September 22, 2008

Eroding Capitalism

Let’s be frank. With every news headline, political stump speech, and conversation held from Wall to Main streets, we’re not discussing the failure of capitalism. We’re focused on the failure of government intervention. Skimming the nasty landscape that riddles today’s headlines, we are awash in corporate socialism, where good risks and resulting profits are private, but bad risks and their resulting losses are passed onto the tax payers.

During the early 2000s, cheap money drove our economy into a long-term spending spree, reminiscent of the Japanese economy of the late1980s. It took nearly 12 years for Japan to recover. During that time, monetary policy was completely ineffective by lowering its interest rates, to the extent that only the priveleged few could receive funding.

In Japan, the economy never felt an overnight shock that may have prevented the long-term ailing that prevailed. Industrial policy was aimed at stability, rather than economic correction. In today’s case in the US, sure, an overnight correction would decimate our short-term economic activity and/or prospects. But that may be preferable to stitching together a quilt of misguided solutions, in the hopes that we’ll get it right someday.

Rather, wouldn’t it be best for all to be held accountable to the same standard– Where an individual (or a corporation) takes responsibility for its own actions. By having Andy feel the pains of Beth’s mis-management, why should Beth ever correct her ways – particularly when Beth has already prepared her golden parachute?

Related Reading

Greenspan’s Sins Return to Haunt Us

The Government Is Not Supporting Stability

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