In a little over a week a new president will be sworn in to office in the United States. Aside from the many exciting and fascinating things about this particular ceremony, it heightens interest in another compelling event underway right now: the still unfolding financial crisis, and a worrying recession – what some are even calling a depression. On the surface, the crisis has once again compelled many to question the character of American capitalism. . .
Progressives are a diverse lot. Most mean well, and truly bend their efforts to the betterment of mankind. Others have little use, really, for mankind, and would just as soon not be troubled with it. Since they inescapably are, however, they are willing to bestir themselves to offer it the benefit of their labors on its behalf in exchange for power and privilege. Still others take a peculiarly pragmatic view of the matter . . .
We all know how capitalism works. But even its most ardent believers aren’t likely to want it in its pure form. Do you really want to scrap all regulation and oversight, and just let everyone sort it out in the marketplace? Some might argue that we do indeed. . .
If some supporters, as we noted yesterday, are concerned about the purity of the capitalism we actually practice, a good many critics are concerned about the purity of the capitalists who practice it. Many are simply appalled at the concept of hosts of people mixing it up while both animated and regulated solely by self-interest. No good is likely to come of that. Surely, the idea that it might seems counter-intuitive enough to justify some skepticism. But Adam Smith certainly was able to see . . .
We all know what the key drivers are behind the various forms that progressivism takes around the world. In general, it is a forward-looking movement. It believes in change, the need for which is discerned, and the application of which is guided, by experts from within its own ranks. In addition, it is devoted to efficiency and discipline, seeking ways to make government a more effective and productive tool for executing its aims. This requires the input and administration of experts, as well. . .
One of the enduring themes of the debate over social, economic, and political organization revolves around the putative tension between freedom and efficiency. Advocates of the latter argue that too much of the former either cannot be trusted to the masses, or cannot be effectively wielded by them. Supporters of the former counter that so-called qualifications are quite beside the point. . .
Capitalism is often thought of as strictly an economic concept. But it is arguably more properly seen as the economic manifestation of a cultural one. In fact, as we’ve noted here before, Edmund Phelps, a Nobel Prize winner in economics, draws a clear distinction between what is sometimes called Anglo-Saxon capitalism as it is practiced in the U.K., the U.S., and Canada, and what he gently refers to as the Continental system of mainland Europe (please see here for more detail on his views regarding this). The dominance of these economic regimes in their respective areas is not a coincidence. . .
At the heart of the debate between capitalism and progressivism over the organization of our societies and economies is the question of information: what it is, who can generate it, who can understand it, who owns it, and who can be entrusted with acting on it. These aren’t as easy to figure out as you might think. But hard core progressives think they are, and all with one answer . . .
A society with a liquid capitalist economy allocates resources to countless endeavors, most of which fail. Some earn an economic return, and are kept afloat, typically from the cash flow they generate from current operations. But the economy as a whole tends to cut off new investments in the many efforts that fail to meet that threshold, diverting them instead into growing the really superior performers, or funding yet newer, more promising ideas. . .
One of the problems with crises is that they create great uncertainty. We are still debating the causes, nature, and resolution of the Great Depression. It should come as no surprise, then, that we remain so unsure about the reasons for, extent of, and way out of the present one, But one thing we do know is that crises attract experts. Indeed, we welcome their appearance, and we submit with relief to their prescriptions. Experts have noticed this. . .
Peter Drucker used to argue that the purpose of a business is to create a customer. He encouraged executives not to try to explain their businesses to their customers, but to let their customers – and potential customers – explain their businesses to them. The business should then organize itself around the results. Capitalism is the ideal vehicle for facilitating this process. . .
As we have observed, trade flourishes in an environment where there is trust in one’s partners – confidence that understanding is mutual and everyone will keep their word. It is also important to have an infrastructure of legal protections, to which recourse can be taken when there is disagreement about whether that has been accomplished. . .
Capitalism is not a program of action designed to facilitate economic activity, but a model used to describe it. It depicts the consequences of the freedom to pursue economic self-interest. These include everything from markets to anonymous shareholder-owned companies, their interactions, and the individual and collective results of them. Many celebrate the accomplishments of this system, and others condemn the presumed costs entailed in achieving them. . .
It is common to think of corporations as entities separate from ourselves – as “things” with no human characteristics or motives. They are just profit making machines, the deadening instruments of distant and terrible masters. We are dragooned into service from the local villages, and all of us – we and our communities, in our ignorance, destitution, and dependence – are held hostage to the mysterious rulers of the silent keep in our midst. Or so it sometimes seems. . .
We observed, yesterday, that the workplace is just one of many social settings in the lives of its workers. This, if nothing else, compels managers to pay close attention to both employees and the community. That is, it is prudent for managers to do so well beyond the requirements of the law, and even beyond the provisions of contracts they may otherwise be able to negotiate, in order to more effectively discharge their primary responsibilities to enhance shareholder value. As uninspiringly calculating as this may sound, it does nothing to diminish the worth or importance to an organization of engaging, thoughtful managers of high moral character who genuinely care about their colleagues and staff, and who inherently built trust and confidence in the integrity of management and the corporation. It simply adds the vital acknowledgement . . .
When management takes the initiative to identify and establish relationships with those who might be influenced by its actions, the term “stakeholder” takes on a perfectly benign, helpful meaning. This is the case, as well, when management responds constructively to constructive suggestions from interested parties that such a relationship might exist. But the term “stakeholder” often suggests a combative relationship, as well. . .
Forestry experts used to attack fires as soon as they began, struggling to put them out before they could do what they imagined to be damage to a vital natural resource. As it turned out, though, they had things backward. The experts learned that their remedy was the real danger, the fires the cure. . .
At bottom, the debate over the nature and operation of an economy is really about freedom – even more than that: possession of freedom, or sovereignty. The question is: does government give us a revocable license to exercise privileges we negotiate with it, or do we issue government a revocable license to administer for us matters regarding the collective interaction of our inalienable rights? We should be experimenting with our institutions, not they with us . . .