An MSNBC article today asks whether this worst financial crisis since the Great Depression will bring about "The End of American-Style Capitalism?" Of course, your answer depends on how you define and how you view America's brand of free-market capitalism. Not all of us agree.
Much of the American marketplace is well and wisely regulated. We've learned over the years--the decades--that unregulated business and markets are decidedly not in society's interest. Yet, let's be clear: given human nature, it is undisputed that a market economy provides the strongest, healthiest, and wisest incentives for a productive society. The opportunities and incentives bring out the most creative and productive qualities of individuals and business organizations in society. But, regrettably, they also bring out the most aggressive, selfish, winner-take-all attitudes and behavior, which too often move them toward and past the borders of professionally, ethically and publicly responsible behavior.
Over the last century or so, industry after industry, in one marketplace after another, have too often proved their lack of accountability to society and its citizens: workplace safety, fair wages, environmental responsibility, market manipulation, truth in advertising and selling, quality and safety of products, among other areas of abuse. And some of these issues continue to pose occasional problems even today. After all, the nature of man and the dynamics of markets remain dominant factors, even with some level of regulation in most all these areas. And now, many of today's businesses are looking for ways to abandon any responsibility for employee pensions and health care.
And yet, throughout my 24 years as a corporate tax and financial executive, my conclusion has been that business and market players most often play by the rules set out for them. And they play to win; they have to. For very often, if they don't win, they lose, or their company loses, and their employees and shareholders lose. That's the nature of a very competitive marketplace, and the well understood natural rules that obtain there. The stakes are often large and very personal.
Human nature and these natural market dynamics often move participants to compete as aggressively and as close to the legal and ethical boundaries as they can. Naturally, they oppose new laws, taxes, and regulations that would constrain them or reduce profitability, and they lobby and contribute as much money as possible to sympathetic legislators who might support them. Then, together, they contest and attempt to eliminate existing laws or regulations wherever possible. They employ public advocacy to assert that the limitations and burdens of more regulation will weaken American business, the American economy, and American employment. But, in most cases, it is just not so. It's not about what is best for society. It is about what is best for them. They are playing to win, and aggressive legal and public advocacy are part of how the system works.
The only problem is that the advocates for society's broader interests are not as strong, well-financed, or as effective as business interests. They emphasize, as well as they can, that a particular economic model enjoys support by a society only when it best serves all the interests of that society. One might reasonably think it should be those broader public interests and the health of society--all elements of society--that define how business and markets will best serve them, not visa versa. Yet, business interests and free-market ideologues too often advocate quite unabashedly and unrepentantly for the opposite--that the best societies grow out of the most unregulated marketplaces. That is, what is best for the market, is best for society. And their definition of "best" is a "free," unregulated market where "trickle-down" economics define social responsibility. To the extent that remains the view of many Americans, it is an increasingly isolated view in today's modern world.
Unfortunately, predictably, when the competitive environment of a poorly regulated marketplace grows white-hot, greater "creativity" and "productivity" (read that, profitability) is too often found only in rationalized ventures beyond the reasonable boundaries of the law, professional ethics, or public responsibility. And the rationalizations are just as creative.
And as this volatile, often destructive process has played out again and again, needed, prudent regulation has often proceeded in its wake. But one area where regulation has a spotty and uneven history is the financial markets: S&Ls, mortgage companies, banks, and particularly the investment banking houses. Free-market conservatives and ideologues, when in power, have sometimes successfully deregulated in these market areas, as well as turning back needed new regulation. Such was the case with regulation of institutional leverage limits and some of the more exotic and risky derivative financial instruments which are at the heart of the current market crisis. We can only hope that will now change.
A healthy market economy is essential to the most successful and healthy societies. But prudent market regulation is also essential to control for the excesses of human nature under such powerful incentives. Aggressive, unregulated free-market ideology is today an anachronism. It is a conceptual vestige of the 19th and mid-20th century. By now, we should be beyond all narrow, limiting ideologies. Let's hold fast to the best ideas about market processes and productivity, and how markets best reward effective producers, yes, but also insist that the role of the market's institutions and ambitions be understood as subordinated to a societal obligation to finance and provide--directly and indirectly--for the greater needs and interests of an advanced and humane society. For, at best, the market is the economic engine that provides for the needs of the greater society, no more, no less.
http://www.msnbc.msn.com/id/27112481
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