Meltdown

Eighty years ago, faced with today's economic events, nobody would have been in any doubt: we would obviously be living through a crisis in capitalism. Instead, there is a collective unwillingness to call a spade a spade. This is variously a crisis of the European Union, a crisis of the euro, a debt crisis or a crisis of political will. It is all those things, but they are subplots of a much bigger story: the way capitalism has been conceived and practiced for the last 30 years has hit the buffers. Unless and until that is recognized, western economies will be locked in stagnation which could even transmute into a major economic disaster.

Simply put, the world has trillions upon trillions of excessive private debt financed by too many different currencies whose risk is allegedly mitigated by even more trillions of financial bets which in aggregate do not minimize the systemic risk one iota. This entire financial edifice, underwritten by tiny amounts of capital, has been created over three decades backed by the theory that markets do not make mistakes. Capitalism is best conceived and practiced, runs the theory, by hunter-gatherer bankers and entrepreneurs owing no allegiance to the state or society.

This is nonsense. Business and the state co-generate wealth in a system of complex mutual dependence. Markets are beset by mood swings and uncertainty which, if not offset by government action, lead to violent oscillations. Capitalism without responsibility or proportionality degrades into racketeering and exploitation. The prospect of limitless pay is an open invitation to bad, or even criminal, behavior. Good capitalism cannot happen without referees to blow the whistle or robust frameworks in which markets can function; neither is reliably created by capitalism itself, hence the role of democratic government. Yet the world is trying to solve the legacy of the last 30 years as if none of this were true and, instead, that the practice and theories that created the mess are still valid.
~ from Our Capitalist System Is Near Meltdown by Will Hutton ~

While I agree with Hutton's overall premise, I do think he errs in the belief that democratic systems can restrain and confine capitalism. To the extent that they succeed in this endeavor, it's always a short-term fix because the capitalists immediately get to work in finding loopholes or trying to subvert the intentions of legislation and regulation.

In the end, we will find ourselves where we are right now again and again. Each time we think we've perfected a mechanism to rein in the corporatists, we will discover eventually that they have already figured out a multiplicity of ways around it.

This has proven to be the hallmark of the capitalist system: moving from crisis to crisis with intervening periods of mass prosperity...well, a measure of prosperity for those of us in the west. For those in other locales, the system sucks all the way around!!