The authors seem to have neglected very important parts of the puzzle. The reason the government saves failing large corporations -- and only very large corporations -- is that corporations have purchased a piece of the government. It is noteworthy that the corporations also have purchased a piece of the US Supreme Court. I say that only because a reading of history shows clearly that the founders did NOT intend corporations to have the same political rights as natural persons. Indeed, it is less than clear that the founders wanted corporations to have any political rights whatsoever. Nevertheless, the bought and paid for Republican faction of the SCt has decreed unlimited political rights for corporations.

Small wonder the government bails them out. Large wonder that the esteemed authors of this piece neglected that all-important fact set.

Would you agree that copyright and patenting is a technical manifestation of the modern corporatist State? That under true and pure capitalism such State protection of profits would not be tolerated? Because under freedom and ownership -that is under true and pure capitalism- if I own something, I can makes copies of that something, to my own cost and ability. I could them proceed to give some copies to some people because that is what I can do with that which is mine.

Where does PS find these people? God, this is such garbage. Let's see... who can tell me some of the things that the authors left out in this Alice in Wonderland version of capitalism? Well, there is that first phase of capitalism when joint stock corporations, aided by state militaries, occupied lands across the globe, enclosed those lands, committed genocide against indigenous people on a spectacular scale, then shipped a hundred million stolen people out of Africa to work on plantations on every continent.

Yes, and then there's that innovative period of industrial capitalism. What term did Blake use to describe the factories? "Dark Satanic mills" was it? Never mind the child labor, the industrial accidents, the endless hours of drudgery with workers literally dying at the machines. I suppose for the authors that it is free market capitalism when the state brings in the military to break strikes, but it is corporatism when the state, forced to it by emerging labor movements, develops minimal labor laws.

Of course, free market capitalism during the boom years do not seem to include the bust years in this account. The 19th century saw something like 20 recessions in the US that were as least as bad as the current crisis and often much worse.

With Keynesianism and redistributive tax policies, capitalism was moderated somewhat in its relentless search for profits. But then that had to end as trasferring profits to those who actually labor is at odds with real capitalism. So came the 80's and de-regulation and globalization. Anyone could have predicted the result: massive wealth and income inequality, scial tension and deplorable working conditions. Check out how it goes for workers in China who actually produce the mac's, ipads, ipods, and iphones that all of us young budding capitlalists use to search the internet (itself a gift from the state to corporations).

Enough! The intellectual dishonesty of Phelps and Ammous can only be tolerated in a society where every facet of social life is given over to the owners for their inspection and approval. Occupy everything (including the telling of history).

It's interesting that the authors criticize corporatism for being unsustainable. One would think it impossible to make that charge when the very same countries that adopted capitalism have essentially all adopted corporatism. If capitalism was so much more sustainable then why was it not sustained anywhere? That capitalism was apparently so successful but no longer exists can't simply be expained as a global "oops" moment.

The reality is that corporatism is capitalism, just a developed capitalism. Those that don't see that are just making excuses for capitalism. The idea that there used to be a pure and perfect capitalism completely detached from government influence is the big lie of the right-wing. Politics and economics can never be as completely seperated as those on the right fantasize.

Perhaps the primary cause of corporate mismanagement is the principal-agent conflict. With fully two-thirds of the S&P 500 boards chaired by their CEO, one would be excused for believing that the fox is guarding the hen-house. Meanwhile, too often it seems like the rest of the board acts like an incestuous rubber stamp, and shareholders have little recourse but to check out (no wonder stock returns are lagging profit growth!).
Once we get this much right, I'll join you on your anti-government crusade. Until then, your argument sounds like a tortured case of retrofitting reason to justify your ideology.

Capitalism circa 1800 was deeply corrupt - that was a central part of Adam Smith's message. There was for example the travesty of slavery as a central institution of the global economy and the minor fact that the sub-continent of India was 'owned' by a private company. It was the intervention of democratic politics that ended those excesses. Yes there is a tension between democratic politics and the economy, but it is a productive and necessary one.

As is often the case, the analysis is partially correct but then it goes off in a direction that is misleading and distracts from the real problem.

'The shift of power from owners and innovators to state officials is the antithesis of capitalism.' Unfortunately, 'owners and innovators' never had much power. As pointed out by OldGuy and others elsewhere ('The banks own this place' - a well known member of the House of Representatives), power now resides with managers of corporations who have been successful in taking over control of government. What we see now is a government that acts to protect the interests of large corporations, to the detriment of small businesses and the general public. That is the issue that needs solving. Politicians can't solve the problem as long as they are dependent on the money flowing their way from corporations. Since SCOTUS will not step in, it is difficult to see where the required change may come from.

Btw, where do the authors suggest we should go now that Facebook (and Google, and others) are compromising their users' privacy in a big way ? Do we really see users moving away from both, or is there simply no reasonable choice left ? If so, they may be seen as utilities, and utilities will always act as monopolies given the chance (i.e. if left completely unregulated).

But then, maybe the authors are right to the extent that the current system is unsustainable and will collapse anyway. Let's see where we come out on the other side then.

So, the authors are insisting that it is “corporatism”. Simply, I do not agree with them, because I think there is something more important than corporatism. They have not considered this at all in their ruminations about the economy. What is that? That is the real market (or supply chain) process as the bloodstream of the real market or economy.

I believe the existing market (or supply chain) process for the real market has been too heavily efficiency-oriented in the Modern Information Age and no longer suitable for the modern information market. With the real market (or supply chain) process as it exists now, the market as a whole cannot self-generate enough businesses and jobs to keep the level of consumer spending at the desired level, no matter how powerful expansionary or stimulus economic policies are adopted.

I would strongly suggest you see: (1) “Overcoming an Economic Sisyphean Task – Or, the True Path Back to Economic Prosperity” http://goo.gl/YzSfQ; (2) “The Real Cause of the Current Economic Crisis and a Suggested Solution” http://goo.gl/9y8Uf.    

It is “real market process”.

To Philosopher's Beard--

Capitalism is deeply corrupt, period. Joint stock corporations traded goods across state lines, goods that had been created through slave labor (or the labor of indentured servants ar a nascent urban working class). Industrial capitlaism exploited the labor of factory workers and now under globalized capitlaism a new working underclass is being created across Asia.

Democratic action by the working class was able to have an impact in reducing caitlaist exploitation only in the wake of violent clashes between labor and capital and with the threat of widespread strikes. Except in the most "corporatist" economies (especially Nordic countries, where the current crisis has been least felt, save Iceland), capital has successfully pushed back agaist the gains of workers. Now, in Amerika, wealth and income are more maldistributed, social decay is more intense, and social tensions are greater than at anytime since the Great Depression.

Capitlaism is immoral as it encourages some to benefit by the exploitation of many. It's always been that way, and the sooner we come up with something better, even if it is "democratic corporatism," the better.

In the meantime we have Nobel Laureate economists spewing the most grotesque historical distortions.

I hate to just make a reactionary comment with no considered rebuttal, but I am left so speechless by the apalling quality and one-sided-ness of this article that I am only able to ask:

Where the hell is Project Syndicate getting this garbage from?

Excellent article on capitalism.

Dr.A.Jagadeesh  Nellore(AP),India

E-mail: anumakonda.jagadeesh@gmail.com

There are too many objections to this piece to list completely, and like other commenters I am surprised that such a naive and ill-considered piece has appeared here.

It seems to muddle definitions of what capitalism and corporatism actually are, a fundamental misdiagnosis of the causes of the current economic situation, incorrect assertions of the causes of failure and success of companies and a crude (and embarassing) use of the slippery slope argument.

Surely the requirement that governments step in to save the banks (and other industries) during the dark days was a result (at least in part) of the lack of regulation, rather than the authors assertions

"This shift of power from owners and innovators to state officials is the antithesis of capitalism. Yet this system’s apologists and beneficiaries have the temerity to blame all these failures on “reckless capitalism” and “lack of regulation,” which they argue necessitates more oversight and regulation, which in reality means more corporatism and state favoritism."

Surely more regulation simply means that the chances of a repeat of the crisis, caused by the unbridled greed of many (bankers and other alike), sometimes aided by the "authorities" (Greenspan etc) are less likely. More regulation does not lead to a slippery slope of state favouratism any more than the part nationalisation of the British banks has caused our society to become radically Communist. It simply means a part reclamation of the rules stopping short term greed trumping longer term economic health.

A slippery slope is only a slippery slope if it is a) slippery, b) a slope. More regulation is neither. (Neither to that matter is less regulation). It depands on the circumstances. More regulation in, say environmental pollution, could simply mean a step towards the transfer of pollution costs from government to consumer (via corporations) and a recognition of those costs to society at large (bringing short term costs in line with long term costs).

Further, the assertion that sites like MySpace and Friendster lost out in the social-media space becasue they sought to undermine the privacy of the users is incorrect. If we look at the example of Friendster, it failed because it didn't do the basics right (http://www.nytimes.com/2006/10/15/business/yourmoney/15friend.html?pagewanted=1), while a series of competitors offered more. If we look at Facebook, it is arguable that the intrusions into users lives are significantly higher that Friendster, while it continues to thrive. Are the authors forecasting its imminent demise? If not, why not? Perhaps a change in market/user sentiment?

It is wrong to compare market regulation in an industry (banking) where the cumulative effects of wrong-headed individuals can lead to global economic strife to a market (social media) that has demonstrably not needed regulation up until now. 

The Alice in Wonderland version of capitalism

In this case, one of the responses was a better read than the article itself. A responder put it this way:

Well, there is that first phase of capitalism when joint stock corporations, aided by state militaries, occupied lands across the globe, enclosed those lands, committed genocide against indigenous people on a spectacular scale, then shipped a hundred million stolen people out of Africa to work on plantations on every continent.

Yes, and then there's that innovative period of industrial capitalism. What term did Blake use to describe the factories? "Dark Satanic mills" was it? Never mind the child labor, the industrial accidents, the endless hours of drudgery with workers literally dying at the machines. I suppose for the authors that it is free market capitalism when the state brings in the military to break strikes, but it is corporatism when the state, forced to it by emerging labor movements, develops minimal labor laws.

Of course, free market capitalism during the boom years do not seem to include the bust years in this account. The 19th century saw something like 20 recessions in the US that were as least as bad as the current crisis and often much worse.

With Keynesianism and redistributive tax policies, capitalism was moderated somewhat in its relentless search for profits. But then that had to end as trasferring profits to those who actually labor is at odds with real capitalism. So came the 80's and de-regulation and globalization. Anyone could have predicted the result: massive wealth and income inequality, scial tension and deplorable working conditions. Check out how it goes for workers in China who actually produce the mac's, ipads, ipods, and iphones that all of us young budding capitlalists use to search the internet (itself a gift from the state to corporations).

Which beautifully illustrates the problem with this author's stance, which happens to be a common one. The problem is that economics cannot be understood solely in materialistic terms, notwithstanding how common it is for people to try to do just that. Quality of life waxes at least equally important and the question of economics is a question of basic justice. I've proposed Zero Zero Banking as one solution, but there are a few out there that do not carry burden of more popular schems, such as Marxism.

Capitalism is an unsustainable concept and forever seeks the highest productivity from each individual regardless of the negative impact on that individual's quailty of life.

kirkomrik.wordpress.com

- kk