This just might be the most elegantly concise deconstruction of contemporary economics that I’ve ever read. It says it all, it says it in less than forty words, and it harpoons the One True Faith dogmatists (of more than one stripe) right up the arse.
Failure is intrinsic to the market economy: but the legitimacy of capitalism depends in part on how it deals with the consequences of such failure.
The full article is here. It’s much more specific in focus than the quote I’ve used, but still well worth a read. As is most else of what Kay has to say. If you only ever read one book about capitalism, it should be his The Truth About Markets, which banishes all wishy-washy starry-eyed hippie leftism from the debate, while still providing incisive critique of the unhealthy worship of market systems (and the deceitful subversion of same by powerful vested interests). It is ultimately a critique (in the full sense of that word) from knowledge rather than ignorance, from pragmatism rather than blind political faith, and from humanity rather than doctrinal venom. Priceless.
I’ll admit that I’m up to speed on that particular issue in England, but the rest of the article was nonetheless very interesting. Thanks for posting that.
nice quote and certainly true. but the problem is to define ‘failure’. tea party views on what is failure certainly differ from tory or continental social democratic views on when and where market-economies fail. defining this failure is the real political battleground in any liberal-democratic market society.
from an european perspective – and I am an american citizen – it’s astonishing what amount of failure – i.e. misery, destroyed lives, value etc – even democrats are willing to accept these days.
Interesting article. There is a similar issue where US government contractors will win a contract and immediately file for bankruptcy. I’m not sure how it works, but it seems to work well for them. Bastards.
On a similar but unrelated note, I’d like to recommend the book “Sex at Dawn” by Christopher Ryan and Cacilda Jetha. The book delves into the nature of prehistoric mankind. The authors go into length about how many scientific conclusions were made wrongly, to support the concept of a nuclear family.
At one point the authors discuss the nature of mankind with regard to altruism vs. selfishness. Whereas Western concepts of economy are based on scarcity, apparently prehistoric humans (and “modern” tribal humans) live on an economy based on excess. A nomadic lifestyle resulted in a surplus of food and greater variety than agriculture-based man. It’s interesting to see how differently prehistoric man may have lived from modern man, where food and sex were plenty. Prehistoric humans may have had an easier existence than modern humans.
Tom Slee’s “No-One Makes You Shop at Wal-Mart” is an excellent deconstruction of free market rhetoric using its own tools of analysis (non-cooperative game theory). Also this post by Cosma Shalizi on the slippage between economic theory and libertarian rhetoric is very nice indeed – http://www.cscs.umich.edu/~crshalizi/weblog/253.html
Read the article and agreed with most of it. However, what is missing is the analysis re: how are the rewards vs. risks are set up. If a loan giver gets rewarded [$, status]for signing people to mortgages, whether they can pay them back or not, they will do that to excess, especially if the risk is transferred via derivatives bought and sold by stock brokers.
Theoretically, governments should be aware that a large middle class [people able to buy lots of stuff]is very important to encouraging wealth production; and modify the “capitalistic system” to provide rewards that encourage this process.
Lately, most govts. have been doing just the opposite and the spread between rich and poor is getting larger and that has lead to unmanageable debt by govts. and citizens who can no longer afford to buy all that stuff, but keep doing it anyway.
Republican ‘economics’ is not economics, pretty simple. Like a science (though it is none) it should be serving well-being. For republicans it serves a dogmatic ideology. This is all there is to it, their ‘plan’ for the economy of the US is to remove the working economy part and insert their version of theocratic ideology. They are willing to destroy it because it simply means nothing to them anyways. Like kids saying ‘what do i care, not my problem, i never liked it anyways’.
Capitalism in and of itself is not a problem, but when capitalists get into the business of governing, everything goes to hell. What is the worst type of government that has punished mankind? The kind that controls the means of production and conducts the central planning for all of its citizens. That is exactly what has happened in the West under corporate plutocrat control. The capitalist overlords have become in totally in charge of government, have become the ultimate authority, and the overlords use that ultimate authority to take our money and the fruits of our labors, through the use of “thugs, uniformed or not, and upheld by a willful ignorance and stupidity of the very majority the system oppresses.” (Excerpt R. Morgan)
In my opinion, Mr. Morgan, your statement about society is the most horrifically accurate defintion to date and equally applicable to current strain of “capitalism” pervading the globe. The classic modern example, the private prison industry writing laws, and politicians plagiarizing those laws under the guise of “security”, to imprison an ever increasing number of people. In this arrangment the prison overhead paid for by the masses, and the elitists using prison slave labor at way below labor market rates, cause a further depression of wages, increased unemployment and increased the tax burden, in order to spawn more black market criminality, to provide even more prison slave laborers, and so the cycle continues until there are but two classes, the slave class and the elitists. Capitalism is no longer capitalism when it governs, its government, bad government.
I should add to the above, that when the capitalists create barriers to market entry, they not only govern, but they also get to define the “black market”. Businesses creating barriers to market entry via government no longer fits the definition of capitalism, because it tramples the hallmark of capitalism, competition.