Capitalism Has Its Dangers

by Keith Cooper

From Broader View Weekly, February 13, 2009

I have looked forward to this discussion of capitalism and the economy. I agree with my brother that the foundation of capitalism is cracking. What we disagree on is the cause of its impending collapse. My fellow columnist somehow feels that government intervention has led to our current economic crisis. I think the damage has come from within the system.

I’m not here to deny the history of capitalism, nor deny the validity of market workings. However, it’s not without its flaws and blemishes. We happy inhabitants of this deteriorating structure have long been living secure within its longevity and sturdiness, oblivious to its disrepair. The laws of supply and demand have not been at work alone in this neighborhood. Greed, crime and malice have moved in from time to time. When capitalists became bad actors throughout our history, threatening the nation’s residents with sweatshops, manipulation of the markets, and oppression of the working class, we have been fortunate to have the government to police the bad guys and clean up the streets. Capitalism has been a mixed bag at best. The same system that gave us Bill Gates and Warren Buffet also gave us Bernie Madoff.

It is easy for Republicans in Congress to pin the woes of the economy on big government. The problem is the argument is weak. It was not the urging of the government that drove financial firms to unethical leveraging of investments. It wasn’t Fannie and Freddie who brought down Wall Street. Corporate greed lured firms into fast money schemes that ignored great risk. For years, many at these firms got fat off credit schemes and immoral lending practices. Then the bottom fell out.

I should also remind my fellow columnist that it was former President George W. Bush (with nearly eight years of experience in the nation’s highest office) who, along with his Treasury Secretary, Henry Paulson, decided we should put these firms on the public payroll because they were too big to fail. Thus began the bailout fever that brought socialism to the wealthy and handed the bill to the American people.

I don’t like the stimulus package idea. I don’t think many of the people who are voting for it on Capital Hill like it either. However, capitalist greed has dug a deep hole. I doubt that the stimulus package is the shovel that will dig us out. But the outcry is for swift action and Congress and the president have few tools at their disposal. The fact is that the bill is costly and it will fall short of success. Republicans will vote against it in attempt to build political capital and prove that Barack Obama can’t bring bipartisan cooperation to Washington. But the bill will pass and Obama will sign it. He and Democratic leaders will be judged on it for decades to come. But we will survive the 2009 Stimulus Package (or whatever name it takes) just as we will survive TARP.

My brother Gordon’s criticism of the president’s recent call for a salary cap is simplistic and misleading. He implies that this maximum salary of a mere $500,000 annually is some blanket restriction across all of corporate America. However, all it requires is for firms who accept a welfare check from the public bailout funds to curb their spending in ways appropriate to their financial circumstances. That kind of fiscal responsibility is a conservative value that should make sense to my brother and others who share his views. And, these executives are still able to supplement their meager incomes with stock options. They just need to wait until the company is flush enough to pay back the taxpayers before they cash in. I think that’s called performance incentive.

Of course, many firms will back away from these restrictions in order to compete for executive talents. Those seeking $10 million bonuses can certainly find homes at these firms that reject the government handout. These companies would be doing us a favor by saving some tax dollars.

What is really needed, however, runs deeper than stimulus packages and executive salary caps. We need to look beyond the sanctity of capitalism. We need to see the pitfalls and shortcomings of our consumer economy. We need to look far past the car hood, to progressive ideals for the future.

Perhaps “inexperience” really translates into not being mired by the tired and worn ideals of the past. Perhaps what is called for is the audacity to pursue new avenues. Perhaps we need to demolish the decaying eyesore of our current economy and rebuild a safer more solid one.