RebelCapitalist: Financial Information for the Rest of Us

We Should Be Questioning Capitalism

Oct 28, 2010 | By: Mr_Blue | Tags: capitalism, de-regulation, money manager capitalism

Huge income inequality, high unemployment and another economic crisis (this one more severe than last one) are all occurring under our capitalist economic system. These are actually characteristics/flaws of a capitalist system but only made worse by the current form of capitalism - Money Manager Capitalism. We should be seriously questioning our economic system particularly when so many peoples’ economic security is at stake.

Hyman Minsky wrote in his book John Maynard Keynes:

No economy, controlled or uncontrolled, can long survive as a free society unless it is deemed equitable, unless it is seem to promote social justice.

Clearly, our economy is not equitable and it certainly not promoting social justice. So what does that mean for our free society? Many, including myself, would argue we really don’t have a free society anymore.

We are far from equitable when Top 1% of population earn over 20% of income in the U.S.:

Or when Wall Street continues to hand out bonuses after practically destroying the economy and the rest of us suffer with 17% unemployment/underemployment rate. This is far from equitable. But that’s our economic system.

What about the fact that today economic mobility (ability to climb proverbial economic ladder) is non-existent for many American.

What about the retirement deficit of $6.6 trillion - the gap between the amount of money that Americans need in retirement versus what we actually saved.

This is all happening under our capitalist system.

Some would argue that the federal government’s interference in our capitalist system has caused these problems. Oh really? Federal government wasn’t holding a gun to anyone head when Wall Street decided to hog wild with mortgages and created other toxic securities based on mortgages (nice financial innovation). Besides, take a look at other developed countries such as Norway, Sweden and even Canada that have far more ‘government interference’ than U.S. and their standards of living are much higher and economies more equitable.

John Kenneth Galbraith introduced the concept of Countervailing Power in his book American Capitalism: The Concept of Countervailing Power (1952). Prof. Galbraith argued that modern economies were no longer competitive but were based on balance of power between corporations, unions, consumers and government. Our capitalist system is way out of balance. Corporations, particularly on Wall Street, have too much influence over policy and government. For instance, between 1998 to 2008 Wall Street/financial sector spent $5 BILLION on lobbying in DC. Some would argue that money doesn’t equate to influence. Oh really? What did Wall Street/financial sector get in return for that $5 BILLION - Gramm Leach Bliley Act of 1999, Commodity Futures Modernization Act of 2000, regulatory structure under Bush Administration shut down, and $12 trillion taxpayer bail out. A pretty good return on $5 billion.

How can I forget? What about that BP Oil Spill/gusher in Gulf of Mexico. Lack of regulation and huge incentive to cut corners for higher profits.

This is all happening under our capitalist system.

Questions or issues for us are:

1) Do we want to change our capitalist system? Maybe the answer is no. We will see.

2) If yes, what changes do we make so that a new economic system is more equitable?

What do you think?

Good luck.