By Harry Cook: I think that if the negative aspects of capitalism (mainly the profit dynamics that lead to monopolistic markets, consumer fraud and environmental harm) could be effectively controlled through government regulation, capitalism would be by far the best economic system.
Laissez faire, the heart and soul of capitalism, fell flat on its face to create the recent America-generated financial debacle that threatens a world depression.
The long-run question now is where do we go from here.
Most mainline economists think that capitalism can be made to work. Gerry Cavanaugh, speaking for a dedicated and vocal minority, says "democratically controlled capitalism is, in my view, a chimera, a beast that does not and cannot exist" (see April 2 letter at length "We're doomed if we continue down the capitalist path").
I think that if the negative aspects of capitalism (mainly the profit dynamics that lead to monopolistic markets, consumer fraud and environmental harm) could be effectively controlled through government regulation, capitalism would be by far the best economic system.
The catch lies in the enormity of the political and economic conditions required — a liberal president and Congress selected by an involved, well-educated electorate informed by an investigative press. (Don't laugh.)
Now, turning to the socialist side, I have to be careful because I am in Gerry's territory. I think, to begin with, we should note that anything close to a successful socialist government — government ownership and control of the means of production and distribution — has yet to appear.
It is my understanding that all leading Western European countries are light years from socialism.
If we turn from political reality to abstract theory, the difficulties do not recede.
Politically, Gerry says that democratically controlled capitalism is a chimera, but I think that democratically controlled socialism is a much bigger one.
Unless you want to assume some fundamental change in human nature, the economic incentive that drives capitalism to such lengths will not disappear with socialism. Instead of being split between economics and politics (which Keynes thought was a good thing for society) it will all focus on politics. The idea of our collective band of politicians, as good men and women as they are, being also in charge of all of our banks and corporations does not give me a good feeling.
The economic problem mentioned before (April 2) is the investment problem. Gerry responded to this by saying that under socialism there would be a surplus as under capitalism. But the issue is not that there would be a surplus but how to invest the surplus.
For the future we will be lucky to muddle along as we have since the New Deal of the '30s. Socialism would be even worse.
Harry Cook is a retired professor of economics. He taught at Southern Oregon University from 1966 to 1986.