All morning, I’ve been reading articles about the inevitable decline of capitalism as we know it.
All a bunch of hubris. Capitalism is alive and is doing very well, however I believe it is being undermined by this unprecedented and tremendously ineffective ‘bail-out’ plan.
I think the very statement of ‘capitalism on the decline’ refers to the concept of ‘economic bubbles’.
Economic bubbles are a common phenomenon in nations whose industries work under highly unregulated systems where the concept of ‘oversight’ is nothing more than an institution responsible for tracking statistical data. Yes, I'm referring primarily to the US system here. We have to ask ourselves why we don't see purely 'European' economic bubbles (note that the current troubles in the European and Asian economies can be traced primarily to the practices of US companies).
Economic bubbles come and go in cycles of 10 years or so. The Savings and Loans(1980-90), Internet (2000) and now the Financial (2008-??)...
The solution is not 'bail out' but 'prevention'. This entire financial debacle could have been prevented and you only have to dig below the surface of only one of the conspirators’ (AIG) investment practices to know why.
I am a spectacular believer that capitalism works and it works well - only through careful and prudent oversight by truly 'independent' regulatory institutions. If these institutions (SEC) happen to fail, I believe they should also take partial responsibility of the crisis.
At this point, our argument is that AIG and its posse were able to con so many institutions and governments around the world that it 'cannot' be allowed to fail because if it does, then it would bring down the rest of the world. There is no doubt that the failure of these massive institutions will cause havoc, however forcing each and every US tax payer to save these companies is only akin to taking money from your left pocket and putting it back into your right pocket.
It is not a solution.
The closure of these institutions will leave a legitimate void in the system and there are other companies all around the world that were prudent enough not to take on faulty practices, who will fill in this void. This is how capitalism works. The closure of these toxic institutions will not drive us back to the stone ages. As painful as this transition of power will be, there is nothing to worry about.
One good example of this is the closure of so many of the investment banks. There are thousands of profitable and 'working' investment houses that are now taking over the role of their bankrupt and careless 'brothers'.
Contrary to common belief, we should all view the capitalist system as one that is dynamic, self preserving and continuously evolving.
Comments