Is Capitalism Good?

Someone asked this on GTAF. May as well repost my reply here since I haven’t blogged in a while..

Capitalism, like most other inanimate things or systems, isn’t good or bad in and of itself. Any system can be used for either, and no system is infallible. So, given the choice of potential success or failure by government regulation over the same potential via consensual means, I will always take the latter. Even though government can smooth out some of the rapid, downward changes (and, in reverse, delay upticks), it is always backed by the threat or actual use of coercive, lethal force. Regardless of whether this force is aimed at the “right people” (usually determined by populist, mob mentality), it only serves to legitimize the authoritarian urges of the people drawn to government work. And it always desensitizes the public to further expansions of the state; or even worse, conditions the public to ask for more of it.

233 years ago, we fought a bloody revolution in large part due to sales taxes on tea and stationary. Yet after two centuries of ever increasing cries from the public to “do something” about this or that, we’ve reached the point where the government thinks it can control or tax anything. And the public demands more of it.

That said, Mike Tequeli is correct that we don’t have a true free market. This crisis was caused mostly by the Federal government forcing banks to lend out money to people who couldn’t afford it via the Community Reinvestment Act and its progeny/amendments. Lots of CRA supporters are pointing out that it only forced a fraction of the banks to do anything, and that the rest was all greed. This is true to an extent, however it ignores that the ones who weren’t forced to do so were still encouraged by the implicit Federal backing via Fannie and Freddie. Either way, it is a result of governmental social engineering, and getting mad at the executives who took the bait is akin to beating the family dog because it shit on the carpet after feeding it chili and locking it in a bedroom for twelve hours.

At any rate, I think the bailout might end up being largely symbolic. I heard somewhere that a number of the institutions who are affected by the mess aren’t going to take part in the bailout anyway because of all the strings which are attached to it. Even if a substantial number do play along, the (half-ass) plan probably won’t do anything other than drag the whole situation out for longer than it would have taken for the market to correct itself. Granted, this will probably make the damage more gradual, and perhaps limit the floor it would reach in the short-term. But overall, I feel the rewarding of bad behavior, both on the part of the market and the government, will only serve to obfuscate the lessons that should have been learned through all of this.

But, then again, I’m not an economist. tounge.gif