What Government must do to save capitalism

From time to time in human history, there occur events of seismic significance, when one orthodoxy is overthrown and another takes its place. Today, the scale of the global financial crisis demands that we re-evaluate the economic policy and philosophy that brought us to this point.

George Soros has said that "the salient feature of the current financial crisis is that it was not caused by some external shock. ... The crisis was generated by the system itself." He is right. The current crisis is the culmination of a 30-year domination of economic policy by a free-market ideology that has been variously called neo-liberalism, economic liberalism or economic fundamentalism. The central thrust of this ideology has been that government activity should be constrained, and ultimately replaced, by market forces. In the past year, we have seen how unchecked market forces have brought capitalism to the precipice.

Instead of distributing risk throughout the world, the global financial system has intensified it. Neo-liberal orthodoxy held that global financial markets would ultimately self-correct - the invisible hand of unfettered market forces finding their own equilibrium. But as economist Joseph Stiglitz has caustically observed: "The reason that the invisible hand often seems invisible is that it is not there."

Just as it fell to Franklin Roosevelt to rebuild American capitalism after the Depression, and to the American Democrats, strongly influenced by John Maynard Keynes, to rebuild postwar domestic demand, to engineer the Marshall Plan to rebuild Europe and to set in place the Bretton Woods system to govern international economic engagement, so it falls to a new generation to reflect on and rebuild our national and international economic systems.

If centrist governments are to save capitalism, they must face three challenges. First is to use the agency of the state to reconstitute properly regulated markets and to rebuild domestic and global demand. With the demise of neo-liberalism, the role of the state has once more been recognized as fundamental. The state has been the primary actor in responding to three clear areas of the current crisis: in rescuing the private financial system from collapse; in providing direct stimulus to the real economy because of the collapse in private demand; and in the design of a national and global regulatory regime in which government has ultimate responsibility to determine and enforce the rules of the system.

The second challenge for social democrats is not to throw the baby out with the bathwater. As the global financial crisis unfolds and the hard impact on jobs is felt by families across the world, the pressure will be great to retreat to some model of an all-providing state and to abandon altogether the cause of open, competitive markets both at home and abroad. Protectionism has already begun to make itself felt, albeit in softer and more subtle forms than the crudity of the Smoot-Hawley Tariff Act of 1930. Soft or hard, protectionism is a surefire way of turning recession into depression, as it exacerbates the collapse in global demand. Social democracy's continuing philosophical claim to political legitimacy is its capacity to balance the private and the public, profit and wages, the market and the state. That philosophy once again speaks with clarity and cogency to the challenges of our time.

A further challenge for governments in dealing with the current crisis is its almost unprecedented global dimensions. Governments must craft consistent global financial regulations to prevent a race to the bottom, where capital leaks out to the areas of the global economy with the weakest regulation. We must establish stronger global disclosure standards for systemically important financial institutions. We must also build stronger supervisory frameworks to provide incentives for more responsible corporate conduct, including executive remuneration.

The world has turned to co-ordinated governmental action through the Group of 20: to help provide immediate liquidity to the global financial system; to co-ordinate sufficient fiscal stimulus to respond to the growth gap arising from the global recession; to redesign global regulatory rules for the future; to reform the existing global public institutions - especially the International Monetary Fund - to provide them with the powers and resources necessary for the demands of the 21st century.

The IMF's governance arrangements must be reformed. It is only reasonable that, if we expect fast-growing developing economies such as that of China to make a greater contribution to multilateral institutions such as the IMF, they should also gain a stronger decision-making voice in these forums.

The longer-term challenge for governments is to address the imbalances that have helped to destabilize the global economy in the past decade: in particular, the imbalances between large surplus economies such as that of China, Japan and the oil-exporting nations, and large debtor nations such as America.

The magnitude of the crisis and its impact across the world means that minor tweakings of long-established orthodoxies will not do. Two unassailable truths have already been established: that financial markets are not always self-correcting or self-regulating, and that government can never abdicate responsibility for maintaining economic stability.

For governments, it is critical that we get it right - not just to save the system of open markets from self-destruction, but also to rebuild confidence in properly regulated markets, so as to prevent extreme reactions from the far left or the far right taking hold.

Governments must get it right because the stakes are so high: There are the economic and social costs of long-term unemployment; poverty once again expanding its grim reach across the developing world; and the impact on long-term power structures within the existing international political and strategic order. Success is not optional. Too much now rides on our ability to prevail.

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There are many different ideas or systems of how an economy should be run. The two most common are capitalism and socialism. They are very different in how they view who runs the economy. Most economies have ideas from both systems, but tend to be more of one than the other.

Capitalism is the economic system based on private or corporate ownership of, production and distribution of goods. It has always existed to some extent in all civilizations but was written about formally by Adam Smith in his book "The Wealth of Nations" in 1776. Capitalists favor a system of free enterprise which means the government should not interfere in the economy - that the laws of supply and demand will make sure that the ecnomy runs most efficiently in meeting people's needs. Capitalism is characterized by competition in which there is rivalry in supplying or getting an economic service or good. Sellers compete with other sellers, and buyers with other buyers. The buyers seek the best possible deal in purchasing goods and the sellers look to make the best possible sale allowing them the most profit.

Socialism is an economic theory or idea that states that the government or the state should be in charge of economic planning, production and distribution of goods. This contrasts with capitalism where free markets predonimate and property is privately owned. Socielism tends to favor cooperation whereas capitalism is characterized by competition.

The theories of socialism first arose in the late eighteenth century in response to the Industrial Revolution where factory owners were becoming wealthy and the workers impoverished. Thus, workers wanted a greater share in the wealth that factories were making. Later a form of socialism called communism sprang up based on the writings of Karl Marx and Friedrich Engels. Communism advocates class struggle and revolution to establish a society of cooperation with strong government control. Communism predominated in the former Soviet Union and much of Eastern Europe at one time. Today it predominates in China and Cuba, but its influence has lessened.

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ALL who will need it in the next four years. That would be everyone who feels duped for having voted Obama in. Be careful what you ask for, you just might get it.

In the words of Yogi Berra: 'It ain't over till it's over.' There will be another election in four years.

We gave Carter - the 1-term wonder - a chance and he wrecked the economy. Reagan fixed the economy (with tax cuts) and bankrupted the USSR out of the arms race. There could be no more stark example of socialism vs free-market economics.

the trouble, let me be the first to accuse you of being a racist, a paranoid, a nasty, hateful person (did I miss anything?) for bringing up all these facts about the president and the party who only have your best interests in mind. How dare you say these things when our brave president is trying his very best to fill your gas tank and pay your mortgage. You should be ashamed.

See? Now nobody else has to break a sweat typing furiously to put you in your place. I'm sure we all feel much better now.

It looks like our wonderful govt is thinking about another stimulus -- remember those tax rebates we got back in the spring of this year? It was $600 an individual and $1200 a couple. The govt doesn't want to do quite the same kind of stimulus as last time because -- get this -- 80% of the Americans who received it used it to either pay down debt or bolster savings. Here's what they want the new stimulus to do:

�The extension of unemployment benefits and possibly food stamps from 39 to 52 weeks.

�A boost in infrastructure spending, despite the problems of getting the money to work quickly.

�Some relief for state and local governments facing tighter budgets because of lower tax receipts and rising Medicaid costs.

God forbid we give something to the middle class -- let's extend the food stamps and boost the "infrastructure spending" -- what is that anyway? I'm guessing it's a way to line the pockets of the suits even more. When is it going to end?

He figures he can win on the Dem ticket because PA has turned Dem. Well, I have news for him.....I doubt it. He only won by a couple votes in the last election because of Pat Toomey running against him. He will definitely lose this election.

I always split my ticket and I usually voted for him, but no more. I don't care what party anyone is affiliated with; but, to me, he is a traitor and that's someone else who is not needed in the Senate.

To those who vote straight party, open your eyes. They are only out for themselves (but is that really news to anyone?)

As posters have said before, we have to educate the people who don't watch/investigate/read up on the candidates running to make sure we vote the best candidates for the job...those who value the constitution, listen to their constituents (which is hard), and vote for the good of the country. Get rid of the a-holes who are in there. We really need to clean house this coming election.,

you didn't answer mine. Where did you hear that the U.S. doesn't make vaccines? Or is it merely more conservative fiction? Because it's simply not true.

You're talking about all this as if it's a leisurely endeavor that isn't time sensitive. I'm talking about protecting my family and your family from a potential bio terror attack using smallpox.

And you're right. No response is necessary at all because you haven't said anything worthy of one.

When a president decides to buy banks, they call that FASCISM. This is exactly what Bush has done.

Are all of you so rich that you don't know what the middle class is going through these days? This country is in a shambles, and people are suffering through no fault of their own.

It's HIGH TIME the plight of the middle class is acknowledged and some help offered.

This "trickle-down" theory is NOT working, and it's time to employ the "trickle-UP" theory.

They are doing all they can to make THEIR life comfortable. As long as they are getting paid and their pockets are getting filled with money......that is all they care about. We can't trust our government. Look at what trusting the government has done to us so far. Our economy is in shambles and the government wants to blow over 800 billion dollars again. This isn't going to fix our economy. It is just going to raise government spending and leave an even bigger deficit than we already had for our grandchildren. This stimulus package is a joke. I am totally against it!

What I want to know is why can't the government start something that would charge companies who outsource production to other countries? Let them open up a factory in another country but they have to pay a huge tax or something to do it. Make it to where it isn't a good financial decision so we can keep the jobs we have now and create more. That would help us MTs out as well. What is the point of creating jobs in our country if companies can still up and leave to go to other countries? Seriously....what is made in America? Even foreign cars like Honda who have factories here in America.....that money still doesn't go to the US. I know it employes Americans but the majority of the money there still goes out of the country. I want American made goods made by Americans. I also think people hiring illegal aliens should be penalized and fined heavily for doing so. That would stop that crap too.

take your money, just like my money, and put it into a package where it gives money to this group and that group and this group over here and just hope that they use that money wisely and that it helps the people who need help? Like I said before....that worked out swell when we gave money to the banks.

I don't want my money to go for irresponsible people either but you know what....it is and it will. You all talk about how everyone should have healthcare and how government should fund healthcare, through taxpayer money, so everyone is insured. Yet you refuse to give money so people can keep their houses? Yes, some were irresponsible and were just plain dumb in their decisions and yet some just got a raw deal during this tough time and got dragged down.

You all talk about conservatives flipping sides when a handout comes along but it sounds to me like all these liberals want to help others out until it comes time to give that help. Healthcare for all paid by taxpayers. You may not have a home and your kids may not have a warm bed to sleep in....but hey....you got healthcare.....whoooopppeee!

What Government must do to save capitalism

What government must do to save capitalism

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