POSTCAPITALISM
Whether the current economic crises will eventually be labeled a recession or depression is immaterial; what does matter is that people are losing their jobs and their homes in increasing numbers. There are those who want to find the culprits, and think that this search will yield answers, and then there are those who want to find a solution, and think that a bailout package or tax incentives will do the trick. I wish it could be that easy. The crises reveal a more fundamental structural and conceptual problem that requires some intellectual heavy lifting. These crises are waking us up from our dogmatic slumber and our comfortable complacency and can provide the opportunity to change our thinking, our behavior, and the ways in which markets work in a democracy.
When the future price of a barrel of crude oil was over $147 in July of 2008, real panic struck the markets, and a gallon of gas was more than $4. Two related things happened last summer. First, we started thinking about alternative energy sources—renewable rather than imported, domestic rather than imported—with care and passion not seen since the days of the Carter Administration. Some even started talking about oil imports in terms of national security and the real costs of depending on rogue regimes, like Venezuela
The same issues have come up with the sub-prime mortgage crisis, when the leading heavy-weight companies Freddie Mac and Fannie Mae were taken over by the government. Commercial and investment banks have been caught in a credit crunch never experienced before, and whatever proposed bailout package is being implemented now will not bring back bankrupt banks and mortgage companies that disappeared Nor will it bring back the thousands of jobs and homes lost in the process. Questions about home ownership, government guarantees, mortgage rates, and the procedures that qualify us to own a home or rent an apartment have been asked in ways we refused to think about them before. This crisis, too, gives us the opportunity to reconsider the fundamentals of our market economy. As will become apparent in 2009, the crises are not over, and government intervention is no longer a guessing game for academics and pundits but a reality here to stay.
So, should we regulate more or less? Should we let the government nationalize all the financial institutions on behalf of the American people? Should we, the people, through our elected government, control all the major industries that are vital for our economic well-being, including banks, energy companies, agribusinesses, utilities, railroads, and airlines? How would we figure out what are vital as opposed to marginal industries? As these questions become real, and we realize how they are all interconnected—a decision about ethanol affects the price of food and energy, for example—we are going to restructure capitalism, the kind of free-market ideology that even the former federal reserve president Allan Greenspan admits might be wrong, or perhaps think about it in more classical terms.
We all have heard of Adam Smith’s Invisible Hand as a metaphor for the smooth workings of the marketplace, where no single authority, like a central government or an extremely powerful monopoly, controls the daily decisions of individual buyers and sellers. This image has been the backbone for all the arguments about the free market and its deregulation: get the government off my back! But we have not heard of an earlier, and perhaps more profound, image that Adam Smith worked with, the Impartial Spectator. This image was supposed to explain and prescribe to the community how appropriate behavior will be judged: we should care about others, we should consider our self-interest in terms of others, and we should ensure a basic level of benevolence so that our behavior will be considered appropriate by everyone in our community. Greed, of course, would be condemned; poverty and suffering in the face of extreme wealth would not be tolerated; and any level of deceit and manipulation at the expense of others would be prosecuted. In short, Adam Smith worried about human nature and the conditions under which a community would be best served. Once the Impartial Spectator ensured that benevolence was pervasive, once we realized our responsibilities to others and to ourselves, then it would be quite reasonable to have a marketplace with an Invisible Hand.
In these perilous economic times, we have no choice but to reevaluate market capitalism not in order to do away with markets or with capitalism, but in order to find pragmatic solutions that can include both markets for their efficient allocation of resources and capitalist principles for their concern with individual freedoms and equal opportunity to compete and collaborate. Crude capitalism never existed, and whatever American capitalism has become over the past century it does not conform to any particular theoretical model. Instead, it has always been and therefore will remain a hybrid of ideas and principles, dreams and wishful thinking. It is both in our power to mold it so it can accommodate the current situation, and our responsibility not to let it fall apart. If we need to involve the government, so much the better: at least our voices will be heard. If we need to intervene and regulate certain industries, so much the better, too: apparently they don’t have the will or competence to police themselves. And finally, when the right time comes, we can reassess where to draw the line between the private and the public spheres, between too much or too little intervention and regulation: what was appropriate a year ago might not be so a year from now.
Whether we use David Books’ terminology of progressive conservatives (NYT 10/26/08) or not, it is becoming clear that we must move beyond ideological extremes that become obstacles for change rather than tools with which change can come about. The dynamic nature of the economy and the people who make it up requires our thinking to be dynamic and pragmatic as well. This is not a matter of being inconsistent or confused, but being careful and tuned into the changing realities of our economy. The economic pragmatism we have been practicing for years should not be hijacked by political ideologues to divide us, but instead appreciated for its flexibility and effectiveness.
Raphael Sassower is a professor at UCCS and his Postcapitalism: Moving Beyond Ideology in Economic Crises will be out in the spring of 2009. He can be reached at: RSassower@aol.com
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