Friday, 10 April 2009

Time Magazine 1980 - Is Capitalism Working?

How's the saying go?

Those who ignore history are condemned to repeat it.

Something like that, anyway.

Thanks for the most part to Jimmy Carter's inept presidency, America's economy was in dire strait some 29 years ago.

Naturally, instead of blaming Keynesian economic policies, unsound monetary policy or reckless fiscal policy, Time magazine chose to question that one thing that the talking heads in the media always give a kicking to when things are down - capitalism.

Sound familiar?

Check out the cover of Time's April 21, 1980, edition:



The article itself is somewhat less bearish than the attention grabbing cover.
Capitalism: Is It Working...? Of Course, but...

In an age of economic anxiety, real and rising concerns about whether free enterprise can surmount the problems of inflation, energy and productivity.

The relentless daily pounding of dismal news drives deeper the public's conviction that the economy is in a profound and morose crisis. Feverish inflation, previously a rare malady limited primarily to wartime, has become chronic. Price spurts once associated with profligate banana republics are now common to North America and Western Europe and threaten the foundations of democratic societies. With every sign showing that prices in the U.S. will continue soaring even as the nation begins slumping into recession, President Carter, his re-election jeopardized by the economy more than by anything else, is stuck in an economic morass.

The litany of U.S. economic woes at times seems endless. Week after week, interest rates crack new records; home owners face 17% mortgages, and companies confront 20% business loans. Energy, the oxygen of industrial life, has become so costly and politically controlled that the U.S. can no longer be certain of enough fuel to keep its factories running and homes heated. The output of goods per hour worked has stagnated. From 1948 to 1973, the productivity of American employees increased 2.9% annually, thus permitting steadily higher real wages and higher standards of living. Last year productivity dropped .9%. The real median income of American families jumped 64% from 1950 to 1970, but has crawled up by less than 1% a year in the past decade. Weekly real take-home pay has been declining for two years. That gauge of American economic health, the stock market, has been sharply depressed.

Amid all this, the Carter Administration has appeared paralyzed and unable to cope with problems that it does not fully understand. Quips Alfred Kahn, the hapless presidential anti-inflation adviser: "Anybody who isn't schizophrenic these days just isn't thinking clearly."

While these travails are felt most acutely in the U.S., the situation is common to nearly all Western nations. Since the mid-1970s, industrial economies have grown about as well as wheat in a drought, while inflation has expanded dangerously. Even countries that have adapted best to recent economic problems, notably West Germany and Japan, suffer inflation or slow growth. The world money system that functioned like a Swiss watch for a quarter-century has been sending off alarms. Gold, the barbarous relic that Shakespeare called the "common whore of mankind," has become the refuge for a world fearful of returning to an economic jungle.

As industrialized and developing nations meet the challenges of the new economic era, they must choose between two essentially different economic systems: the market economy and the command economy. Neither exists in pure form. They overlap, and there are myriad variations within each model. But the difference between them is basic. In market economies the principal business decisions are taken by individuals, who freely exchange their goods or services. In the command economy, the state makes the fundamental business decisions.

Capitalism, the system that relies on the maximum use of free markets and the minimum of government controls, is today being challenged as at no time since the Great Depression. On all sides the haunting questions arise: Is capitalism working well enough? Can the system suffer and survive these problems? Can it be repaired or is it fatally flawed?

One might be tempted to say: What else is new? The free enterprise system has been constantly questioned and condemned ever since that absent-minded Scots professor Adam Smith, another revolutionary of 1776, enunciated its basic philosophy. But today's doubts are deeper and the assaults more virulent. They come not only from capitalism's old critics but from its longtime champions. Leftist Economist Robert Lekachman of the City University of New York declares: "The central economic fact of our day is the declining vitality and élan of capitalism and capitalists." And Chrysler Chairman Lee Iacocca also says: "Free enterprise has gone to hell."
Read the rest here.

Capitalism's resilience has been remarkable in spite of serious assaults by government bureaucracies around the world.

How many standards boards are there?

In a free market you wouldn't need any.

How would you know a butcher serves clean meat? Because people still shop there. If he didn't then the market would know that and he'd go out of business.

How many regulations are there? Tax rules? Taxes?

And yet, despite massive inefficiency in government spending programs, capitalism has been able to keep free economies alive.

Viva La Capitalism!

Long may it continue to lift people out of poverty the world over.

(Nothing Follows)

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