Guest opinion by Harry Cook: Where I take issue with Cavanaugh is in his blaming this disaster on capitalism; blaming this on capitalism is like blaming the car for the accident.

Gerry Cavanaugh responds (see July 14 letter at length "The stagnation of capitalism") to my July 2 piece "Financial fiasco in a nutshell." My point was that the financial meltdown that has brought the world financial system to its knees was the work of a few bankers exploiting financial weakness in our system along two lines, the housing boom and the credit default swaps.

Where I take issue with Cavanaugh is in his blaming this disaster on capitalism. Blaming this on capitalism is like blaming the car for the accident. Both the car and capitalism have to be controlled.

The fundamental problem with capitalism is that it has several inherent social deficiencies (monopoly, consumer deceit and environmental degradation) that have to be controlled for capitalism to work in the public interest and not for the benefit of a few. (Problems in the international area are a whole new and different set of issues beyond my scope here.) Conditions for control are an involved electorate and the election of a president who understands these weaknesses of capitalism and will support enabling legislation and appropriate regulatory power for the necessary federal agencies.

Unfortunately, political reality is that the foregoing is much easier said than done. The electorate is woefully uninformed, misinformed and uninvolved and the probability of adequate regulation is very low. We will be lucky to muddle along in the future much as we have in the past. The last 30 years of essentially Republican laissez faire policy has seen wages virtually flat, while incomes at the top have skyrocketed. Credit default swaps are laissez faire at work.

It would be nice if there were the socialist alternative suggested by Cavanaugh, but it does not exist. There is no country with an advanced economic system that is socialist (government ownership and control of the means of production). All modern European economies are basically capitalist with a strong element of government control and regulation.

Moreover, it has never been analytically explained how socialism would work; perhaps that is why the modern socialist government is nonexistent. No one, so far, can explain how socialism would replace the market mechanism of capitalism, especially the investment function. It is invariably blithely assumed that socialism could slide in and take over.

Cavanaugh clearly sees the need when he says, "We need an economic system that is democratically controlled, ecologically sane and designed to provide for the use and needs of humanity." So true. I couldn't agree more. The question is where is it?

Harry Cook is a retired professor of economics. He taught at Southern Oregon University from 1966 to 1986.