Saving American Capitalism
Why is it that the eternal verities of capitalism -- growth, full employment, financial stability, rising real wages -- seem to be vanishing just as the century-old enemies of capitalism -- fascism, socialism, and communism -- finally faded into the history books? Many developing countries newly drawn into capitalism as the only way to the “promised land” are now more doubtful than ever. Even those Asian countries, as the recent beneficiaries of capitalism, are having their doubts whether the whole thing was a setup -- that is, a trap.
As one scandal is followed by another, shaking the foundations of the most successful capitalism in the world, one will not be surprised to see Americans wondering whether they are still participating stakeholders or simply spectators like anyone else. In fact, it is possible that most Americans will be posing themselves one critical question: was it a mistake to have defeated communism, leaving the present excesses of capitalism unchecked? This concern is not unreasonable. Historically, dominant social systems -- Egypt, Rome, the Middle Kingdom of China, and the British Empire -- when without competitors, lost the ability to adapt.
From its inception, capitalism has remained historically controversial and morally vulnerable. And with each period of rejection, capitalism reemerges reformed. One of the most critical periods for capitalism was between the two world wars when the attitude of most Protestant ethical thinkers, once custodians of capitalism, became strongly anti-capitalistic, culminating into the first Assembly of the World Council of Churches at Amsterdam in 1948 that sought the transformation of capitalism.
But why has capitalism witnessed so many criticisms, in contrast to the politically and economically centralized collectivism? In other words, why is it that notwithstanding its ability to guarantee all forms of freedom, capitalism remains constantly challenged by many?
The answers are found in how free-market capitalism is practiced. Free-market capitalism as practiced in the United States today is not different from the notion of capitalism in the ancient Greece, where economic opportunity and possibility of upward mobility had no caste or class limitations. From Aristotle to Thucydides to Plato and to Pericles was the recognition of the concept of individual worth as the foundation for democratic self-government to the extent that for Pericles: “the shame (and the shame) is not in being poor, but in not doing anything to escape from poverty.” The ancient Greeks completely understood the free market economy, where individual upward mobility is demanded and rewarded. But they also understood that the struggle could end up very cruel since everyone was on their own.
The founding fathers of American democracy and capitalism shared this truth with the ancient Greeks. Therefore, the American concept of “inalienable rights” to life, liberty, and the pursuit of happiness, as enshrined in the Constitution, not only enhanced individualism, it went further to celebrate individualism beyond capitalist entrepreneurialism, beyond Protestant convenant, and beyond democratic citizenship.
But the questions here are two. Is improving oneself at all costs because not doing so one is to blame, not limited to some ethical values? And how much emphasis should modern society place on individual self-development, culture of selfishness, and a ‘me-first’ mentality without a drawn line to prevent self-aggrandizement?
While the obsession with money-making is central to the capitalist economic system -- which remains good for the purposes of economic expansion, entrepreneurial creativity, and for building a large pool of capital to further economic and technological development -- a problem arises when this obsession becomes the only perspective in a society. The problem here is that the capitalist system, does not having a single mechanism for dealing with this, other than simply legitimizing the accumulation of wealth, which poses some ethical nightmares to those individuals whose obsession with making money conflicts with both respect for the law and adherence to some societal ethical codes and cultural norms. The inability to reconcile these conflicts is the weakness of free market capitalism. Even the “philosopher-guardians” of the state in ancient Greece found themselves unable to solve these problems.
But the good news is that despite the enormous self-destructing forces in capitalism, it always emerges winner all time, saved by its custodians. Bismarck, in the 1880s, saved capitalism from collapse in Germany by inventing the public pensions and health care. Churchill did the same in Britain by introducing a large-scale public unemployment insurance system in 1911. Roosevelt knew that the days of capitalism were numbered, had those who fought to defend it come back from the battlefield to discover they remained excluded from the benefits of capitalism. So, he invented the social welfare state, as the new postwar capitalism. Even America’s Marshall Plan in Europe and the helping of Japan to build a new postwar economy, knew that that was the only way to restore faith in capitalism in those countries after the war.
Capitalism remains without alternative. It has transformed the conditions of human existence in many remarkable ways. If it has survived all this long, including the years of great assault from Marx, it did so precisely because of its self-correcting forces and the smartness of its custodians, who completely understood that capitalism’s long survival is dependent on its ability to minimize revolutionary conditions inherent in the middle-class. There is no doubt that capitalism will survive the present assaults from corporate financial scandals. And as Professor Lester Thurow rightly stated in a recent New York Times article, corporate scandal is always part of capitalism.