Capitalism: Two Perspectives

Cobb: "The Day Capitalism Died"

The moderate-conservative Republican blogger in California opines that capitalism doesn't die just because the man running the government is a socialist:: "It would seem that by definition, anyone dumb enough to be a socialist is less intelligent than Adam Smith. I exaggerate socialist stupidity, but Adam Smith understood something about the greed of men, socialists only understand the greed of businessmen. Limiting the greed of businessmen but giving everything by law over to the appetites of the masses is indeed a formula for self-destruction. This is why command economies that survive restrain the masses to an extraordinary degree. It doesn't aug[u]r very well for those who start in the peasantry but are clever enough to figure out how merchants make money. Where's the incentive for them to learn? Where's the law that protects them as they do?"

He continues his commentary: "Free men don't wait for government legislation and business programs to figure out how to make money with their fellow men. They scheme about it over a beer at the local pub or turn their living room into a smoke filled room or sit up late nights in the dorm or walk into Mr. Peterson's corner store and ask for work. They read the Wall Street Journal or Motley Fool. They even try out for game shows. There are a million ways to make a buck and those dreams and schemes never stop percolating. Cigarettes trade in prison, sandwiches trade on the schoolyard. Every man is a market, you merely need to find his price. Governments will always have some role in setting rules and regulating markets. But markets are between and among men and have always been because it is our nature to trade selfishly to eventual mutual benefit. Some men are clever traders and others are fools, but they are motivated by the same thing - their very nature as human beings. That never changes no matter what the balance of power. Capitalism dies when the human spirit dies. Anybody want to take a wager on when that happens?"

Jagdish Bhagwati: "Feeble Critiques: Capitalism's Petty Detractors"

The pro-capitalist economics professor and senior fellow in International Economics at Columbia University opines: "It was bad policy that kept China and India from growing in the first place. Only after [classically] liberal economic reforms did these countries register accelerated growth rates that, during the last 20 years, finally pulled nearly 500 million people above the poverty line. However grim the current crisis has been, it cannot be used to deny this elemental truth. Arguing the other side of the coin, the AFL-CIO and other labor unions in the United States claim that trade with poor countries has produced paupers in the richer countries by depressing real wages. But this dire conclusion is not supported by empirical findings. My own analysis, dating back at least a decade (and extended in my 2004 book, In Defense of Globalization), argued that, if anything, the fall in wages which labor-saving technical change and other domestic institutional factors would inevitably have brought about was actually moderated by trade with poor countries. This benign conclusion has since been reasserted by Robert Lawrence of Harvard’s Kennedy School (despite an unsuccessful attempt by Paul Krugman in a recent Brookings paper, commissioned by Lawrence Summers, to prove otherwise). Indeed, the same goes for the effect of unskilled immigration on the wages of our unskilled workers. Giovanni Peri of U.C. Davis has shown for unskilled immigration what I showed for trade with poor countries: that the effect is benign."

Professor Bhagwati continues his commentary: "Thus, we need not apologize for [classically] liberal policy in terms of its effects on overall prosperity, on poverty in poor countries, or on the wages of the poor in rich countries. To compare an interruption of this remarkable progress to the collapse of the Berlin Wall is like drawing a parallel between a tsunami and a summer storm that brings rain and a rich harvest to parched plains. These critics, including Stiglitz and, ironically, George Soros (who has done rather well by working the markets), also argue that the current crisis spells the end of 'market fundamentalism.' My Swedish friend Leif Pagrotsky, who was a cabinet member in Prime Minister Goran Persson’s government and is on the left in his country’s Social Democratic Party, told me with amused astonishment that at a panel meeting at Columbia University in New York, Soros had accused him of exactly this sin. 'Market fundamentalism' has now become a phrase of scorn in these fringe populist circles, much like 'liberal' is in the fringe right-wing circles."

More: "The presumption from which these critics start is that our markets were based in a pragmatic center but then moved to the fundamental right, letting markets rip — and rip us apart. But this is totally wrong for much of the world, and certainly for many developing countries that had been mired in quite the opposite problem, an anti-market fundamentalism that was reflexively and irrationally hostile toward markets and reliant on knee-jerk interventionism that went so far that Adam Smith’s invisible hand was not only not seen but never felt. When these countries finally realized the costs of their anti-market fundamentalism, they moved to the pragmatic center. So, yes, there has been a shift in recent years, but it has not been from pragmatism to market fundamentalism, as critics such as Stiglitz and Soros would have us believe, but from anti-market fundamentalism to the center."