There is good capitalism and then there is bad capitalism. Good capitalism is socially responsible. It serves and benefits society at large. Bad capitalism is the corpocracy's socially irresponsible economic policies and practices that benefit only itself and was largely responsible for the 2nd Great Depression, or Economic Katrina that began a few years ago and is still taking its toll on us. The modern version of bad capitalism in
In moving toward socially responsible capitalism, nine characteristics of bad capitalism need to be recognized and eliminated: 1) free market ideology; 2) fear mongering over national debt; 3) privatization; 4) economic disparities and poverty; 5) shut-out capitalists; 6) financial speculation; 7) exploitative globalization; 8) unsustainable development; and 9) elitist pay without performance.
Because bad capitalism is so enter twined with it, the rest of the corpocracy will also need to be eliminated and that requires a host of sweeping political, legislative and judicial reforms, not just economic reforms per se (I have already given an overview of all the reforms needed in my article about Powell's legacy). The intent of the present article, therefore, is just to discuss very briefly each of the nine bad characteristics and also needed changes that would add up to the kind of capitalism we deserve to have and must have.
In discussing the changes needed I will occasionally refer to a nationwide taskforce on economic reform. It doesn't yet exist, but let's assume it has been commissioned by some nongovernmental group and charged with polling the opinions of middle class Americans, the socioeconomic group absolutely essential to any true democracy and viable economy, and then melding the solicited public opinion with the taskforce's a) consideration of new ways of thinking about capitalism; b) enunciation of a proposed new national economic policy; c) design of a socially responsible form of capitalism that has none of the nine bad characteristics; d) proposed objectives and initiatives to implement the design; and e) report on the findings and recommendations to the administration, to the Congress, and to the American people.
There would be no economists on the taskforce who were blindsided by Economic Katrina that swamped
1. Free Market Ideology
Adam Smith's espousal of a free market has been far overblown. The putative "father of capitalism" made only a passing reference to "the invisible hand" in his Wealth of Nations and never once in it used the term "capitalism." A moral philosopher, he understood the importance of morality, which he believed was manifested in a person's sympathy for others. He would have recoiled at the very idea of the corpocracy and its capitalism, for he thought the emerging corporations of his time posed threats to society If only that prescient man along with Aristotle could join the taskforce!
The proof is already in the flattened pudding, flattened by Economic Katrina, that free-market theory is utterly unworkable, destructive, and a hypocritical ploy by the corpocracy. The so-called Chicago School of Economics, where Friedman once held forth, is hugely responsible for touting the virtues of the free-market. And it is especially noteworthy and satisfying to learn that another influential member of that camp, lawyer and economics writer Judge Richard A. Posner, has since turned heretic and is now debunking the free-market ideology. He ought to be the honorary chair of the taskforce, and it should include in its proposed national economic policy a debunking of free-market theory! The policy also needs to delineate government's proper obligations and role both in society and in its market place so as to strike a balance between total government rule on the one hand and total market rule on the other. This policy would do well to reflect Abraham Lincoln's view that the proper role of government "is to do for a community of people, whatever they need to have done, but can not do at all, or can not so well do, for themselves-in their separate and individual capacities."
2. Fear Mongering Over the National Debt
In one of his many insightful columns Nobel laureate Paul Krugman wrote that fear mongering over the national debt may prove to be as destructive as was fear mongering over weapons of mass destruction (WMDs) that the Bush Administration relied on to justify bombing Bagdad. Just as the WMDs were never found so too says Krugman has no evidence been found that proves the fearful claim by politicians, cons, and others that the national debt destabilizes our economy as well as jeopardizes its recovery. The reason the unfounded claims could prove destructive in the short term he says is that they create a pressure for reductions in federal spending that would actually worsen the current socioeconomic situation.
As I see it there is good national debt and there is bad national debt. Good debt means enough federal spending on programs to help meet real economic and social needs such as more employment, better education, and better and affordable health care that once better met will require far less government spending in the future, by then only maintenance spending in contrast to remedial spending. Bad debt means going into the red from unreasonably and unfairly low taxing of the wealthy; from more rather than less corporate welfare, especially warfare welfare; and from federal spending on initiatives our society doesn't really need, actually suffers from it, and shouldn't be burdened by them.
National debt is a political and socioeconomic phenomenon. When President Clinton left office there had been no federal deficit for three years and surpluses were expected to continue for a decade longer. President Bush's policies, on the other hand, created massive bad debt. His policies were to overspend on the wrong initiatives and charge the wealthy even less for expenses. Both presidents in their policies contributed in no small measure to Economic Katrina, and attempts to recover from it simply inflated the debt (not all the economic stimulus spending in my opinion was bad debt). Today, the national debt seems to be around $13 trillion. Meanwhile, the social needs of the country have been festering from underfunding of education, health care, and employment programs, the very needs that had they been attended to would have, as I said, resulted in good and shorter term debt.
The taskforce needs to examine federal spending levels under varying political, economic, and social conditions and propose some kind of a gauge for determining what would be the appropriate deficit levels in the short and long term under the various conditions, including a good estimate of what would be a realistic, war-free defense budget.
Rabid government haters and corporate purveyors of privatization argue that business can do much better than government in providing public services and meeting public needs in general. Not so! Michael Edwards, activist and author, explains in his book, Small Change: Why Business Won't Save the World that the inherent nature of business with its profit-seeking motive and its short-term perspective and demands makes business unable to come even close to solving hardcore problems like poverty, epidemics, war, social discord, and the like. I would simply add this question: How many business firms, large or small, can you name that are making significant inroads on such problems?
Yet the public sector is increasingly being taken over by the private sector. Reclaiming them totally, as in the nationalization of industries, would be a draconian and politically suicidal step. Nevertheless the task force should strongly advocate nationalizing certain public-sensitive industries such as the defense industry, the energy industry, the financial services industry, and the health care industry. The task force should explore all proposals for reversing privatization, including the many proposed by the non-economists on my list (but insufficient space here to include those proposals).