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Hobson’s Economy

Kip Ward

Posted: 12.09.2008 / 4:41 PM PST

Capitalism, oh how things have gone nuts.  I’ve spent my life as a capitalist; eaten, breathed, and for better or worse loved it.  Anyone who seriously studies capitalism should be in awe of the simplicity and efficiency of the free enterprise system.  It’s a system that recognizes humankind’s infinite greed and selfishness, and then uses the forces of competition to keep it in check.  The bottom line is that it works; or at least it did.

So how could things have gone so wrong, after all isn’t there still plenty of greed and selfishness around?  How can a system that is based upon our worst qualities possibly be failing?  The bottom line too is that capitalism, as we have known it, is in trouble.  Or maybe even more accurately put; we are in trouble because of capitalism, as we have known it. 

A couple of centuries ago, we discovered in our exploration of the free market that capitalism needed regulation. That is why we have strict laws regarding monopolies among other things. Unfortunately as the global economy and its accompanying financial infrastructure have grown larger and more complex we have found that unbridled capitalism can burn so wildly that it consumes all its fuel and burns itself out. Maybe even taking us with it.  And so we struggle with the oxymoron of a regulated free market.       

So how we fix it, I haven’t a clue.  Capitalist systems in their most basic forms are easy to understand and manipulate.  It is part of what has made America great.  But the complexity of the current world economies are so vast that it may be well beyond the reach of our government initiated repair and rescue plans, including Obama’s.  

Did our congressmen and senators really understand the complexities of the bailout plan that was passed a short while ago?  The answer has to be absolutely not.  It is a good bet that few of them have any knowledge of economic fundamentals whatsoever. They simply vote how their party and the lobbyists tell them to.

The truth is that there maybe relatively few people in the world that understand the world economic dynamics well enough to have a shot at charting the proper course through this financial jungle. And even they are likely to disagree among themselves.

The beauty of basic capitalism is that it is self-correcting.  It is Darwinism pure and simple.  Either the business competes or it dies, and the consumer is the beneficiary.  Businesses come and go, and with each cycle businesses become more efficient and more competitive. 

This may no longer be the case. Businesses have supposedly become too big to let fail.  Failure would cost too many jobs, endanger our national security, and simply cause too much suffering.  It is all part of going big and global.  The economic titans have secured their future not through efficient economic practices and sharp business management, but through lobbing, selling the amount of misery they will cause if they are forced suffer the consequences of their own irresponsible and selfish actions.  And maybe they are correct.  Maybe the price of their failure is simply too high.  At least to a population that has had to endure little sacrifice. 

If the faltering giants have their way it may be the demise of capitalism, at least as we have known it.  And we will be the worse for it.  We will have mortgaged our children’s economic strength and prosperity for a chance to unravel this incredible economic mess in which we now find ourselves.

Unfortunately a Hobson’s choice may be the only choice we have.  It appears that to do nothing is to likely fall into almost certain economic ruin. It’s ironic that a system that was founded upon man’s greed and selfishness should be brought down by it. 

How will we succeed in resolving this crisis?   Obama’s plan seems well thought out, with specific goals and at least an outline of a road map to get there.  The question is will it be enough and can we provide enough stimuli before we run out of resources.  Are we in effect trying to extinguish a gas fire with a squirt gun?

Obviously time will tell, but at least there is a ray of hope in that Obama’s plan is in stark contrast to the lackadaisical approach of the Bush administration to simply give everyone $ 600.00.   If we can see why that failed then we can also see why Obama’s plan may succeed.   

And will we succeed in resolving this crisis?  I guess it depends upon one’s definition of success.  Obama’s goal is to pull us out of this recession and rebuild our infrastructure to make us a lean mean international competing machine.  He says the government can pay back all of the money it has borrowed once we have fixed our underlying problems. 

Given the alternatives, I guess I can live with that.