Why Capitalism?

Why Capitalism?

Why Capitalism?

Why Capitalism?

Synopsis

A review of the headlines of the past decade seems to show that disasters are often part of capitalist systems: the high-tech bubble, the Enron fraud, the Madoff Ponzi scheme, the great housing bubble, massive lay-offs, and a widening income gap. Disenchantment with the market economy hasreached the point that many even question capitalism itself. Allan H. Meltzer disagrees, passionately and persuasively. Drawing on deep expertise as a financial historian and authority on economic theory, he provides a resounding answer to the question, "why capitalism?" Only capitalism, he writes, maximizes both growth and individual freedom. Unlikesocialism, capitalism is adaptive, not rigid - private ownership of the means of production flourishes wherever it takes root, regardless of culture. Laws intended to tamper with its fundamental dynamics, such as those that redistribute wealth, fail. European countries boasting extensive welfareprograms have not surpassed the more market-oriented United States. Capitalism does require a strong legal framework, Meltzer writes, and it does not solve all problems efficiently. But he finds that its problems stem from universal human weaknesses - such as dishonesty, venality, and expediency -which are not specific to capitalism. Along the way, he systematically analyzes the role of government, positing that regulations are static, but markets are dynamic, usually seeking ways to skirt the rules. Regulation is socially useful if it brings private costs into line with social costs (forexample, the cost of taxes to hire policemen compared to that of the impact of rampant crime); if it doesn't, regulation simply invites circumvention. Vigorously argued, sweeping in scope, Why Capitalism? reminds us of the fundamental vitality of the one economic system that has survived every challenge, and risen to dominate the globe.

Excerpt

It was with a mixture of surprise and disbelief in the fall of 2008 that I read journalists’ commentaries on the end of capitalism. Many welcomed the expansion of regulation and government intervention and the weakening of market competition as a regulator. Several journalists asked me to comment on the alleged end of capitalism. Did they not see that capitalism had become the dominant form of economic organization that had spread in the past 50 years from a few countries in North America and Western Europe to Asia, Latin America, and now to Africa? I often wonder if they are pleased by the increase in regulation that coincides with sluggish growth and persistent high unemployment.

This book offers my explanation of the success of democratic capitalism and the failure of alternatives. Democratic capitalism has three unequaled strengths. It is the only system that achieves both economic growth and individual freedom, and it adapts to the many diverse cultures in the world. Adapting to cultures means that it works well with people as they are, not as someone would like to make them. Democracy . . .

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.