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In Defense Of Capitalism

Posted on Sunday, Oct 19th 2008

The Economist this week has a good analysis on the future of capitalism. Yes, we’re amidst a crisis, and yes, things went out of control, but in building any sustainable complex system, there will always need to be rounds of debugging involved. Overall, I’m still in favor, as the Economist is as well, of Capitalism. This crisis, I view as a debugging process, which will take out a bunch of the broken code in the system, and in the long run, the world economic system will emerge stronger as a result.

What I still cannot stomach, however, is Obama’s anti-business, anti-free trade, anti-globalization, big government, unlimited spending policies. It is clear that Obama has never managed a P&L. That is scary.

It is disappointing that the American political system does not provide opportunities for experienced executives to run the country. Black messiah, war hero, or Hockey mom, these people have no credibility for running a business. And whether you like it or not, as someone quoted (also in the Economist this week), the Business of America is Business.

Obama will, in all likelihood, win the election on Nov 4. I hope capitalism will not undergo a major set-back in the process.

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I don’t know how delusional people have to be to believe that US economic policies reflect that of free market systems or capitalistic systems. What with the current government bailout to the protectionist policies or regan era. It is evident that capitalism in theory is good yet in implementation is flawed. Capitalism has no place for morality to enter the equation and doesn’t discount for the value input(voting rights) of future generations. Any system whose aim is to achieved short term profit maximization without any bounds does not account for environmental destruction, economic growth disparity between classes. A free market economy that needs to be debugged is no free market economy at all.

sumankarthik Sunday, October 19, 2008 at 11:42 AM PT

Well said Sramana…I doubt that he will be anti-everything as you say his campaign has implied…at this point it’s all about public opinion polls and the media is eating up his appeal – On one hand he says that diplomacy is at the top of his agenda…on the other he criticizes globalization…Adam Smith would cringe lol

It’s all about pleasing everyone and I doubt that attitude will change while in office – your article reminds me of perhaps the only good point McCain made at the last debate when he brought up that Obama was against free trade agreements with Colombia.

Lateef Sunday, October 19, 2008 at 11:56 AM PT

Suman, On short-term versus long-term, and on environmental issues (and a variety of other issues), I believe, that capitalism as a system still needs further debugging. I think there’s a big difference between theoreticians and pragmatists. Theoreticians need an unadulterated free market, while pragmatists will settle for something that ‘works’. I happen to be more open, and on the latter camp.

The reason capitalism is still the best system is that it rewards work and effort. The concept of “making money” is at the heart of the American system which now the rest of the world is trying to learn. Wealth can be created. That’s America’s core value system.

Obama’s philosophy is scary in that it breeds entitlement. People get rewarded for non-effort.

That will be a disease. An epidemic. If Obama survives 2 terms and spreads this disease, it would be a disaster.

However, I think he is simply using political rhetoric to win right now, and when the time comes, he will show more respect for capitalism and globalization.

However, his desire to please everyone is indeed a turn-off.

Sramana Mitra Sunday, October 19, 2008 at 12:16 PM PT

there are two people who support capitalism.

1. who don’t know zip about capitalism

2. who know just too well that capitalism never works but it works for people who know how to abuse that.

Stick to capitalism. I hope US debt would hit another 4 trillion before Obama or McCain ends their term if selected.

minhaaj rehman Sunday, October 19, 2008 at 12:37 PM PT

Sramana,

I think you need to recalibrate (and you eventually will).

Unregulated ‘free market’ Capitalism is now having its “The king has no clothes” moment.

Here’s one to open your eyes: Wall St has been undone, killed, decapitated. How?

– CEOs and the SEC
– in the Basement with a
– Unreported Change in Leverage Ratios

Who? Suicide: Wall St killed Wall St and Capitalism (as we know it) died too.

(I am not a Socialist, but I am very fearful of the immense destruction to value in stocks and the real economy which is unfolding.)

pk de cville Sunday, October 19, 2008 at 1:40 PM PT

I agree with you sramana, capitalism has some good things to offer but pragmatic capitalism with protectionism, isolation and regulation driven by socio economic and environmental concerns should be the way to go. I think there should be a minimum bar a society must reach in terms of affordability of health care, food and other basic human and environmental rights upon which this ‘Neo-pragmatic capitalism could work’.

Anyway as far as the presedential race is concerned. It has merely turned into voting in the lesser of two evils.
– On the one side is a recovering cancer patient who has a ‘bimbo’ for a running mate. Who apparently will have to deal with an anti-american movement both militarily and economically in terms of russia-latinamerican cooperation.
– On the other hand as you say is someone who is playing the role of representative of the left to perfection and as you say might well be rhetoric. I can’t remember the last time any american president pushed through economic reforms thatdif not benifit large corporate interests. Any civilian benefits were just offshoots.

I think the best candidate has dropped out of the race as they almost always do(Ron Paul).

sumankarthik Sunday, October 19, 2008 at 2:42 PM PT

S-
I’ll take a pass on experienced executives running the country. In the last century, there have been four presidents with pre-election business experience.

Warren G. Harding (newspaper publisher)
Herbert Hoover (mining engineering)
Harry Truman (retail men’s clothing)
George H.W. Bush (oil field services)

– Harding presided over a five-year bribery scandal.
– Hoover raised taxes.
– Truman tried to nationalize U.S. Steel.
– Bush raised taxes.

Bill Bucy Sunday, October 19, 2008 at 4:50 PM PT

None of them were the real top notch business leaders, bill.

I think, Romney was a very promising candidate in this election.

There is Reed Hastings, CEO of Netflix and now on the board of Microsoft who has dabbled in Politics, and is a very promising person, whom I would love to see in the Presidential race down the line.

I am not compelled by Meg Whitman or Carly Fiorina at all. Meg Whitman – McCain’s idea of his treasury secretary – would be a poor choice.

On the other hand, there are people like John Doerr who would be very interesting in cabinet positions.

Goldman Sachs has always sent its alumni to politics. I would, however, like to see also some people who have close familiarity of entrepreneurship, and another set of people who know how to restructure largescale businesses, which is what drew me to Romney.

The US system needs restructuring. Romney would have been good for that job.

Another person with some relevant skill-set would be Mark Hurd, HP’s turnaround CEO.

Sramana Mitra Monday, October 20, 2008 at 10:19 AM PT

I don’t think it’s possible to deduce anything about the desired background of economically successful presidents from the limited data set (only 15 presidents since 1920).

For sheer brainpower, track record and overall promise, easily the best-qualified 20c US presidential candidate was the man who, uniquely among the Paris Peace Conference participants in 1919, had impressed Maynard Keynes for his wisdom and judgment: Herbert Hoover. Brilliant engineer, successful entrepreneur, leader of a phenomenally successful and unprecedented famine relief campaign that saved a million lives or more in Russia.

And yet Hoover was imprisoned by a bad economic idea that prevented him from responding effectively when an economic crisis arose.

Clinton had good luck: first, that the business cycle turned in early 1992, and second, and more importantly, that the GOP swept the 1994 midterms, forcing him and Rubin et al. to get serious about deficit reduction.

Carter had disastrous luck. Nixon experimented with all kinds of policies, some wise and some less than wise, but ultimately, neither he nor any of his three successors had anywhere near so much influence on the nation’s economic direction as the man whose policies brought down Carter and (eventually) created the roaring recovery of 1984 that re-elected Reagan: Paul Volcker.

Does Obama understand this?

Who knows? There’s next to nothing in his background that would indicate he’s ever paid much attention to questions of wealth creation, international trade and capital flows, etc.

The man is a cipher and has no record to speak of, which is probably the main reason he was able to run before he’s ready and sneak past much better qualified and more experienced candidates.

Then again, given the dismal performance of our political class during the past month, and the bizarre insistence of the progressive party on a policy of encouraging 70% home ownership in a nation where >50% of households have negative net worth, the bar’s been set awfully low. Heaven help us all.

Tom McLaughlin Wednesday, October 22, 2008 at 10:11 AM PT

Yep. Living beyond ones means has never been considered a virtue except in America in recent times.

Sramana Mitra Wednesday, October 22, 2008 at 10:47 AM PT