Don’t throw the capitalist baby out with his gross bathwater

My dad is a huge fan of Bill Moyers and encouraged me to watch Moyers’s recent interview with the economist Richard Wolff. The video is online Bill Moyers & Company: Richard Wolff interview.

In the interview, Wolff makes his case that our current capitalist system is corrupt and that we should be investigating alternatives. Here’s one thing he tells Moyers that caught my attention:

I think this is a capitalism that I would say has lost its sense of its social conditions, its social limits. It’s killing the mass support without which it cannot survive. So it is creating tensions and hostilities that will take left wing, right wing, a variety of forms. But it’s producing its own undoing and doesn’t imagine it because it focuses so much on making more money in a normal way of business that it somehow occludes from itself. It doesn’t see the larger social conditions and what its behavior is doing to them.

I completely agree with Wolff on this point. One of the most severe economic risks we face today as a global society is that individuals might lose faith in capitalism, and reject the system altogether in favor of a more state-centric model. That’s a story that’s been played out numerous times in Latin America, to take one example where over the years many countries have experienced the rejection of a capitalist strongman in favor of a populist, more socialist idealism. That promise is rarely fulfilled, and the remedy for capitalism often has turned out to be worse than the disease.

One might tend to shake one’s head at the foolishness of the Cubans, Venezuelans, and Bolivians who reached for that socialist dream at various points in history, and who are suffering under the weight of economic mismanagement today. But the real fools were the leaders who preceded these countries’ populist adventures, often enriching themselves and their class while doing little to improve the lives of the poor and disenfranchised. They were the ones who truly killed the goose for a few measly golden eggs, by creating an association between capitalism and their own failures.

I’m an unabashed supporter of free markets, not because I am a Baha’i, but because I am so hard pressed to find historical examples of sustainable economic growth, development, or poverty reduction when they are absent. But there is a difference between free markets and what Shoghi Effendi decried as “unbridled capitalism”, a system with little rules or protections. You can make the argument that the current economic system here in the US (and many other countries, for that matter) is worse than “unbridled capitalism”, in that our system has rules that are actually rigged in favor of the wealthy and powerful.

A well regulated capitalism — where people make their own choices about what to buy or sell or lend, the market drtermines prices and quantities, etc — is good. But a well-regulated capitalism is not what nearly drove us to economic oblivion in 2008, or is currently worsening the gap between rich and poor, or is driving up the costs of health are for all of us. To use faux-economics terminology, what we have now is not capitalism but institutionalized rent-seeking on an enormous scale. The solution isn’t dumping free markets altogether, just a different set of rules and a basic sense of modesty, justice, and integrity that’s required for those markets to work the way they’re intended. I hope people have enough patience to recognize that, channel their frustrations in the right direction, and avoid desperately reaching for an even more disastrous Plan B.


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