When the financial crisis hit, a lot of people on the left claimed that the crisis was an indictment of the capitalist system. They called for new levels of government involvement in the economy - more regulation, more spending, more social programs, more ‘investment’ by government in energy, technology, jobs, you name it.
Well, here we are a couple of years later. I’m looking around the world, and it seems to me that Capitalism is doing just fine - I can still buy the products I want at good prices, there are no shortages, no real price spikes.
But then I look at all the places where government has stuck its nose in - the financial bailout packages look to be a disaster, with huge gobs of taxpayer and borrowed money being shoveled to crony capitalists like Goldman Sachs. In the meantime, the government’s predictions for job creation in the U.S. have been wildly off the mark.
The net effect of these government policies is to create a huge moral hazard by setting the expectation of bailouts if a company is ‘too big to fail’ - socializing risk while keeping profits private - just as those companies want it.
In Europe, the social democracies are failing. Their spending is out of control, their debt is out of control, and now EU taxpayers have had to pony up to bail out Greece, with Portugal, Italy, Spain, and Ireland on the bubble. Now the entire EU structure itself is at risk of collapsing.
The U.S. has a 107 trillion dollar federal entitlement shortfall, a monstrous deficit, and skyrocketing debt.
The states with the biggest governments and highest taxes are failing. California and New York are bleeding their best citizens as they pack up and move to states where government is less intrusive. California is near bankruptcy.
Most states are running huge deficits in their public pension and health care plans - deficits that would put private fund managers in jail. Estimates of the total shortfall range from 450 billion to about 3 trillion dollars. Bailing out just the state governments would cost as much as 30 times as much as the cost of TARP.
The ‘socialist paradise’ of Venezuela is collapsing. It’s mired in debt and its economy is moribund, despite high oil prices.
Japan has just spent another $687 billion on yet another stimulus - after a decade of similar stimulus packages. Japan’s economy is a mess, its debt is out of control, it has a seriously overbuilt and expensive infrastructure it cannot afford to maintain (thanks to all that stimulus ‘infrastructure investment’). And despite all these stimulus packages, Japan’s industrial output is collapsing, falling 8.1% in one month alone in November.
Spain’s much-lauded ‘investment’ in solar power has failed. It turns out that government subsidies can’t kick-start new industries and create permanent ‘green jobs’. The jobs only exist as long as the government pays for them. What Spain DID manage to do is screw up the solar industry - causing malinvestment leading to overproduction and ultimately, losses of all the new jobs and billions of dollars of money wasted. The solar power industry is now in big trouble because it wasn’t allowed to grow organically and sustainably, but instead was pushed into a bubble by government, which then popped when they ran out of other people’s money.
The Spanish solar power subsidy program was lauded by Obama and held up as an example of how the U.S. could do the same thing. Good thing it didn’t, huh?
So my question is this: For those of you so quick to condemn capitalism after the financial crisis, just what will it take for you to admit that big government or central planning is not the best model for a society or an economy? Do we have to wait for California to fail? For the Euro Zone to collapse under its own weight? For baby boomers to find out en masse that their ‘savings’ had long ago been spent by politicians eager to buy current votes, and that the government has run out of other people’s money to pay them with?
At what point do you cry “Enough!” and let the market work and leave people alone to manage their own affairs?
