Capitalism and the Swiss (near) miss

Prior to the start of last week’s World Economic Forum in Davos, Switzerland, founder Klaus Schwab said that “Capitalism in its current form no longer fits the world around us.” It would be naïve to dismiss this statement as merely the words of a Swiss economist because it reflects the opinions of most Western political leaders, including the Obama administration.

How often are American citizens told by their government that the latest recession was the result of capitalism run amok? How many times was “big business” castigated while the administration portrayed itself as working hard to protect its citizens from the egregious abuses of a free-market economy? With these questions as background, it is understandable why disillusioned citizens, possessing degrees from progressive universities, have taken to the streets in protest. After all, who in their right mind would want to maintain a system where only the rich (the one percent) get richer and the poor (the 99 percent) get poorer?

Playing largely on popular opinion, progressives in authority, both in the U.S. and the E.U., have increasingly begun to include the descriptor “crony” to capitalism-at-large in order to further influence the general populace. Once all capitalism becomes crony capitalism in the eyes of the public, the call for a fundamental economic shift, away from a free market and toward a state-controlled system, becomes easier to sell.

The irony of this line of reasoning would be laughable if it weren’t so galling. To believe that more government economic control is needed to correct the mistakes of current governmental interference requires a leap of faith that even Benny Hinn would call excessive. Yet that is precisely what was being promoted last week at Davos and what the White House has been calling for since 2009.

An advanced degree in economics isn’t necessary to understand the basic tenets of capitalism. At its heart, capitalism is simply a system of profits and losses; both aspects are equally important.

Unfortunately, the administration and American media constantly portray profit as evil and losses as avoidable. However, according to Thomas Sowell, “the losses are equally important for the efficiency of the economy, because losses tell producers what to stop producing.” Sowell’s words are a harsh slap in the face to a society where winning and losing are no longer valued, where “empathy tables” actually exist and where elementary schools are increasingly abandoning grades so as not to harm students’ self-esteem.

Though profit and loss is capitalism at its heart, there are many different variations of capitalism depending on the level of government participation. What is considered capitalism in the West is more a form of state capitalism. Would the U.S. have a majority stake in General Motors or the administration be allowed to limit executive’s pay via a “pay czar” if America was truly a laissez-faire economy? Absolutely not.

The reader now returns to Schwab’s words: “Capitalism in its current form no longer fits the world around us.” Schwab’s pre-conference statement was intended to set the tone for the discussion, primarily concerning the sluggish economic recovery in America and the E.U. member-state defaults and bailouts. Based on pronouncements made by the Germans, the French and IMF Chairman Christine Lagarde, the desired result was to incite greater government intervention in Western economies, a la China (whose economic model was greatly fawned over by the Western delegates).

However, there is also an ironic truth to Schwab’s words. Capitalism “in its current form” (emphasis mine) is not working. Though I doubt he meant it this way, he is correct- government interference in capitalism is hindering the recovery it claims to desire. In order to correct the problem, Western governments should release their holds on their economies and allow the markets to determine what succeeds and what doesn’t. That alone will produce real and lasting recovery.

Klaus Schwab, founder of the World Economic Forum, is a prophet, albeit an accidental one. His statement that capitalism “in its current form” isn’t working is completely true. While his goal may have been more government intervention, Americans should look to the past and see what works best: less government involvement in the market.

Conservatives have the opportunity during the election to insist on less government involvement in the economy. Will they? Let us all hope so, for our future’s sake.

2 thoughts on “Capitalism and the Swiss (near) miss

  1. Burwell,
    You are once again right on the “mark,” pardon the pun. The “Old money” Europoean elitism now permeates the halls and offices of our White House and much of Congress. Boiling it all down, the formula is quite simple, you reward hard work and exceptionalism, balance your check book (even if it is national), spend money on defense, necessities, and follow the Golden Rule, and never run your national credit cards up past the limit (especially if your new credit comes from Red China). Keep up the great work. Love, Don

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