Will modern capitalism survive this financial crisis? The Occupy protesters camped out around the country may hope that it won’t, at least not in its current form. Economist Kenneth Rogoff sees few alternatives, but plenty of challenges to the system in a new essay for Project Syndicate:
I am often asked if the recent global financial crisis marks the beginning of the end of modern capitalism. It is a curious question, because it seems to presume that there is a viable replacement waiting in the wings. The truth of the matter is that, for now at least, the only serious alternatives to today’s dominant Anglo-American paradigm are other forms of capitalism.
Rogoff points to five serious challenges currently facing modern capitalism: a failure to price public goods (clean air, water, etc.) effectively, high levels of inequality, “the provision and distribution of medical care,” the undervaluing of “the welfare of unborn generations” and, finally, financial crises. Rogoff points out that economics has solutions for many of these problems, if politicians dare to implement them:
In principle, none of capitalism’s problems is insurmountable, and economists have offered a variety of market-based solutions. A high global price for carbon would induce firms and individuals to internalize the cost of their polluting activities. Tax systems can be designed to provide a greater measure of redistribution of income without necessarily involving crippling distortions, by minimizing non-transparent tax expenditures and keeping marginal rates low. Effective pricing of health care, including the pricing of waiting times, could encourage a better balance between equality and efficiency. Financial systems could be better regulated, with stricter attention to excessive accumulations of debt.
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It seems the truth has a decidedly liberal bias…. None of us wants to see an end to capitalism but all of us should remember that the ultimate end state of unrestrained capitalism is feudalism, where a few people have most of the wealth (and all of the control).
Hot debate. What do you think?
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Capitalism is survival of the fittest. It will survive as long as humans want to get the advantage of one another.
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It sounds like you should read The Darwin Economy
Great Post-this needed to be said, as obvious as it seems to some of us. The depths of naivete of the OWS protesters can be pretty appalling. There is nothing wrong with Capitalism that can’t be fixed, and moreover, absolutely NO promising alternatives.
As regards the fifth problem (financial crisis), I find John Cassidy’s (Why Markets Fail) pretty compelling: that the rules of “free markets” as elucidated by Adam Smith don’t apply to Macro-level global finance, at least not in a comprehensive sense. We don’t print our own money do we? It seems to me that exploring in finer detail the optimal balance between the State control and private enterprise is really what’s needed, and perhaps what ALL of this is about.
Hot debate. What do you think?
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Your implication about the goal of Occupy Wall Street seems pretty naive itself. It seems to me that what they want is exactly that capitalism *be* fixed – they agree with you that that is possible – not that capitalism be scrapped.
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To take this a step further, I don’t think most OWS people have a problem with “modern capitalism.” I think they have a problem with “American capitalism.” Specifically, the cronyism, focus on short-term profits, and moneyed influence over government interests.
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“Capitalism” is one of those words that is so poorly defined and means different things to different people (sometimes with different strong emotions associated) that I try hard not to use the term. The question “Will Capitalism Survive?” is a silly one. If by Capitalism, you mean private ownership of capital, market competition, wage labor, and other basic elements of capitalism, I don’t think anyone is seriously proposing alternatives.
When a lot of people, particularly liberals and OWS protesters, say they dislike “capitalism” they really mean Plutocracy. Other people are upset by the financialization of the economy and the idea that people make money by shuffling money around rather than actually creating useful goods and services in the “real” economy.
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Survive? Capitalism died the instant the Fed bailed them out. THAT’S not capitalism!
Whatever Crony Profits and Socialized Risk is, that’s what we have.
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I think the rich will survive either way, but whether capitalism survives all depends on how you define it, as previous posters have rightly pointed out.
It seems that capitalism as we know it, a system where gain is privatized but risk is socialized, should simply not survive. It’s a flat out poor system.
However, I’m not sure how it could effectively change. It seems congress is unwilling to do anything useful, to the point where the parties will block literally anything the other party tries to do, and both parties have vested interests in satisfying the whims of big banks and industry. Capitalism shouldn’t survive, but it seems under the current political system it may very well do that.
Unfortunately wealth redistribution schemes ultimately socialize gains and privatize losses- not a superior alternative..
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Insert Churchill quote here.
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Capitalism without bankruptcy is like Christianity without hell…….. I forgot where I originally herd this but it is the truth.
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