Don’t blame capitalism!

The one-handed economist

I don’t know when this trend started, but it’s now with tiresome regularity that I hear students and adults (adults!) blame capitalism for many sins: poverty, environmental destruction, corrupt politics, the housing “crisis”, failing health/educational systems, and so on.

Do the sins of one capitalist company condemn the whole system? Condemn all markets? What if an industry is sucking blood? Taking profits as society decays?

Can you blame markets or capitalism when it’s politicians who make the rules? Is capitalism at its worse still better than central control at its best? Yes, in terms of providing consumer goods, but maybe not in terms of delivering what “society” values (the environment, equality, opportunity)?

To me, the answer is obvious because I separate the market/economics/capitalism as a means of production and ownership from the society/politics/regulation of what’s allowed in the market as well as how market wealth is re-distributed via taxes.

There are plenty of examples of rich countries with capitalist markets and good social outcomes: The Nordics and Switzerland are obvious, most of the EU and rich Asia (Singapore, Japan, South Korea) are doing well. Even the former communist countries of Europe are doing much better, economically and politically, since the Fall of the Wall in 1989. They are now more capitalist and less socialist.

The US is perhaps uniquely bad at sacrificing citizens to the whims of the rich. American has exported violence through wars, guns and its drug policy. American politicians (usually Republicans) have consistently made it easier to harm the poor (education, health care, work) while helping the rich (a recent example). It’s in that sense that the US is more like a “developing” country, despite being “rich” in terms of per capita GDP (like Saudi Arabia).

Indeed — the US ranks #5 in GDP per capita (Ireland is #1, for bad reasons, so pay attention to Switzerland at #2; NL is #8) but ranks #24 in terms of the inequality-adjusted human development index (Norway is #1; NL is #4), which considers life expectancy, education and inequality as well as economic output. The US drops by the most places (19 places) whereas Finland jumps by the most (11 places).

Here’s that analysis, which includes a nice figure:

Aside: In this 2019 debate (just rebroadcast) on the motion “To Stop Climate Collapse, We Must End Capitalism,” those arguing for the motion repeatedly confuse the roles of economics and politics. George Monbiot argues that capitalism requires (unsustainable) growth, that those with money control natural resource wealth and that everyone must get rich. His collaborator Farhana Yamin argues that capitalism doesn’t address social justice and leads to subsidies to polluting industries. These points ignore the role of government and regulation, which can (and does, in some countries) address all these issues. Listen to the debate — especially the points made by Tony Juniper — to understand where the real problems are, and how to reduce the harms of climate chaos.

To me, what we need is NOT a different economic system than capitalism, but a different better political system for regulating capitalism. That means more democracy, more political competition, more subsidiarity, more citizen assemblies.

Bottom Line: Don’t blame capitalism for market failures when political failures are the real issue.

David Zetland, The One Handed Economist

Addendum: Podcast on State capitalism with Trumpian [mafia] characteristics