Rehabilitating capitalism

For those who have lost faith

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Readers' comments




There is no need to endlessly apologize for acting in one's self interest or pursuing a maximum profit through lawful activities. The notion that free enterprise and the profit motive are morally flawed and the successful must pay endless penitence to the High Priests of Social Responsibility is pure collectivist claptrap and stinking hypocrisy! Free enterprise has liberated the masses from grinding and cruel poverty! Collectivism has merely exploited misery for the meanest and power hungry of ends! The greatest good deed any human being can do for another is to provide him or her with a productive job!! Free enterprise does that, collectivist social responsibility self anointed priests do the opposite!

HsiungNuisance in reply to bampbs

This is true bampbs. However, if the Fat Lady ain't sung yet, she does have a 200 pound tumor. The excision nearly killed her and the follow-up chemotherapy is causing her to shrink for many years.

HsiungNuisance in reply to guest-iojmlij

Isn't the offshore tax haven in the UK primarily fulfilled by the Channel Islands of Jersey (and Guernesy)?? Also, its not even "dog-eat-dog" anymore in the USA, but more like "dog-eats-its-own-tail". More like capitalism = economic cannibalism where the nation eats its own citizenry, led by cannibal oligarchs. Sounds like a bad US reality TV show. Be thankful you live in Switzerland. I'm soon to become an emigre myself.

Marty J in reply to Rick T.

I think the whole matter of deductibility of interest is worth studying. It's deductible for businesses because it is an expense item and the Corporate Income Tax tries to only tax net income after expenses--eliminating deductibility could put us in the position of taxing nonexistent profits, even taxing a firm with net losses.
OTOH, deducting interest expense favors debt over equity--then we try to compensate for that with preferential treatment of dividends and cap gains--tho there are other reasons to give cap gains a break. Distortion upon distortion as we try to compensate for the previous action with yet another.
The whole thing is VERY complicated and worth studying, I don't pretend to know how it would come out, but it's asking the right questions, at least.


Anyone looking for something more useful should read Tomas Sedlacek's Economics of Good and Evil. For some reason I haven't figured out, it is a hit in the German-speaking world but not in the Anglo-Saxon world.

Timothy D. Naegele in reply to pnp2

Thank you for your comments.

Mankind has no control over natural tsunamis in the great oceans of the world, and similarly Mankind has no control over economic tsunamis either. They have lives of their own, and they will stop when they have run their course, and not a minute before.

Adam Smith described this as the "invisible hand" in his magnum opus, "An Inquiry into the Nature and Causes of the Wealth of Nations" (or simply "The Wealth of Nations"), more than 230 years ago.

pnp2 in reply to Timothy D. Naegele

"Hold on tight. Things will get very ugly; there will be runs on banks in Europe and elsewhere; and the human suffering will be unfathomable."

"There is nothing inherently wrong with capitalism. Such an assertion is absurd."

Well, there is something wrong. This is not a natural tsunami. It is an economic tsunami. And it can be stopped. There is historical proof:

The Jews had the "Jubilee year" when everyone would receive back their original property, and slaves would return home to their families.
The Greeks in 600 BC had the "Seisachtheia" with more or less the same purpose.

Capitalism is about taking risks, earning winnings but also about cuttting losses when necessary. The global financial sector instead of providing services to the economy has become the economy itself. This is such an epic bubble - so much bigger than any other bubble in the known history - that has to be deflated controllably. I rest confident that Capitalism eventually will find the way out of the long list of dead -isms.


Few things. Firstly, I haven't read the book,(don't really intend to) hence I cannot judge about the quality of the work but do have a few thoughts on the points the author has made in the article.
"When government favours the private sector, Mr Zingales argues, it is all too often by being “pro-business” rather than “pro-market”, meaning that favourable conditions are provided to particular institutions rather than to institutions broadly." He must be talking about crony capitalism here, which instantly reminds me of the situation in Thailand in the 90s where a large proportion of financial institutions were run by relatives of the government officials.Therefore when the foreign banks lent money to those instituions, they believed that in fact they had a little bit of protection. And the foreign lenders were been right: in roughly nine out of ten cases, foreign lenders to finance companies did indeed get bailed out by the Thai government when the crisis came. (the Asian crisis). Similar kind of games were being played all over Asia at the time, but this kind of crony capitalism, albeit it created a massive bubble, it still led to a large number of investments being made in those countries, and if not this "cronyinsm" then perhaps there would no inflows at all.

Also, the pre-last paragraph describing Mr.Zingales three proposals, about subsidies and transparent taxes honestly sounds like something out of high-school economics textbook.

Lastly, I was slightly puzzled by his "tie between capitalism and morality" and "public shaming of corporate crooks". Surely this would undermine the original purpose of capitalism. The line between morality and imorality in business is very fine and subjective from my perspective. And to concluse, I really don't think we should get too wrapped in those ideological debates because at the end of the day, we are steadily moving away from the industrial age towards the age of IT technologies and science which I recon will be very hard for the government to control in the same way as they control physical industries and manufacturing. If they struggle to control the current financial sector, who knows what will the economy look like in 20 years time?

TheTrue2 in reply to HsiungNuisance

Adam Smith was wary of businessmen and warned of their "conspiracy against the public or in some other contrivance to raise prices." Again and again, Smith warned of the collusive nature of business interests, which may form cabals or monopolies, fixing the highest price "which can be squeezed out of the buyers". Smith also warned that a true laissez-faire economy would quickly become a conspiracy of businesses and industry against consumers, with the former scheming to influence politics and legislation. Smith states that the interest of manufacturers and merchants " any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public...The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention."...I guess we missed "the boat" on this one for the last 30 years...cronyism unintentionally creating inequality that hurts

Marx focused on the labour theory of value and what he considered to be the exploitation of labour by capital. The labour theory of value held that the value of a thing was determined by the labor that went into its production. This contrasts with the modern understanding of mainstream economics, that the value of a thing is determined by what one is willing to give up to obtain the thing. Both philosophical points of view are two sides of the same coin...they both ignore the importance of conservation and restoration to ensure that we will always have all the things we want...I think this is why both capitalism and communism are vulnerable to inequality

harderwijk in reply to Jessie M

Let me be the first to metaphorically shake your hand. It’s not very often we get to read such measured and cultivated conjugations in these parts. Thank you.

Please understand that my personal interest lies not primarily in what I think is still euphemistically called ‘Economics’, but rather the imaginative manner in which most people habitually use language. (Which, incidentally, would seem to adequately describe roughly 100% of all human intercourse on the planet.) Your 618 carefully considered words (I printed them) read very like a breath of fresh air in amongst the usual coarse ejaculations of the unwashed. While I have no clear concept of your persona, which is as it should be, and therefore little clear idea what you were thinking when you composed your post, I make of it an impression of one who has been through the wars. And bears the scars to prove it.

Your reference to “buzzwords” made me sit up. You’re not much taken, I take it, as little am I, by the poorly articulated and much-promulgated, politically contrived dichotomies currently on offer, that seem to inform so much of what passes these noisily inter-connected days for public discourse. So few seem yet to realize that any of the plethora of throw-away labels we pin so lightly to our shirt, vulgar epithets like “Capitalist”, “Socialist”, “Catholic”, “Right-Wing”, “Left-Wing”, “Protestant”, “Feminist”, “Jewish”, “Liberal”, “Atheist”, “Communist”, “Buddhist”, “Imperialist”, “Gay”, “Christian”, “Republican”, “Democrat”, “Pro-Choice”, “Muslim”, “Conservative”, et al, say precisely nothing whatsoever about who you are.

If I may, I think your penultimate paragraph is written like a pro. I want to pretend that I detect a sense of jaded weariness in your observation that, “There is truth to be found on both the left and the right, but this review did a good job of burying both underneath right-wing articles of faith.” But you also know, I hope and believe, that any public discourse, particularly as presently so inescapably mediated and universally disseminated, can do no other than exploit, for any perceived capital gain, all the clichés and populist formulations that obviously buy mass appeal, always denominated in momentarily enduring subscriptions.

But what is more important? That people ought to know what to think, by reading the right op-ed analyses? Or that we afford ourselves ample opportunity to learn, no matter what else we choose to waste our time with, to know how to think, by, for example, drinking enough water and sleeping well?
I cannot fault your conclusion. Except to point out that, in your earnest scriptural zeal, your last sentence ended up with a misplaced clause. (You are the subscriber, I think, who could be inspired, not the TE editors.) Which only goes to show, in terms of my own pedantic hobbyhorse, that, whatever we think we might’ve said in what we wrote, requires at least an equal agility on the part of the reader, and holds no iron-clad contractual guarantee of crystal comprehension.

But well I can identify with your professed willingness to “keep an open mind”, despite having occasionally “to listen to right-wing talking points”. Although I’m not sure that I share your grim determination to believe (“in the face of all aridity and disenchantment”), that you may yet succeed in the ever-vigilant preservation of one’s own integrity.

terrestri in reply to guest-iaaiiji

Ugh, you are dense - the author of this article isn't arguing anything other than the merits of the book and a brief introduction of the subject matter - TE isn't saying "failure is an inherent part", the author of that book is.

You'll have to read the book to find out what he means - I'm certain that he explains it.

HsiungNuisance in reply to TheTrue2

I often wonder who notes the irony of the last 30 years. The 1970s saw growing scarcities of various kinds throughout the world. The result was price-rationing in the capitalist countries and state-rationing in the communist nations.
Price-rationing was cruel, but state-rationing was worse. It became grossly corrupt, and made a mockery of the socialist ideals on which their systems were founded. The ruling few lived well; the many lived miserably. We saw what happened as their moral legitimacy was destroyed by corruption and resulting gross inequality. They were unable to reform and instead got revolution.
Merely 30 years after the collapse of the communist states, the rationing policies and its hand maidens - efficiency and competition- have also created widespread corruption and gross inequality that is undermining the moral legitimacy of what we used to call "the Washington Consensus" in the West. Its rather ironic that Poland, which defies the economic downtrend of Western economies, was freed by Lech Walesa, head of a major labor movement. I still remember his 1983 Nobel speech: "He who once became aware of the power of Solidarity, and who breathed the air of freedom will not be crushed." Austerity, as sold by the corporate statists, is just another form of rationing policy and who knows where that will lead as it punishes the broad electorate while rewarding the corrupt financial elites. Business elites are taught in this vein and will not be responsible without controls. Adam Smith himself said as much.

terrestri in reply to guest-iaaiiji

The irony of course is that you became so incensed at reading one page of a two page article that you stopped reading and starting typing a silly retort which doesn't say what was actually wrong with the article. This is common of children.

The other irony is that you're bashing TE's standards and you're not even a subscriber.

This's all like calling a radio station just to tell them they suck and not offering any reasons why - you might as well be yelling at clouds.

HsiungNuisance in reply to jonfid

Yes, thanks to Lady Thatcher, the Scots working people now largely support independence from Britain, and the United Kingdom that existed since Jacobean times may come to an end. What a great accmplishment! To reply to your naivete more directly:

a) The "free market" is an economic fiction much like the "state of nature" in the political theory of the 17th-18th century. Like todays "free market" ideology, it was used to justify all manner of subjugation of people by the state. Only today, its subjugation by the corporatist state, whether left or right. Markets today are in economic historians D.H. Fisher's words, "highly regulated and actively manipulated by both public and private instruments. The real question is not whether we should interfere with the market, but what sort of interference we should make, who will make it, and what its extent will be." Will it be governments representing the interests of the broad citizenry or the the interests of rent-seeking, regulatory-capturing elites?

That increase of living standards you speak of was really a brief span of time between the late 19th century and the third quarter of the 20th century, after which USA and UK gov't policies favoring the financial elites had eroded the living standards of the broad working citizenry. And now the price of these policies is coming home to Western Europe and the United States.

b) Actually, you are correct about the need to "reverse the process", only it does not necessarily mean straight redistribution across the spectrum. It just means making the financial elites redirect their investments back home to productive enterprise that employ the broader citizenry and promote higher living standards. This could mean somewhat lower profits for some, but that would be the cost of doing business, and would be mitigated ultimately by the R&D to increase productivity. Referring back to (a), "free trade" in a globalized market is just another euphemism for allowing corporations to manage international trade instead of governments, which was the norm through the 1970s. Corporations only think in the "short run", leaving it to governments to think for the "long run".

guest-iaaiiji in reply to zoratao

I am not a math major but I believe that the negation of consistency would be inconsitency. But at this point I am not sure if we are deaing with the inverse or the contrapositive?

If P then Q
If ZF is inconsistent then its inconsistency can be proven.
My formula merely shows consistency, nothing more.



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