Shackle laissez faire capitalism
Despite admirable business success, Joe Scarlett provides no objective or philosophical support for a connection between “free markets” and “the best economic system in the world” (The City Paper, Aug. 16). Here are a few contrary facts and values.
“Wealth generation” is not the primary measure of an economy. It is the production of valued goods, services and work for a community. “Spectacular wealth” starts with the 2007 average S&P 500 CEO pay of 344 times the average worker, the highest differential by far in the world. No U.S. city ranks above 30th in international comparisons of quality of life. Most northern European nations equal or better our productivity with substantially more democratic benefit.
Regulation is not “only” an added cost of production. Regulation provides the legal framework for level playing fields as well as the political stability for economic decision making. It pays for businesses’ external costs (infrastructure, pollution, training, bailouts, unemployment insurance, etc). It requires fiduciary responsibility of financial intermediaries.
Scarlett’s “wild and crazy ideas” describe well the shadow economy that recently brought free market capitalism to its knees. His “innovations” — like exotic securities, abstruse financial modeling, reckless speculation with “other people’s money,” 30-to-one leverage, off-shore tax avoidance, and government-subsidized globalism — all contributed to successive energy, stock, tech and real estate bubbles of the past two decades.
Surely Scarlett jests in defending free market “failure … as long as we don’t violate the various laws and regulations.” Since the 1970s the captains of wealth, aided by officials of both political parties, have systematically dismantled restraints on financial extravagance. The resulting losses of jobs, homes and retirement accounts are not victimless business failures.
Apparently Scarlett has not absorbed the recent admissions that laissez faire capitalism has congenital flaws. Yet like Scarlett the Johnny-come-lately critics (Alan Greenspan, Jeff Rubin, Lawrence Summers, Alan Blinder, et al) can’t see past “immutable laws of economics and history” (Blinder). That is where alternative evidence and values would help.
Richard Posner, for example, suggests we learn from the more seasoned and productive — and less Darwinist — European capitalism. William Greider unmasks the rotten pillars of U.S. corporate capitalism: waste, consumerism, environmental destruction, militarism, subsidy, foreign labor, trade deficits and excessive inequality. Such analysis undercuts Scarlett’s mantra that regulation leads to business mediocrity. Wish that the U.S. could promote competitive industries, retain labor, and provide social unity as the Scandinavian and Northern European governments do.
Kenneth C. Winter