Capitalism & Regulation

Capitalism of today is what Adam Smith, author of The Wealth of Nations, 1776, called Commercial Society and we sometimes call a Free Market System. Merriam-Webster offers an 1877 definition: "an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market."

The  beauty of this system is that under ideal conditions the strongest motivators of human action which include greed, selfishness, lust for power, are directed into activities that benefit the society at large on balance instead of what would otherwise likely be activities that harm society. This is not a totally fair or egalitarian society but one in which the extremes of deprivation at the hands of a cruel dictatorship are not reached - at least if necessary controls and limits are placed on just how far people can go in satisfying their less than savory motivations.

Without some limits, capitalism will devolve in either of two directions. With too few controls it will become a corrupt government of a few who hold all the wealth and power over a largely impoverished society. Examples are Afghanistan, Pakistan, Somalia.  With too many controls it will devolve into a brutal dictatorship of controlled economy such as what we had with Communist USSR under Stalin and now we see in Iran and North Korea.

So, we need a balance of control.  Enough control to keep the system reasonably fair with a broad distribution of wealth but neither over-controlled nor under-controlled.  In our system, as so eloquently and intelligently stated by Thomas Jefferson in the Declaration of Independence and James Madison in our Constitution, the government's job is to provide the controls with a system of laws that are fairly enforced.  These laws being drafted by the representatives of the people at large who choose their representatives.  Further, the true feedback to achieve stability is the fact that these representatives of the people who are democratically elected by the governed can be thrown out by the people at the polls.

This works only to the extent that the people who go to the polls have accurate information and realistic beliefs for making their decisions. In this technological age, with its flood of mass electronic media, one would think having accurate information would be easy.  But as we have seen, it is as easy to put out inaccurate information and those with the greatest wealth and power can pay to get whatever message they want sent to the masses.

The combination of this ability to control the message with the new knowledge from cognitive science about how to impress beliefs into minds with carefully framed mass messages, has led us to the situation we are in today where the stability of our capitalistic system is threatened. Specifically, we have people in those states with the worst health care, worst education, highest unemployment, greatest number of people living in poverty and which receive far more government money than they pay in taxes, electing those politicians who want more tax breaks for the rich, want to not improve health care, oppose education reforms, reject federal money to help relieve poverty, and who support economic policies that will only worsen the situation (but greatly increase the wealth of the few who are already wealthy). How in the world can this happen in our representative democracy? 

It happens because those who have gained enough power have learned how to manipulate perceived reality by controlling the mass messages.  They do this with framed messages that reinforce certain neural connections in the listener's brain thereby establishing preferred perceptions. This is well explained by Professor George Lakoff, professor of cognitive science at Berkeley in his book, "The Political Mind."  One process is to frame a message around the religious values held by many in the largely southern impoverished states, and pound it in with the Republican talking points that are repeated over and over, and with blatantly dishonest campaigns such as the Swift Boaters. All of this is so willingly broadcast by news organizations and enthusiastically by Fox news. In the George W. Bush administration this was skillfully orchestrated by Carl Rove who I call the Brainwasher in Chief.  Achieving political power by controlling the message of course is an age-old tactic, the propaganda of Stalinist USSR and now the controls over press in Iran and North Korea even to some extent China are recent examples.

Policies of politicians that, while beneficial to the very powerful and most wealthy are at the same time harmful to the State and its people, if implemented, will pose the  greatest risk to the longevity of our capitalistic system. We are in a time now where the stabilizing process of democratic feedback that should prevent such implementation is being severely tested. Will  our system work to overcome the negative forces of misinformation campaigns and restore balance to our democratic process?

Clearly, current regulation and laws need to be enforced and others changed or created to prevent the current situation from arising again.  We see the power of the powerful being exercised largely through the rampantly out of control lobbying channels and through the control of funds for political campaigns.

The age of irresponsibility

Our nation was born in the Age of Reason. Has that been supplanted by the Age of Irresponsiblity? Jeremy MccArter's article "Reagan Was Wrong" in the June 29, 2009 issue of Newsweek highlights a lot of what I observe.

The uproar in the 60s devolved into a decade of declining economy ending with Jimmy Carter's depressing steps to restrict speed limits to 55 and limit gas purchases, along the soaring interest and inflation rates. Then comes Ronald Reagan who took the brakes off with an anything goes, do what every you want attitude. No longer did deficits matter, drive as fast as you want, be as greedy as you want, reduce the obligation of those who have benefited the most from our society by reducing their taxes at the expense of the less fortunate, don't worry about environment - just rape the earth, don't feel any obligation to those who can't make it - just abandon them to the streets (he closed the mental hospitals in California as Governor and let the communities assume the responsibility which they did not do), let the homeless sleep under bridges and beg on the streets. Fail to reach the standard of developed nations by limiting the quality and quantity of health care to the ability to pay. I could go on and on with this.

The point is that all of this is contrary to the values of our country which hail from the Scottish philosophers John Locke (with the help of Thomas Jefferson his ideas found their way into the Declaration of Independence) and Adam Smith who in the Wealth of Nations set down the basis of democratically controlled capitalism. Many don't know however that Adam Smith also wrote a book on morality and was clear that his capitalistic system would not work without a moral population. In practice we see that without limits imposed by the government, greed displaces morality among the economic movers and shakers.

The current near collapse of the global economy, a very deep recession with extended unemployment over 17% and approaching that of the great depression is the consequence of this 26 years of irresponsble govenment that did not do its duty to limit the excesses that are part of human nature or tend to the economic realities or foster a tone at the top for proper education and preparation of the population to keep the country globally competitive.