What we have now isn’t capitalism

Adam Smith
Adam Smith

(By DJ, promoted from the comments here to America’s love affair with capitalism a fatal attraction?)

Before we talk about America’s self-destructive love affair with capitalism, we need to define it. So many still fail to make the distinction between capitalism, as envisioned by its “father” as markets regulated by a central government, and economic anarchy envisioned by Rand. Adam Smith would be appalled by so many aspects of what passes for capitalism in the U.S. today. Even Keynes envisioned economics as local and national, not global.

First and foremost, selfish and immoral (or at least amoral) greed had no place in Smith’s theory– the whole intent of “self benefit” was not just personal wealth, but a stable market and a strong society, both of which benefit the economic actor. To do otherwise qualifies as economic terrorism. Smith wrote an entire (little-read) volume about how morals were an essential part of capitalism.

Secondly, Smith realized that government MUST perform certain functions that the market cannot efficiently perform. Public education, roads, etc are essential public works that can only (fairly) be provided by the government. The drive for privatization of everything has nothing in common with capitalism.

Thirdly, Randian anarchists favor more subsidies and less regulation. Talk about looting the treasury! Smith envisioned the opposite: a strong central government that could manage a market to prevent it from getting out of control. Today we subsidize the powerful– banks, oil and coal, mega-farmers– giving them a competitive advantage, despite the fact that we know their impact on our society is negative. And we demand little in return.

Fourth, progressive taxation was one of Smith’s brilliant features. It helps prevent too much wealth from accumulating at the top. The flat tax, the efforts to reduce taxes on the rich, these are NOT consistent with a healthy capitalist system.

Capitalism isn’t perfect. But lately it’s not even practiced.