It’s ironic that the question would be raised about a system that has brought economic freedom and prosperity to so many. But the public image of capitalism always suffers during economic downturns. This time, populist conservatives have teamed with traditional enemies to slap around capitalism pretty badly.
The most publicized attack was “friendly fire” from candidate Newt Gingrich, a long-time eloquent defender of free markets and entrepreneurship. Yet in the heat of the GOP primary battle, he unleashed a broadside against then-frontrunner Mitt Romney, accusing him of being a “vulture capitalist.” He claimed Romney downsized companies and eliminated jobs, all while making good money for himself.
The charges stuck, causing a turnaround in the polls. But it was despicable because Newt knows better. He knows that competition is the essence of capitalism, as is the unbridled flow of capital to its most profitable use. He knows that risk-taking is essential and that by definition not all risks turn out well.
The successes of capitalism are because weak performers are continuously being weeded out. They either improve or are replaced by stronger players able to bring better, cheaper goods and services to the marketplace. Over time we all see a rise in our standard of living.
Bain Capital, Romney’s company, was in the business of rescuing floundering companies and making them profitable, if possible. This often involved management changes, reducing the number of unproductive employees and other efficiencies. Sometimes it didn’t work and the companies failed anyway. The net result of the process was substantial job creation and wealth generation. But the benefits were hard to see while job losses, even if temporary, were wrenching.
Gingrich knows that many Americans are ambivalent about capitalism. They
Iike its fruits but the process can seem perilous. They have a faulty understanding of the link between the two. Rather than educate and lead, Newt chose to exploit their lack of understanding. Shame on him.
But Americans increasingly have a sense that the system really isn’t fair, that the game isn’t played on a level playing field. They have a point.
It recently came to light that members of Congress were fabulously successful investors, able to achieve rates of return far higher than the average 401(k) owner. Sheer intellectual superiority seemed an unlikely explanation. It turned out that insider information available only to them was the key. Whoops! Reforms are on the way.
Even more troubling, we sense a pervasive culture has developed in which who you know and how well you play the political game matters more than ability or productivity. All the bailouts, subsidies, Obamacare exemptions and other goodies aren’t spread around evenly. They go to the favored few, people with connections and political clout.
Take Goldman Sachs, for example, sitting at the pinnacle of the world of crony capitalism. Goldman regularly makes substantial political contributions, primarily to Democrats in recent years, simply because Democrats control the action now. They also have 30 ex-government officials retained to lobby on their behalf.
Not coincidentally, Goldman pocketed $10 billion in TARP funds and an additional $12.9 billion as an aggrieved counter-party to AIG. Your corporate welfare dollars at work!
Goldman alum Jon Corzine, a $3 million Democratic contributor and major Obama bundler, was able to fend off the proposal of the Commodity Futures Trading Commission, headed by a former Goldman colleague, to prevent companies like his MF Global from investing in foreign sovereign debt. While the friendly watchdog slept, Corzine’s reckless gambling lost $2 billion for his clients.
Capitalism often takes the hit for these outrages but it’s not capitalism; it’s corporate socialism. We need more capitalism, entrepreneurship and innovation, not less, if we are ever to achieve economic recovery.
East Valley resident Tom Patterson (firstname.lastname@example.org) is a retired physician and former state senator.