Capitalism After the Crisis

Today I read a great article in National Affairs called "Capitalism After the Crisis." It discusses what is happening to the idea of capitalism after the recent economic crisis, and makes some very important points. One of the most important ideas is that the idea of capitalism is dying today, but not because of it's failures, but instead because we are turning away from capitalism:

When the government is small and relatively weak, the way to make money is to start a successful private-sector business. But the larger the size and scope of government spending, the easier it is to make money by diverting public resources. Starting a business is difficult and involves a lot of risk — but getting a government favor or contract is easier, and a much safer bet. And so in nations with large and powerful governments, the state tends to find itself at the heart of the economic system, even if that system is relatively capitalist. This tends to confound politics and economics, both in practice and in public perceptions: The larger the share of capitalists who acquire their wealth thanks to their political connections, the greater the perception that capitalism is unfair and corrupt.

Under Democratic-control and influence, America is increasingly becoming less a company where your fortunes are defined by what you do, and is increasingly becoming a nation of who you know- who your political connections are, who is giving you grants of taxpayer money, who your parents are, etc. If you have a million dollars now, the best way to turn it into two million is not to work harder and develop a better product- it is to lobby government to have government help protect your product from competition, or to give you a government contract, or to help you in some other way. Our nation is becoming corrupt under Democrats and corruptible Republicans.

Think about what is going on today, especially in the debates regarding healthcare and energy. Supporters of government control of these areas of the economy talk about all the failures of these 'private capitalist systems'- but over the past decades, energy production and healthcare have become amoung the most non-private non-capitalist systems in our economy. The soda-pop market or movie business does not have the same problems as transportation, energy, healthcare, etc- and the difference is not that these problem areas are more capitalist, it is that they are less capitalist.

The problem with healthcare is not not enough government, it is too much government. The problem with energy is not not enough government, it is too much government. The problem with transportation is not not enough government, it is too much government. The problem with education is not not enough government, it is too much government.

The sad thing is, America might have turned the corner towards statism and corruption, and what once made us exceptional may have been lost forever:

Once economic and political systems are built to reward relationships instead of efficiency, it is very difficult to reform them, since the people in power are the ones who would lose most in the change.

One way to possibly make America exceptional again is to remember how we got here. When your children read stories or watch movies, what sort do they read or watch?

The image many Americans have of capitalism is therefore that of Horatio Alger's rags-to-riches-via-hard-work stories, which have come to define the American Dream. By contrast, in most of the rest of the world, Horatio Alger is unknown — and the image of social mobility is dominated by Cinderella or Evita stories: fantasies more than plausible dreams.

Are your children taught to win the government lottery? To win riches by being a professional athlete? To go to Hollywood and star in movies? To marry someone rich? Or are you teaching your children that the way to success in life is hard work and a good attitude? And is our society still reinforcing those teachings by rewarding hard work and a good attitude more so than luck and connections?

Read the whole article- I'm only pulling from a tiny portion of it, but the whole thing is indeed a good read.