A Failure of Capitalism? Really?

By Anthony Gregory
Aug. 17, 2011

So let me get this straight. After the most socialistic century in history, during which all industrialized nations finally found themselves gravitating toward a mixed economy model, we see a somewhat significant financial collapse of international significance and then another stock market drop a few years later, and it supposedly tells us that capitalism is “doomed.”

Nouriel Roubini says so in a new column at Slate, which goes so far as to argue that

Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proved wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality, and reduces final demand.

Of course every time there is a significant problem with the economy, we are to blame capitalism. In the United States, this has been the trend since the Progressive Era. Workers have it tough, businesses and banks are unstable, and products are contaminated? Blame capitalism, create the Federal Reserve, and usher in a decade of increasing federal intervention in the economy. Oh, but the boom of the 1920s has led to a bust? It must be capitalism’s fault, surely! So the government needs massive public works projects, nationalization of various industries, price controls, agricultural subsidies, more government control of banking and money, and finally a massive war to bring back prosperity. Oh, but wait! There is still a huge disparity between rich and poor? The Great Society and a War on Poverty will take take of that! Now things are good. Capitalism’s rough edges have finally been softened away. There might be some remaining problems, but nothing that steadily increasing federal budgets and countless new pages of federal regulations can’t fix.

Now comes the financial collapse of 2008, and it’s the free market to blame all over again. Forget that for a full century, the economic interventionists have promised to fix all the problems caused by capitalism. Ignore the fact that leftist professors have been claiming that FDR remedied these kinds of problems for all time. Now we are dealing with a new crisis and surely free enterprise is the culprit. With Bush saying he had to abandon free market principles to save them, with Greenspan saying he was too trustful of the market to regulate itself, surely now everyone is on the same page and the government measures necessary to fix the economy will easily be implemented. The bailouts of late 2008 were absolutely necessary to get us on the right track, we were told by all establishment voices.

In January 2009 a Democratic president of a distinctly social democratic variety came to power, and with a Democratic Congress soon was able to push through everything he said was needed to fix the economy. New regulations. Appointments of various economic “tsars.” Bailouts of myriad industries. A gigantic stimulus program and a major revamp of the health care system that we were told would help start saving money very quickly.

A little over two years have passed and the fundamentals of the economy seem no sounder than when McCain said they were sound in 2008, discrediting himself fatally in his electoral prospects when the economy turned sour. The recession and unemployment persist and the market tanks again. We had been told by the central planners they had this covered, yet somehow economic reality has gotten away from them and they were unable to predict or stop the latest problems, despite all the powers they have seized in the last century in the name of finally stabilizing the market.

What is to blame? Not the central planning elite. It is capitalism to blame. Marx was right, the pundits say once again--just as they said almost a century ago that Marx was right about everything else, that capitalism would create general impoverishment and never get basic goods to the masses, that socialist states were the next step on the way to a world without class, war, hunger, or conflict, that the fledgling Soviet Union showed the optimistic future of humanity.

Back then capitalism was to be blamed for mass starvation, and socialism was to be the cure. Nowadays nobody would claim such nonsense as the exact opposite seems to be closer to the truth. So now capitalism is blamed for any dislocation of the market, anything falling short of ideal. Meanwhile, the political class, which has promised for five generations to use the power of the state to sweep away all the imperfections of capitalism, has seemingly failed to do so. The concentrations of economic power identified by FDR still exist, only more so, as liberals lament. The poverty rates targeted by LBJ have hardly improved, despite trillions spent in the War on Poverty. The financial instability eyed by Obama for elimination still remains. Yet what should be blamed? Capitalism, of course.

Marx was indeed brilliant. He argued that logic worked differently for different people, that a capitalist’s reasoning was fundamentally different from that of a proletarian’s. That much seems a bit of a stretch. But different people do seem to follow the steps of logic in fundamentally different ways. If not for that, Marx’s crazed philosophy would have never caught on, and nobody would be pointing at today’s economic troubles, existing in a world of vast regulation and government spending, and say it vindicates Marx’s critique of the free market.