History has proven beyond doubt that capitalism works. When reasonably regulated to moderate excess no other system of economic organization can better create wealth, promote stability and improve lives. Capitalism is successful because it appeals to rather than fights our basic human instinct for self-survival.
But like any complex system of human organization, capitalism has inherent flaws. The robber-baron era of unbridled excess led to monopolies, which crushed any competition, which in turn undermined the application of free market forces to match supply and demand. Unregulated capitalism devolves into an oligarchy. Around 1900, an amazing 45% of all wealth was held by just one percent of the richest households. John D. Rockefeller's fortune once equaled 1.53% of the U.S. economy, about $600 billion today.
A reasonable question about Rockefeller (Carnegie, Gould, Mellon, Vanderbilt) is, "so what?" Why is concentrated wealth detrimental to society? Rockefeller's fortune came from a monopoly that forced virtually all grocery/hardware stores that sold kerosene or lubricants to stock only Standard Oil products. Hard to imagine today but nearly 80% of Americans were served by Standard Oil -- and by no other oil company.
Without regulation capitalism behaves like the Tacoma Narrows Bridge in which cycles of instability add to each other cumulatively until the system collapses. The most recent example is the disintegration of the banking and housing industries following a decade of careless deregulation of Wall Street. The bottom line is that capitalism works, but needs to be modified from its purest form to be most effective.
As with capitalism, history has proven that a government of, by and for the people is the best form of political organization. Winston Churchillmore aptly said in quoting an unknown predecessor, "... democracy is the worst form of government -- except for all others." Our form of government is a messy compromise among deeply divided factions at the Constitutional Convention. Early on our government was of, by and for landed gentry. Slaves and women come to mind. Many practical tweaks to democracy's purest form are meant to protect the minority voice (small states, individuals). Just as unfettered capitalism leads to monopolies, which destroy capitalism, our founders understood unfettered democracy leads to tyranny of the majority, which destroys democracy.
Like capitalism, democracy works, but needs to be adjusted from the ideological purest form in order to reach its full potential. Ronald Reagan claimed that "government is not the solution to our problems, government is the problem." Ignoring the irony that he was seeking to lead the government he argued was the problem, he was fundamentally wrong. The problem is the inevitable flaws in any complex human organization, private or public.
We have developed an American myth about the magical efficiency of market forces and have deified entrepreneurs. We have developed a growing disdain for government as an obstacle to progress. Neither is entirely true or false: capitalism is not wholly good; government is not entirely bad. Both the private sector and government are essential, and both are flawed. Our future lies in our ability to balance one against the other, extracting the best from both and minimizing the worst from each. This is where the Tea Party specifically, and conservative Republicans generally, have utterly failed. They have lost all sense of balance, relying solely on a mythical private sector that has no counterpart in the real world.
Government as Devil
Experience shows that privatizing what should legitimately be a government function rarely has a good result. The two most obvious examples are education and the armed forces.
Ensuring that we offer free (mandatory) education for all children is inherently a governmental responsibility, one to which our founders devoted much thought. Yet some propose that the deplorable state of education can be cured by market forces. Unfortunately, attempts to improve education by creating competition among select charter schools has resulted in fraud, abuse and nepotism -- and lower standards of education -- where such systems have been tried in California, Texas, Ohio and Pennsylvania. We've seen some great successes with charter schools, but the failures undermine the claim that competition is always the answer.
We have privatized our military to some significant degree with decidedly mixed results. Blackwater is one example of things gone wrong when we slice off from our government tasks that should remain with our elected officials and armed forces. We could easily anticipate that hiring men and women to act as soldiers but without the oversight, training, or discipline so essential to a professional military force would lead to trouble. Blackwater operatives were involved in a deadly shootout in the streets of Baghdad in 2007 that left 17 Iraqis dead and 20 wounded. Blackwater's actions were so egregious that the incident lead to murder charges. While those charges were later dismissed by a judge in the U.S., nobody can be proud of what was done that day. We also have to worry about the agenda of those mercenaries. Case in point, a former employee of Blackwater alleges that Erik Prince, the company's founder, "views himself as a Christian crusader tasked with eliminating Muslims and the Islamic faith from the globe," and that Prince's companies "encouraged and rewarded the destruction of Iraqi life."
Too much government is bad, but so is too little. We must strive for a government that is as big as necessary, and no bigger. The Tea Party is blind to that critical balance; they seek to diminish government without maximizing its essential and necessary good. Members of the Tea Party revere our founders but miss the subtleties of their genius and contort their ideas to fit their ideology.
Private Sector Savior
After wading through multiple menus and dozens of options, does anybody waiting on hold or sitting at home all day to meet the repairman "any time between 8 am and 5 pm" view cable providers or telephone companies as the ideal example of efficiency? Our government is inefficient by design to prevent precipitous action; companies large and small are inefficient through incompetency and mismanagement (which of course also contribute to government inefficiency).
Getting government "out of the way" of entrepreneurs, a popular Tea Party idea, has failed miserably on the false assumption that all government regulation is a brake on economic growth. That claim is naive. Only through government regulation can we approximate an even, open and honest playing field that encourages rather than impedes economic growth by creating common expectations of transparency and integrity in information exchange. Yes, too much government regulation is clearly detrimental and stifling; but too little is equally deleterious. We need balance. Just review the laundry list of malfeasance in the financial sector to see what happens when balance is lost. Here are just some of the firms, funds and financial gurus that have been accused of bilking investors: Goldman Sachs, Bernard Madoff, Enron, Dennis Kozlowski, WorldCom, Adelphia Communications, Rite Aid, Morgan Stanley, Dick Strong, Janus, Bank of America's Nations Funds, Bank One's One Group funds, Alliance Capital, Prudential Securities, Putnam Investments, Merrill Lynch, Wilshire Associates and Brocade Communications.
How can anybody witness the fraud and abuse on Wall Street and dismiss corruption as the outlier? This cauldron of waste, fraud, abuse and inefficiency is the private sector so beloved by the Tea Party. How many times do we have to be burned before realizing that without supervision (i.e. government regulation), these kids are going to break something (collapse our entire financial system)?
Capitalism and entrepreneurship drive our economy. But in the absence of reasonable government regulation they spiral out of control leading to collapse. Once again, we need balance, using the awesome power of market forces to promote growth and wealth, moderated against self-destructive excess with government oversight. The Tea Party has it all wrong. Their agenda is naĂ¯ve, dangerous, ill-conceived and neglectful of all the history we know.
I would like to add a personal note. I worked in the federal government (State Department and White House) for 11 years, and for the past 15 years as a successful entrepreneur/business owner. Comparing those experiences, the smartest, most dedicated, hardworking and talented people I encountered were in government. By far the worst bureaucratic maze I ever encountered was in the private sector, engaging a large multinational corporation with which my company was to become a certified vendor. For three months we daily battled paperwork, unreasonable demands for documents already sent, conflicting or duplicate requests from different departments, and self-contradicting, inconsistent and ever-changing criteria for certification. Other vendors with fewer resources and less patience dropped out in frustration. Ronald Reagan was then, and the Tea Party is now, wrong, terribly wrong. The problem is not government; it is large complex organizations, which become inherently inefficient with size whether in the private or public sector. There is amazing talent in both sectors. Balance is the key to our future, but the Tea Party and their Republican sympathizers completely miss that point. We all suffer for their irrational fear of one and idolization of the other.
Jeff Schweitzer is a scientist, former White House senior policy analyst and author of Calorie Wars (July 2011) and A New Moral Code (2010). Learn more about Jeff at http://jeffschweitzer.com.
Follow Jeff Schweitzer on Twitter: www.twitter.com/JeffSchweitzer
“Unregulated capitalism devolves into an oligarchy.â€
From
http://dictionary.reference.com/browse/oligarchy
ol•i•gar•chy  [ol-i-gahr-kee]
–noun, plural -chies.
1. a form of government in which all power is vested in a few persons or in a dominant class or clique; government by the few.
2. a state or organization so ruled.
3. the persons or class so ruling.
How is that not what we are now?
With a sarcastic ‘Thank You!’ to a generation (or more) of Presidents and complicit Congresses
Federal government is especially necessary when considering policy that benefits all of a nation's citizens---such as defense, education, health. And it takes taxes to pay for them--not magic.
Under capitalism man exploits man; under socialism the reverse is true. -- Lech Walensa
People have been brainwashed into confusing Socialism with Communism solely for political reasons.
You CANNOT have successful Capitalism without Socialism. It would be impossible. We are and have always been a country that has always combined capitalism and socialism.
I believe (and every American I have ever met-otherwise no roads, social security, VA etc) the statement below:
"Socialism is required for things that we absolutely must have, like health care, the common defense, police and firefighters, clean air and water, and so forth. Free markets are wonderful for all the crap we can live without"
There's nothing wrong with that!!!
Capitalism can and always has existed beside Socialism. They complement each other. They need to be balanced against each other to prevent injustices by either ideology.
That is what our two party system is supposed to be about but the corruption of our system has thrown it out of balance.
Go too far to the right, we get fascism. Go too far left we get communism.
We have gone too far to the right.
Blackwater is a complete derivative of gov't. Gov't collected taxes and chose a vendor and in the process created a monster. The entire cozy relationship between the military and its chosen vendors is a horrible Frankenstein that gov't loves. The basic approach of gov't is to control and it would prefer a highly regulated market of large companies. However, the control is an illusion. Look at banks, military, the auto companies, etc.
With 1/3 of our GDP in gov't functions, the largest parts of our economy directly regulated (health, education, finance), there is no evidence that the gov't is a good regulator.
One final small example. The FDA expert panel recently determined at the cancer drug Avastin does NOT work for breast cancer. Medicare has decided to pay for it because it doesn't want the political headaches of making the right decision. Our gov't at work
I completely agree that regulation is necessary but it is fundamentally broken.
Letting the few largest private entities control our legislative , regulatory and electoral systems in order to maximize their economic advantage over the competition in the marketplace is not a free market.
Disenfranchising the citizen/ consumer / employee / 401k shareholder from any real ability to exercise collective purchasing power is not the democratic republic that ideally would provide a stable growing economy.
This anti-government propaganda is intended to have us resent the government cop instead of the robber baron who controls him.
Charlie Munger of Berkshire Hathaway just said here at his last shareholders meeting ....." the Wall Street Bankers were allowed to become megalomaniacal gamblers that made another bubble".