Free Markets, Free People


Davos elite: Capitalism is the problem

That is certainly the premise at work in Davos as “political and economic elite”, who’ve served us so well to this point, meet to plot discuss modifications to capitalism.

Economic and political elites meeting this week at the Swiss resort of Davos will be asked to urgently find ways to reform a capitalist system that has been described as "outdated and crumbling."

"We have a general morality gap, we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence, and we are in danger of completely losing the confidence of future generations," said Klaus Schwab, host and founder of the annual World Economic Forum.

"Solving problems in the context of outdated and crumbling models will only dig us deeper into the hole.

"We are in an era of profound change that urgently requires new ways of thinking instead of more business-as-usual," the 73-year-old said, adding that "capitalism in its current form, has no place in the world around us."

Show me “capitalism” at work somewhere, please?  Social welfare, in its current form, driven by high taxation and deficit government spending, is what “has no place in the world around us”.

The dirty little secret these “elite” won’t admit was that their premise that capitalism could forever fund their social welfare states is absolutely wrong and failing.  They’ve killed the goose that laid the golden capitalistic eggs.  It isn’t “capitalism” that is failing.  It is their social welfare system that is “outdated and crumbling”.

These are just the same people who got us into this mess trying to shift the blame from unsustainable policies founded in socialism to something which has kept their socialist utopias functioning for more years than they would have had it not been there.

And we should also be precise about what it is that has kept them stumbling along this long … a mixed economy, not capitalism.  A mixed economy which has featured less and less capitalism as the years have gone by.  Capitalism in its defined form exists in few, if any places in this world.

Margret Thatcher’s warning that the only thing wrong with socialism is you eventually run out of other people’s money has come true … again.  The agony was only prolonged because some free market mechanisms were left to at least partially function over all these decades that the Europeans (and now Americans) were constructing their little social welfare houses of cards.  The elite simply refuse to see that reality and now seek another target to which they can shift the blame.  The ultimate in “can kicking”. 

The eurozone’s failure to get a grip on its debt crisis and the spectre this is casting over the global economy will dominate discussions.

"The main issue would be the preoccupation with the global economy. There will be relatively less conversation about social responsibility and environment issues — those tend to come to the fore when the economy is doing well," John Quelch, dean of the China European International Business School, told AFP.

"The main conversation will be about a deficit of leadership in Europe as a prime problem," he added.

The deficit in leadership isn’t just found in Europe.  It is found worldwide.   And it isn’t a deficit of leadership from capitalists, but instead a deficit of leadership within the ranks of the political elite.  They continue to do or try to do the same things that have gotten us into this mess and expect different outcome.   We all know how Einstein defined such activity.

It is interesting to note, too, that the Euro elite are now ready to pitch “social responsibility (however they define that – does that mean the welfare state?) and environmental issues” over the side.

But, in fact, it is more than just that which they should be considering abandoning.  The problems they face do not find their root in a capitalist system or within capitalism itself.   In fact, capitalism could be their savior, if they only gave it an opportunity.

However, they’d also have to abandon most of the social welfare state to do so.

No, their primary problem is to be found with the institution that has attempted to control their economies and which constantly gets in the way of any capitalistic successes in the name of social justice. 

Government.   And more to the point, government spending driven by high taxes and borrowing.  It requires a deficit in intelligence not to understand that.

In essence Davos will be the elite – the social welfare elite – trying their hardest to shift blame on a system they’ve done the most to try to kill over the decades (even while using it to extend the life of their social welfare states).

Controlling government, taxation that provides disincentives to business, labor rules that prohibit firing bad employees, mandated early retirement and generous welfare benefits are not the problem of capitalism.

They are the problem of large, intrusive and socialist leaning governments.

But, apparently, that won’t be a part of the discussion in Davos.

~McQ

Twitter: @McQandO

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21 Responses to Davos elite: Capitalism is the problem

  • I have to read this a couple of times to absorb what he actually said.

    “we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence”
    All of these are true. More so in those states that tried the “European” model.

    “we are over-leveraged” .. yes, virtually all of the EU’s problem with the Euro start here.
    “we have neglected to invest in the future” .. this varies from country to country.
    “we have undermined social coherence” .. the search of “diversity,” “multiculturalism” and “moral relativism” has only made this worse.

    • @Neo_ This is a persistent problem of the left. They can sometimes identify symptoms, but they consistently get the underlying cause wrong.

      • @Billy Hollis @Neo_ They have no choice. What they want doesn’t work. I’m amazed how they double down on the stupid.

    • @Neo_ He also mentioned the morality issue. Perhaps he means we need capitalsim, but not crony capitalism, or mixed models?

      The lack of money to “fix” these problems put the Left in a dilemma. They can’t use the carrot so much, so now they have to try the stick of higher taxes, but Europe is already heavily taxed. Plus voters don’t like taxes in general. Good luck to all of us.

    • Blaming capitalism is a bit much like blaming water for drownings.

  • This piece for the Times dovetails quite nicely with this …

    “WITH little fanfare, a dangerous notion has taken hold in progressive policy circles: that the amount of money borrowed by the federal government from Americans to finance its mammoth deficits doesn’t matter.”

    http://www.nytimes.com/2012/01/22/opinion/sunday/the-dangerous-notion-that-debt-doesnt-matter.html

  • The US is in worse shape than a number of European countries, including those with much more effective social welfare states. Moreover, the stronger European states have more social mobility, a stronger economic base, and more social cohesion than the US. The US model of deregulation and tax cuts has lead to bubbles and high debt (debt started during the Reagan era, both governmental and corporate/private). Those who say that somehow more “pure” capitalism can function have no understanding of how the global political economy works, they are into ideology and simplistic ‘theory’ that makes markets look magic.

    The folk at Davos are right; there’s too much 20th century thinking and the next generation will surely wipe it away, with those locked in the past bitching and moaning as they fade away.

    • @scotterb Scott, you are a slave to early 20th century thinking. It is all crashing down around you and you can’t admit it.

      • @Don S @scotterb Give him a few days… the man is just back from hols and it takes time to get back into the full-time meaty analysis of paleoneocommunocryptocapitalfascism in the online fora… and to check if the Euro survived during his ski trip… if Angela Merkel is still milftastic this year… check if Iran has fallen under the rule of bright young teenagers listening to the Footloose soundtrack… if Obama has replied to the letter offering services as an international man of mystery… check if the university will approve another junket/field trip to Italy this year… check if any damn students enrolled this year…

    • @scotterb Uh, heh, psssst, the folks at Davos ARE the 1% of the 1%.

      • @looker @scotterb My God, that’s… I don’t even know what that is!

        • @DocD @scotterb True? <chuckle>

        • @DocD @scotterb I enjoy the irony in him listening to the advice of the extremely rich. He seems to think the extremely rich at Davos are the ones who gave their money away to get those keeno Socialst benefits for all those European countries.

          I think those rich guys are rich because they’re smart enough to get everyone else to redistribute THEIR income, and these rich cats are more than happy to guide that and give the rest advice while they sit in their protected rich enclaves enjoying the good life.

          Let me point out how well the American system of capitalism has worked up to this point. We have stores, that are ENTIRELY dedicated to PETS. Food (note to self, remember to pick up a $50.00 bag of DOG FOOD on the way home), toys, BIRTHDAY CARDS, clothes, FOR PETS. We have done so well that we can afford this obvious luxury to the point where it’s just a very common part of our society.

          You can only get observations like that from people who come from places like India, which is where I got it.
          Pause for a moment and think about the demonstration of wealth, and leisure time of a very large segment of the population, that such a thing requires.

        • @looker @scotterb This Davos round is reportedly the most well attended, ever. Lierally thousands of businessmen and politicians flocking to try and keep the ship afloat. They’ll say whatever they think necessary to keep the current system going since change means little so long as there is no revolution. For all Scottie’s yipping about 20th century thinking his dreams of national unity (aka social cohesion), redistribution (regulations and tax hikes), supranational governance ( EU wetdreaming) and new Soviet men building the strong economic base is so utterly and totally early 20th century his “writings” would be familiar to my grandfather’s generation.

          But he can look at Europe and among a couple of dozen countries cherrypick one or two to prove whatever point he is making and it just so happens the boys at Davos think they can save their respective fiefdoms by sounding like an old-school social democrat’s wet dream so Scotty is down with the 1% on this one. He was against the 1% before he was for them, in other words.

    • @scotterb And, of course, you ignore the bulk of Bruce McQuain’s article which refutes your straw man arguments.

      Crony capitalism and mixed economies are not free market capitalism. When American politicians deride “deregulation”, in nearly every case they are deliberately misstating what happened, in a cynical ploy to smear their opponents. For example, changes in large system filled with regulations in which a small number of regulations in one corner of the system are relaxed, as was the case with California power, are not “deregulation”. Most regulations are the result of lobbying by crony capitalists, as a means of rent seeking or shutting out smaller competitors who can’t afford to bear the costs. Rolling back such corrupt regulations by one party to stop the corrupt flow of money to contributor to the other party is typically done in the usual political party pendulum fashion, and almost never is the result of a principled defense of free markets.

      High debt is a product of spending. For the US, overspending includes the military bases in foreign countries, for which American taxpayers foot the bill to defend Europe, Korea, Japan, et al., thus saving the so-called “more effective social welfare states” the cost of paying for their own defense. It also includes wars, Social Security (Ponzi scheme), Medicare. A huge chunk of today’s debt is from “stimulus” spending, by Obama and Pelosi.

      Bubbles are sometimes due to natural market fluctuations (e.g., the dot com bubble), but are at other times the result of government artificially propping up markets (like housing) which effectively kicks the can down the road while the bubble grows larger. Watch China in coming years to see an example of a socialist country with a massive real estate bubble, caused by central planning (not deregulation or tax cuts).

      As for your indictment of “magic” markets, that’s another straw man. Certainly, there are plenty of advocates of the free market who have simplistic arguments. But they don’t speak for the rest of us, who understand there is nothing “magic” and no guarantees on anything. For me, as with a number of other free market proponents, it’s not about any pragmatic arguments, but the recognition that it is unethical to use aggressive force, regardless of any use of the appeal to consequences fallacy (which is usually completely inaccurate anyway).

    • @scotterb In what would be irony if it didn’t happen with most of his comments – There is no more simplistic or ideological theory than Erb’s ‘bubbles are bad’ argument against capitalism.

    • @scotterb

      What deregulation? The Federal Register grows every year. Some regulation has been altered to favor certain chronicly crony businesses, but that is not deregulation.

  • Meanwhile, Croatia, promised their turn at the public trough, signs up for the EU – now, WHERE, given the trouble the EU is having, is the money they’ve promised Croatia going to come from?

    http://www.thenewamerican.com/world-mainmenu-26/europe-mainmenu-35/10660-croatia-votes-to-join-eu-after-pensions-threatened

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