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January 25, 2013


My favorite courses that I took leading to a degree in economics were those in economic history. I briefly toyed with the idea of pursuing a PHD in the discipline for an academic future, but went to law school instead.

There had to be some form of economic organization ever since humans got together in some broader form of social organization. Even a hunter-gatherer society represented some form of economic organization, and after humans finally came into agricultural surplus that allowed the rise of urban communities because they didn’t have to hunt food all day every day, opportunities for more sophisticated economic organization were greatly increased. Trade between and within tribes was preferable to the taking of the other’s resources via war, a disruptive event which caused economic havoc and dislocation. The new freedom gave humanity a chance to pursue the arts. Science and philosophy were now possible. Humanity was on the move, all the way from the tribal to today’s nation-state status, and forms of economic organization evolved to meet the changing needs of such societies, albeit unevenly in different places and times and for different reasons (all historical studies within themselves).

Skipping thousands of years from the liberating agricultural explosion of the Fertile Crescent to today, we are told that we are a capitalist country, i.e., that we have decided that capitalism is the best form of economic organization there is for the most people in this country. Countries which pursue socialist forms of economic organization are said to be following a false premise. The truth is, of course, that both the United States and Sweden, for instance, pursue blended forms of capitalism and socialism in varying degrees, a hybrid form of economic organization felt to be best in meeting the needs of our respective societies at this time. There is no purity in any economic “ism” – it is a pragmatic science. Whatever works.

As time goes on and new problems arise to be surmounted (increasing population, environmental costs, the prospect of entropy etc.), the blend may need to emphasize one of the “isms” over the other. New problems (or recognition of old ones) call for new emphases. We need to be cognizant of the need for change in providing an economic framework for the maximum benefit of the society we serve as the economic environment evolves. No “ism” or particular blend of “isms” is eternal. Again, whatever works.

My favorite economists are John Kenneth Galbraith and John Maynard Keynes (aka Lord Keynes). They spoke boldly of how to fine tune so-called free market economies for the benefit of all the people to be served. They were populist in that their ideas were fundamentally to benefit all the people and not just the few who had a lot of money and thought they owned the economy as a result (as though money and its protected status are all that is at stake in a free economy). They had no problem in having government provide demand when private enterprise could not or would not do so. Their models were proven true time after time. (They would, as I, have a lot of trouble with the current view that austerity is the way to go. Austerity, as proven by Joseph Stiglitz, Nobel-prize winning economist, is exactly the wrong way to go today).

They knew that capitalism would work for all of us only if regulated to obtain such a result. They were and are right. Left unregulated, (economic) history has proven that capitalism may work for the few in the short run but invariably leads to monopoly, price and other restraints of trade (and “the few” all the while talking about “free trade,” “open markets” etc., the very ideas they are destroying with their monopolizing antics). With lots of money for such PR propaganda, they have had a remarkable degree of success for the last 40 years, among other eras.

It is our task, unpopular as the business press and Wall Street PR artists will paint it, to regulate capitalism for the benefit of all and not just the few. Ironically, without regulation, capitalism will destroy itself since it will overstep the limits a nation-state in the final analysis has to invoke for its own survival. Greed feeds on itself, but contains the seeds of its own destruction.

Following are some observations from the past about capitalism, from left to right:

Milton Friedman (from the right wing Chicago School of Economics): “The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system.”

John Maynard Keynes: “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”

Paul Buchheit: “Capitalism is a cult. It is devoted to the ideals of privatization over the common good, profit over social needs, and control by a small group of people who defy the public’s will. The tenets of the cult lead to extremes rather than to compromise.”

And from the bare-knuckle street economist, Al Capone: “Capitalism is the legitimate racket of the ruling class.” (Al was from a different Chicago School.)

So take your pick. I choose Keynes. When the five richest Americans sat on their growing investments and made almost $7 billion EACH last year (that’s $3.5 million per hour) and during the same year the minimum wage for tipped workers is $2.13 per hour, and the “business income” of the zillionaires is taxed at a lower rate than the waiters and waitresses had to pay as “ordinary income” on their hourly income, I think it is time for regulation, starting with the lopsided internal revenue code.

With regulation, and irrespective of massive propaganda to the contrary, we may still be able to save capitalism from its destination of collapse due to the fatal greed of its practitioners.  GERALD  E

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