CAPITALISM, SOCIALISM AND NATURE
When the Soviet Union collapsed, and smaller experiments in communism did not deliver on their idealistic promises, many in the West thumped their chests and crowed about the victory of capitalism over socialism.
But is capitalism’s supremacy so certain. It took some major social programs by the government and a world war to lift the US economy out of the ditch after the Great Depression. There have also been serious recessions since then, and some economists warn that the Great Recession in 2008 may only be the prelude to a much bigger breakdown in the foreseeable future.
So one must wonder if any system is immune from disastrous boom-bust cycles that can lead to failure of the whole system. The answer is probably that no complex system can be made permanently stable when all potential internal and external perturbations are considered.
On a more optimistic note, nature offers some guidance on maintaining stability in a very dynamic world. Nature has been around for billions of years and will go on for billions of years. Nature continually experiments with just about every possibility that is allowed by the laws and principles of nature. We might do well to design our societal systems more like natural systems and less like artificial systems. Warning: this would require politicians and the public to have a basic understanding of the general laws and principles of nature that have been discovered by science.
Many of the founding fathers of America were natural philosophers who studied nature and had a great appreciation for science. The checks and balances they tried to build into our constitution are a reflection of that. When you study economic breakdowns in our recent past there is a common thread: a significant degradation in checks and balances. The housing market bubble of the most recent recession was largely the result of various forms of deregulation. Banks were allowed to engage in risky loans and become over-extended. Risky forms of investment were allowed, such as collateral mortgage obligations. Ratings agencies were giving AAA ratings to dubious investment products that never should have had such high ratings. Checks and balances were removed because the corporate titans, bankers and investors were making boat-loads of money.
The few who tried to warn others that we were on a path to disaster were ignored or ridiculed as enemies of free market capitalism. Then there was disaster. Then there was reflection and attempts to put some checks and balances back in place. Then there was a movement to chip away at those new checks and balances. Now we see the rise of new investment products with significant risks, like collateral loans obligations. Oh, but they pay quite handsomely to investors!
The bottom line is that in order to have a stable economy one must have robust checks and balances against human greed, corruption and stupidity. You need well-conceived regulations that are maintained by vigilant, intelligent and objective people who have a high degree of integrity. In order to accomplish this difficult task we cannot continue to allow the Big Money titans to decide who gets elected and votes in the rules of the game. If we do not put an end to this short-circuiting of democracy for the people and by the people, then we will be stuck with the chaos of boom and bust cycles, as well as obscene levels of income inequality.
We can do much better. It will be a long road back to the original American ideals. The first step is to vote, and vote with your brain rather than your gut.