy, has built into its very DNA the ability to learn from past mistakes. Capitalism can evolve and adapt, that is why it will never die. Command economy, like the myriad political systems that spawned it, Socialism, Communism, Fascism, etc., would go to ridiculous lengths to hide its failings rather than admit them. A Command Economy therefore can not evolve and adapt; it has a self-distract gene!

Command Economies lasts one or two generations- 50 to 100 years- maximum. Where they have survived that long or for much longer, it would be becomes millions of innocent people had to suffer and die. So instead of the Command Economy dying, millions of ordinary people were sacrificed to appease the Socialist Demons!

Posted by Wilbert Mukori | Report as abusive

As with freedom, you need honesty and responsibility to keep it true.

Posted by jason | Report as abusive

One of the basic tenents of philosophy is that while one cannot prove the existence of others, the act of proof is sufficient evidence to assume one’s own existence (I think, therefore I am). The only person, object or force in all of reality that must exist is you yourself.
Given that, freedom is not a luxury, or a benefit we receive from benevolent governments. Freedom is a fact of nature. Capitalism recognizes that nature and attempts to harness it for the best possible outcome. To deny freedom is to reverse the basics of philosophy, holding each person more accountable for the well being of others than that of those they directly care about.

Please don’t misunderstand me. There must be discussion about the proper law society uses to hold people accountable. Peaceful coexistence requires standards of behavior. If those standards are called ‘regulation,’ then fine. But if you deny the basic reality that Freedom is natural and required for life, then expect disaster.

Posted by Sunny Molini | Report as abusive

I fail to see the need to term things as Capitalistic or Socialistic or what have you. These are merely scape-goat terms used to screw over people; Justified in the name of Capitalism or it’s because we are a socialist country; whatever.

The fact of the matter is that regardless of what system you want to use or what you want to call it there should be oversight, effective regulation and safeguards and the system as a whole should benefit the many more often than few. And the present day situation with Capitalism is that it is benefiting the very very few at the very very top and leaving the country and economy in shambles. So, anyone who advocates for this sort of system is either ignorant or a beneficiary.

Also, while we are talking Capitalism you might as well through in Globalization since this is a really big part of the problem. Corporations (legal persons whom never die) are free to move into any markets or nationalities as they see fit whilst human beings (the real kind of people) are not for the most part. There is a clear indication that Capitalism has run amok since it has empowered the company far beyond that of the real human being. This in turn deteriorates and undermines Democracy and in turn this changes the very fabric of the system of government. So, in essence the free for all capitalistic system is inadvertently leading to socialism out of necessity anyway. So you can either have a system whereby you take care of the other through government sponsorship or you can let other take care of themselves through opportunities created by government. The purpose of government is to protect persons and free for all capitalism (or Capitalism 1.0 as it is being called) whereby CEOs get to run companies into the ground and walk away with billions of worth is not at all protecting the people. So, yes, Capitalism 1.0 is dead or it will be soon by the necessity of having to do away with it.

You are only free until you start to murder people without cause, at that point you create the need to implement and enforce laws which in turn diminish your freedoms. So to all the CEOs and like. Thanks for diminishing our freedoms due to your greed. Thanks for destroying the country with which gave you so much and was meant to give so much to the rest of us. Thanks a whole lot.

Posted by Dude | Report as abusive

Capitalism is meerly resting, unless you’re of the mind as some are that the Karl Marx type of equalization act needs to take place. In trying to push aside the comments of “Socialism”, Barack Obama protested to much this weekend about the remarks, and proceeded to spell out his philosophy. In doing so, he never disputed his complicity in Socialism, and went a little further with examples that may have come directly from “Marx” writings.

Posted by Jay Germaine | Report as abusive

The end of Ideoligies.

No ideology will work. Ideoligies are static concepts that exclude new insights and knowledge. The people have to find a open dynamic interdependent configuration in order to evolve, adapt and improve society.

Just as every individual and all life is a work in progress.

Humanity is approaching a transitional phase and the longing for a higher purpose is enhanced by the unique events of the past few decades.

Many solutions to the great issues facing us are known. Many are also still to be found. Commitment is the key to acting on what we know and discovering what we do not. A process of sound principles is the prerequisite for achieving sound results.

Perhaps our foremost challenge remains the internal struggle in our human nature which is mirrored by the lager issues we face as a species. Although the only way to true fulfilment is to follow the better angels of our nature and strive for a better world, the status-quo is easy to succumb to unless something motivates change.

Throughout history, a combination of moral courage, enlightened self-interest, the development of capacities to solve problems, the impact of events on the lives of a majority of people and communication efforts to change consciousness have been the catalyst for change. The underpinnings for a universal global consciousness have been emerging for decades, if not for the past century or more. The need to articulate this in a manner that resonates universally and that is always present in our daily consciousness.

The time has come for a Meta-System-Transition.

Posted by chris Boston usa | Report as abusive

This is (IMO) a Failure of Capitalism.

There are people “believe” in capitalism, in the same way they would make excuses for a football team that lost its way – if they were a fan. Or any belief compared to any other belief.

The crisis is complex, admittedly, but it was de-regulation that allowed it to happen. People were allowed to create an illusion of wealth. If nothing is done, people will continue to act in self-interest and the capital markets will stay frozen.


Posted by Malc Cochran | Report as abusive

On a very low level, it’s amusing to see the west finally unite in cocerted effort as the ashes of empire swirl about their feet. The leaders of governments and finance
are acting the fools we knew them for all along.

You could begin reading about this crisis more than 8 years ago. As the years passed the articles on the internet and in published books spelled it out clearly,
becoming more strident in their tone.

Proving that, yes, these leaders, these fools really do live in a vacuum. Now we’re all to pay for it.

One can only hope that the destruction is complete and that enough of the new global consciousness survives
to insure it never goes down like this again.

Jeff Barton
North Bend, WA

Posted by Jeff Barton | Report as abusive

Capitalism is a tricky thing to get to work right. It works well when there is transparency of information with goods and services and good laws to enforce contracts and prevent fraud. So, buying something simple like a quart of milk in a capitalist system works because you know what you are getting and how much it really costs and there’s little risk. (Even there, the law provides for expiration dates, which reduces risk of buying spoiled milk.)

But complex capitalist instruments like insurance (e.g. credit default swaps or health insurance) or obscure derivatives (e.g. mortgage backed “securities”) don’t work without careful regulation and clear information (accurate risk ratings from an impartial rating agencies.) Even when terms are spelled out, people can misunderstand what’s going on. Blind faith (such as by Alan Greenspan’s) in a free market economy is misplaced without perfect above board information about the goods and services being sold. Perfect information is not possible, so the best we can do is careful regulation to prevent people from cheating the system.

Posted by CW | Report as abusive

[…] Tags: Economics, Freedom, knowledge, Policy — @ 3:07 pm I’ve heard a great deal of talk about this in the wake of this ‘crisis,’ and it troubles me. I commented on the linked […]

Posted by Capitalism 2.0? « Sunny Says | Report as abusive

” Each shall produce according to their ability and receive according to their need”. Our current economic state has put millions out of work with the promise of millions more unemployed. Close to 100 million citizens either have no health insurance or cannot afford the insurance and co-pays the have. For the economy to be able to make alternative energy feasible to bring to market, energy prices had to rise so high as to choke the economy and bring the world to the brink of economic collapse.

As long as wealthy capitalists contribute their wealth to politicians who legislate monopolies for these very same people, the capitalist system will run through the cycles of boom and bust. I am not sure there ever was a time that was any different. Certainly the American model of capitalism has proven that repealing regulation and restriction simply leads to the exercise of greed, excess and even criminality.

I do not think the free market will bring about better schools, harbor and coastline protection, green sustainable energy, conservation of resources and a myriad of other practices and products. In other words at this juncture of civilization, capitalism has proven incapable of providing what humans really need.

Smaller more autonomous societies might be able to rebuild markets that are functional in meeting human needs. Time however, is running out. Potable water, arable land, energy and mineral resources are all in decline. An economy predicated on increased wealth and growth is almost certainly unsustainable in the 21st century. This means civilization will have to posit new values with which to base society upon.

Materialism is not much different than addiction. The euphoria of a purchase wears off and another fix must be acquired. For there to be an abundance of cheap goods, others must be oppressed in a state of poverty to provide them to the privileged. How is this a system that best provides for human needs? At some point we must all realize that an injury to one is an injury to all.

Posted by Anubis | Report as abusive