On April 9, the Rasmussen Reports released the results of a poll showing that only 53% of Americans considered capitalism better than socialism. The poll question didn’t define the two systems, and it’s possible that with the Republican Party painting every program intended to help people who need help as Socialist, this gives socialism a better image than it deserves. In the long run, capitalism is the better system, or should be, not because it’s intrinsically better, but because, like gambling, you’re always safer playing the odds. What’s important to realize is that, also like gambling, it’s always a good idea to shuffle the deck.
It doesn’t make any difference what the organization is or even what system it’s run under; if it’s run well, it will work well, and if it’s run poorly, it will fail. Historically, you can look at England under Queen Mary, a.k.a. Bloody Mary, who managed to bankrupt the Kingdom, lose a war with France and alienate anybody whom she didn’t burn for heresy. She was followed by her half-sister Elizabeth I, who revived the Exchequer, encouraged the arts and turned England into a world power.
In ancient Rome, Augustus, the first emperor, did a competent job, but he died in 14 BCE and the Romans had to wait for Vespasian in 69 CE before they had a good government again.
Closer to our own time, consider the Veteran’s Administration Hospital System and FEMA under Bill Clinton (excellent) and George W. Bush (disasters). Even at that, the US has been lucky, with fewer total incompetents than we might have had.
Private industry has its own examples. Consider Apple computer. Steve Jobs came back to the company he’d co-founded mostly because John Sculley, Michael Spindler and Gil Amelio had managed the company so badly that nobody would take the job. There was a time that General Motors had 51% of the American automobile market, but things change when you have people making dumb choices.
It’s not the system—it’s the quality of the organization, management and labor. The limiting factor of socialism is that by definition it’s a monopoly, and in the wrong hands, it can ruin an entire nation all at one time. Capitalism, in theory, offers the advantage of competition. When Studebaker-Packard Corp., following the advice of the money managers, stressed short-term profits over long-term quality, General Motors and Ford were there to take over the automobile market. When GM and Ford did pretty much the same thing, Honda and Toyota gained market share. In theory, capitalism offers a back-up system, so that if one company goes sour, there’s another waiting, vulture-like, to take over the market.
Of course this advantage goes away when companies get too big, as defined by “too big to fail.” This is usually the result of a series of mergers and acquisitions, and a government that can’t say “no.” The struggling Chrysler Corp. carries the remnants of Nash, Rambler, Hudson, Willys-Overland and Kaiser Motors. Charles Pfizer Inc., which has already swallowed Warner-Lambert, Parke-Davis, Pharmacia, Upjohn, Searle and a couple of smaller appetizers, now wants Wyeth, which had taken over Lederle Labs and A.H. Robins. Express Scripts, a pharmacy benefit management company, is buying WellPoint, which is more of the same. A look at the history of the major banks, JPMorgan Chase, or Bank of America, shows a similar history, a progression of buy-outs and mergers. The resulting messes led, if not to monopolies, at least to oligopolies that have to be bailed out because the failure of these financial behemoths would hurt too many people. That’s what business-friendly government gets you.
One proposal for dealing with too-big-to-fail is to nationalize everything, or, for the moment, nationalize the dysfunctional banking system. The idea has a lot of appeal, if only because it reduces the risk of rampant inflation that would destroy the retirement savings of millions of aging people who have already been financially eviscerated by the stock market debacle. The disadvantage is that while the administration we have now looks fairly good, it doesn’t protect against a second coming of Warren Harding or Bush III. Nationalization is a fast and easy solution to the problem, but it creates a monopoly, or near enough, with nobody around to pick up the pieces the next time voters make a tragic mistake. Nationalization is the ultimate merger, the final step in creating something too big to fail. In contrast, breaking up the banking system, pharmaceutical manufacturers and perhaps the automobile industry, would re-introduce competition into the market. That way, when this happens again, there’s always a chance that next time, somebody somewhere will remember how to run a business.
Sam Uretsky is a pharmacist living on Long Island, N.Y.
From The Progressive Populist, May 15, 2009
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