Rogoff is being delierately disingenuous. He should be clear that when he speaks of capitalism he is talking about the 'ango-american' variety or neoliberalism. It is that which has the problems he has outlined. Inequality, greater poverty amongst the ill equipped to succeed, unsustainable resource depletion, a tendency to lurch from crisis to crisis etc. It is Europe's close links to this form of capitalism through the interconnectedness that is globalization which, combined with institutions that were inadequate, which has caused the Euro crisis. Perhaps expected in a currency of only 10 years in age. The social democratic form of capitalism in which society, business and government pull strategically in the same direction as in Scandinavia and Germany and to an extent France has been highly successful. It is mendacious to suggest that it is not sustainable.

The Chinese model, in which society is less tightly connected to the state-business nexus....but which is evolving to connect a newly created civil society with business and government to ensure that economic development is sustainable and benefits the people it is supposed to....will likely evolve towards something similar to Northern European model though with a much greater development imperative and lead role from the state.

It is this strategic collaboration evident in both forms of capitalism that will dominate after the decline of Anglo-American neoliberalism. Such an inclusive, and highly participative and therefore democratic model will be a stark contrast to one which pits the rich against the poor, capital against labour and which has collapsed because the wealthy have taken tight control of institutions and un-levelled the playing field in their favor. De-regulating the ability of the system to act as a check on their actions and allowing huge and unsustainable inequalities to develop.  It is this form of calitalism that has collapsed...anglo-american neoliberalism....capitalism more generally remains our best hope...but this time for prosperity through equitable growth.

Capitalism, as communism and as any economic, social or political system has been created by the human mind. The human mind, surely capable of doing good, is sick at its roots. One of the healthiest minds in the 20th century, Mahatma Gandhi, once said “there is enough in this world to satisfy everyone's needs but not to satisfy one man's greed” He would probably make the greatest economist today but he would definitely not be invited to deliver a lecture on Economics at Harvard university, would he Mr. Rogoff? Too dangerous.

Greed is not only present in those who work in Wall Street or in the banks whose reckless lending practices precipitated the current crisis/chance. Greed is in me and it is most probably in you too.

“Market-based solutions” sounds derisory at this stage of the game, an oxymoron of sorts. Those solutions might work in the short term, would benefit the financial elites and their cohorts in the medium one and would die causing new havoc among most of the population. Am I being too pessimistic? Maybe I am. I am also playing the game of the economist: predicting the future as if economics were a science. 

I agree with the previous post that the Scandinavian model seems to be sustainable. It is also more democratic than Anglo-American neoliberal capitalism. However I cannot judge but by what I hear and read; I have never lived in Scandinavia myself. One the other hand, I do not see the Chinese model evolving towards the Northern European one. But again, my knowledge of China is reduced to my readings and to one year living there. How we love speculating about the future.

All of our problems are solvable; however, we are becoming less able to adapt to our evovling society as we become more complacent and stubborn ideologically.

The political system will inevitably be capitalisms undoing. 

"Continental European capitalism, which combines generous health and social benefits with reasonable working hours, long vacation periods, early retirement, and relatively equal income distributions, would seem to have everything to recommend it – except sustainability."

Mr Rogoff bemoans inequality, but also the attempt to ameliorate it through welfare - which is only 'unsustainable' because of the huge rise in inequality!

On healthcare: "... how to maintain incentives to produce and consume efficiently without producing unacceptably large disparities in access to care."

The NHS solved this dilemma decades ago, providing an adequate, universal service according to need rather than bank balance. In contrast the US private insurance system has managed to cost more, while giving worse outcomes and leaving tens of millions of Americans with inadequate cover, while over-treating those that can afford it. Ironically, the NHS has suffered from the imposition of an 'internal market' but still costs less than half as much. Yet Rogoff is locked into his 'price-mechanism' paradigm. The profit motive simply doesn't work in healthcare because it provids erverse incentives to over-treat the wealthy and neglect the poor.

Rogoff pretends that using taxes to control pollution or healthcare is a 'market mechanism' when, in fact, the use of taxation represents an admission of market failure. Unless that is recognised taxation will remain ineffective. And pretending that there can be significant redistribution while keeping marginal rates of taxation low is similarly unrealistic.

Mr Rogoff gives every impression of being the captive of an ideology.

The reason 'capitalism' is failing is because it has morphed into coprorate kleptocracy.

Incidentally, China's success has been predicated on te relative equality of incomes in the West - without that access to mass consumer markets it would be dead in the water. As wages and conditions for the working/middle classes are eroded - so is its market.

We'll all go down together.

Dear Sir

A view in some ralistic direction by  a former chief economist of IMF which indicates that on that side of the table also, there is recognition of shortcomings of capitalism and that it may be replaced by some other system in the coming decades.
As for saying that the problems being faced by capitalism is due to its production of wealth (and even prosperty), it is a fact and is what was predicted by Marx.
 However, these problems were not  able to challange the capitalist system in past because of social welefare packages delivered by capitalism. But , with the abolishment of socialism in the world, the capitalism is surfacing rapidly in it's cruel form , from which cuerrent day managers (and financial institutuions) are taking advantage only through technical knwledge of doing so.

Thank you Ainvar and lifeonmars for your insight.

"Mr Rogoff gives every impression of being the captive of an ideology."

It is very comforting to see that the influental people are beginning to see the cracks in their illusory pillar of capitalism as a strong economic model. What is saddening is to see the ease at which these people can dismiss socialism.

It is a shorter path to fix socialism than to fix capitalism. In the end, the machinists of the economy, governance, will dictate the equality of their society. In a capitalist mindset, this is of little importance; we all lose in the long run, as we all are experiencing. In a socialist mindset, at least our overall equality is relegated, in theory, to be as important as the economic model.

There is a long way to go to get to a technocratic social democracy. Let's take the steps for justice. For all.

Nobody thinks Modern Capitalism is unsustainable. The USA and Canada both rely on a system of 'soft' money, an exchange of campaign contributions and favors/litigation, which corrupts the very root of the Democratic process. 

The problem is not with Capitalism (as the owners of all the capital will tell you--they're doing very well), but with Democracy. Voters are growing very very bitter.

a) They didn't vote for George Bush the first time.

b) They didn't vote for the Patriot Act

c) They didn't vote for George Bush the second time.

d) They voted, in a landslide victory, for Barack Obama

e) Despite electing a seemingly perfectly 'Democratic'(as in party) candidate, none of his ideas or plans go through the Legislative process

f) The rise of so-called Blue Dog Democrats reveal that regardless of the party in power, the Corporations will bribe their way into the legislative process.

g)Rather than rinse and repeat the process again, the people throw their middle finger to the Corporate Slaves, and go right to the Master's front door. Wall Street, NYC. The real Government.

Capitalism itself is great, but if you look at what the USA has been 'producing' in the last 20 years (Besides Apple, some Internet businesses, some computer software, Natural Resource mining, and 'Financial Services), the market seems to be punishing American companies for bad behaviour and lack of innovation.The fundamental 'Economic' problem here is that Americans don't have access to affordable access to higher Education (eg. human capital investment).

Since only a small proportion of rich Americans can afford to go to a great school, only a small proportion of Americans are prospering. THAT system (as well as the equally unsustainable 3rd World Health Care system) is unsustainable. Between a 3rd World Education and 3rd World Health Care system, and growing GINI score, our Corporate Masters are turning USA into the Third World Country.

American Capitalism has never been stronger. American Democracy has never been weaker. We have all the answers, but none of the facilities with which to implement them.

well said 21tiger -

what we are witnessing is a failure of DEMOCRACY!! Why aren't the people outraged at the inequality of modern capitalism and the greed of the 1%? If this were 17th century Europe there would be revolt and revolution. We have been so taken in by the 'bread and circuses' thrown to us by the rich...

As Mr Rogoff points out at the beginning there is no alternative to capitalism currently being debated - testimony to the powerful hegemony held by neoliberals. Nowadays being a Keynesian is the equivalent of being radically socialist.

With regard to healthcare - no, we do not need to look at ways of funding increased access and utilisation. Politicians need to stop using it as a vote-winning strategy at elections, and we need to vastly increase voter turnout amongst the young - countering the demographic 'tyranny of the majority' represented by self-interested pensioners. The only sustainable strategy is to transfer funding from costly medical care towards preventative public health care - Ivan Illich discussed this 45 years ago in 'Medical Nemesis'. But of course there are no heartwarming medical miracle stories involved in this approach and the benefits will only be realised well after the term of any current parliament....

Oh, looks like we're back to the problem with democracy again.

I'd be most interested in a follow-on article offering more detail on possible solutions to each of the five dilemmas outined.  

To me, the greatest concern is building the kind of cooperation necessary to develop global solutions.  The political deadlock in the EU and US are symptomatic of valuing of competition over resolution.  Transforming this norm is a prerequisite for any plans to address the five problems Rogoff outlines.  How will this be accompished ?

I tend to agree that democratic deficits are at the core of the problem. Where is the movement for a real 'campaign finance reform' ? Neither corporation, nor institutions of any kind are legitimate voting citizen. Consequently, any such funding of political parties, canditates and of campaigns is strictly forbidden.

This may take billions out of the election process. So what ? Only registered voters are permitted to donate up to $ 5,000.- for an election in a totally transparent way. It would even be preferable to have political parties taypayer-funded, say $ 10.- per vote achieved.

If democracy is taken back by the people, nobody needs to rally against Wall Street, or whatever.

Gulmar

Free-market capitalism proved to be extremely efficient in theescalation of expanding - but unable to rationalize
The chances of exit from the crisis in creating more rationalsystem of socio-natural === Rationalism - associations to whatlasting functional democracies in the market --- the categoricalrequirements of social reproduction of natural conditions ofexistence, present and future generations all over and all theNations
 

It is amusing and a shame that an article with such profound definitional problems could be written, let alone prominently pubished, by one of our elite economists. A simple question, Dr. Rogoff: what is capitalism?

Rogoff uses the term in such a broad based fashion that it seems to mean just about anything the author would like it to mean. Taxing to achieve social redistribution is capitalism and not doing so is capitalism. Regulation is capitlaism and so is non-regulation. State capitlaism of the Chinese variety, the Swedish variety, and, presumably, the Mercantile variety are all capitalistic as is the fiendishly Darwinistic  non-state model of an unregulated marketplace. Both the invisible and the visible hand are capitlaistic.

Marx's most basic lesson was that capitalism is a historical phenomenon. Understanding its historical evolution depends on seeing how class antagonism--the central facet of capitalism--plays out. Rather than acknowledging this, Rogoff, without making it clear, clings to archaic notions that capitalism is "natural" and rational and the fulfillent of human nature. That these notions conflict with reality is proven by his own muddled use of the term, where he collapses all the significant historical alterations of capitalism--themselves the result of fierce ideological and political struggles between classes--into one entirely distorted whole.

A static, reified conception of capitalism in the face of rapidly changing historical circumstances has always been an ideolgical ploy of the apologists for capitalism. Casting capitaiism in this way makes it appear an inevitable and unalterable, natural fact.  What's weirdly post-modern is that Rogoff presents this one "fact" as having dozens of different faces.

Humpty Dumpty knew that glory and impenetrability of meaning are joined at the hip. The instrument of glory is a laguage so protean that the masses remain stupefied. Rogoff is a master: "'When I use a word,' Humpty Dumpty (Rogoff) said, in rather a scornful tone, 'it means just what I choose it to mean—neither more nor less.'”

But, then, Humpty Dumpty did fall and crack up, and he was maimed and rendered irreperable.

We must not forget one critical enabler of sustainability: which is adaptability.   Certainly , top-down, command oriented political / economic systems have some ability to accomodate dynamic change through strategic mandate.  But this tends to do best when focused on one overriding mission that they force alignment to, for example driving exports.  But history and complex system theory suggests that bottom-up, more distributed systems are more adaptable over the long term.  Though may be less efficient and more messy at any given instant.

A derivative implication of this point is efforts to fix the current set of problems should not be to drive any particular top-down solution.  Rather better to improve the pre-conditions for bottom-up solutions by ecouraging experiementation, transparency, and resisting the power of entrenched interetsts to sustain current rigidities.

I believe it can all be traced back to here.

http://keeptheworldatwork.com/?p=19

And the solution will be a society that recognizes the World over that we need both greed and humanity to be balanced so that we will have a thriving democracy built on capitalism.

Virgil

Keep The World At Work

We have not effectively regulated the creation of over-leveraged financial products powered by information technology in the Modern Information Age. Despite the potential risks of those products, financial institutions went ahead, as it was felt they contributed to increasing the level of consumer spending.  We now know we were wrong.  Modern capitalism just needs more effective and updated regulation. That’s it.

It’s not capitalism. It’s the outdated market process in the modern information market.

A serious mistake has been made in developing numerous transaction systems and applications through the use of IT and networking technology over the last 20 to 30 years of the Modern Information Age.  This mistake created a maddening economic condition in real markets.  If we do not break down the logic of the existing downward-spiraling economic condition – the real source of our problems -- I believe that every new effort will be just as ineffective and useless as everything else we have tried.

What mistake? Please see this article: “The Real Cause of the Current Economic Crisis and a Suggested Solution” http://goo.gl/9y8Uf . If we fix this mistake immediately, I believe we could still save our economy...

I think we are looking at this from the wrong angle.

It is like looking at the wrapping on a present, or the make up of a woman and try to judge what is underneath from the superficial layer.

Economics is simply the superficial representation of the relationships in between human beings.

It is not the economical, financial system we need to change or adjust, but how human beings relate to each other.

All through human history up to this point we approached each other, we make business, establish connections based on a simple calculation: how is this going to benefit me, what is my profit from all this?

It does not matter what system we talk about, what governance is on top of the economical structure the self calculation is always the same.

It is not capitalism, communism, or any other system that is unsustainable, but how we relate to each other.

In the 21st Century humanity has become a single, interconnected system, as the "global" name suggest we are today in a closed, interdependent network, very similar to how our body is comprised of billions of cells and many organs.

With our previous "my benefit/profit first, regardless of others, regardless of how I exploit the rest" mentality we resemple to cancer cells, and this is what is leading us to crisis after crisis and even potential existential problems.

In order to escape the deepening crisis, and to build a safer, sustainable future first of all we have to change the attitude with which we relate to each other, and we have to learn to work mutually together for the sake of the whole human network, like cells in a healthy body.

And then we will see what kind of an economical and governance system grows out of that foundation.

Rogoff's own answer to the question "Is Modern Capitalism Sustainable" seems to be in the negative,  which then would mean; back to the drawing board.

If the current organisation of society is inherently unsustainable, then everything must be put into question with no sacred cows allowed or stones unturned. Tinkering with taxation may be useful but most probably wholly insufficient since current policies "vastly" undervalue the welfare of future generations. Let's be clear; we are currently trashing the planet at a super-sonic rate and the reasons for that are inherent in the current organisation of the economy and in the lack of any form of governance at par with the challenges at hand. Sweden may be less unsustainable, but it is far from as sustainable as society on the whole needs to be.

Start with an empty sheet of paper and determine what "sustainable" is and then reverse engineer a system of governance apt to achieve that. I am convinced that the resulting organisation of society is entirely different from the current one. But this is what is needed. I would very much encourage such an effort to device a blue print for an economy and constitution that is truly sustainable. Tim Jackson has written on this theme but that is the exception, it seems. It also seems that the bulk of economics stands in the way of new thinking. This column was therefore a very welcome piece of "perhaps we should be doing things entirely differently, after all".

With all due respect, this article is complete and utter nonsense. Capitalism survived, prospered and spread around the world by being more attractive to more human beings than other less efficient economic systems. At one point nearly half the globe was socialist/communist and now that's been relegated to the dustbin of history as a failed experiment.

Let's take some of these points one by one. Point one, polution and global warming... Soviet Union and China, to name two of the larger non-capitalist countries have *far* worse track record of polution. Compare BP's handling of recent oil spill (paying billions to affected fishermen, more billions on stopping the spillage, etc, etc) and for example the Chernobyl disaster where public wasn't even told for several days, let alone any compensation to the affected people. I'd rather live in US than the China as far as quality of air is concerned, any day.

Point two, inequality. The author assumes that inequality is an obviously bad thing and makes not attempt to eleborate why that is. I don't see anything obvious about it. Inequality is a natural state of human condition. We all have different heights, weight, color of our eyes, different abilities, different ambitions, different motivations. *That* is rather obvious, I'd say, not the opposite. And if we all are different, with different skills, desires, motivations, abilities, why on earth should those differences somehow result in economic equality? That's just nonsense. Take someone whose ambition is to sit on a couch and watch TV all day long and someone whose ambition is to cure cancer... why should we desire "equality" between two such people? Or any two people?

Third, healthcare. Compare US average life expentacy to that of Soviet Union or China. Would *you* want to travel to a communist country to be treated or would you rather go to a hospital in Washington DC? As for healthcare taking up greater and greater % of GDP.... who is to say it shouldn't and who is to say what % is just right? Back in the day of curing everything by bloodletting and leaches, I'm sure healthcare was close to zero % of GDP and it's been increasing ever since. Who is to say we peaked out?

Four, "welfare of unborn generations". I don't even know what this means. Why on earth should future generations be more valuable than the present? There is no obvious logic in this statement, just vague emotion related to kids. And the statement of "there is no guarantee that this trajectory can be maintained" is even more nonsense... please tell me *one* thing that is actually guaranteed in this life other than death. So why are you asking for future resource availability to be "guaranteed"?

And five, financial crises. And that's bad because....? The obvious answer is because of unemployment, dislocation of jobs, etc, etc. However, the problem with that argument is that the reason our economy has been able to develop as far as it has and create all these jobs being lost -- and many many more -- is precisely because risk and reward are part of the system.

I read the comments that followed the article and I'm shocked that not one person fundamentally disagreed with the author. The article is full of nonsensical assumptions that no one questions and accepts as given. Someone please tell me where am I wrong in the above?

@ mabell.

Very funny. Well done.

Ken, capitalism will "win out" because you can show mathematically
that it has to win out.  It's easy to show, using computational
complexity theory, that in a socialist economy, as population grows
exponentially, the number of government regulators must grow
exponentially faster.  That's why Mao Zedong and Pol Pot had to
slaughter millions of people in the Great Leap Forward and the Killing
Fields to implement their utopia, and that's why they failed anyway.
And that's why N. Korea, E. Germany, Russia, Cuba, and other communist
countries simply got stuck in the 1950s.

It should be possible for a grad student to do a project and figure
out the limits of socialist control over a capitalist economy.
Since you're limited by the number of regulators, you can control
only so many things.

By the way, the population of China is infinite, for all practical
purposes, and so you can apply some of the limiting theories of
complexity theory to it.

John J. Xenakis
GenerationalDynamics.com

Hi mabell, are you happy? Is it really what you want? No need to reply me, ask your heart.

Corruption of Democracy

This time, the voice of corruption in politics has been raised prominently from no other country but the US. It became an open secret that the corporations do fund the parties to get favors. The situation in other rich countries may not be different more but it is yet to come out on surface explicitly. Whereas the backseat  countries are concerned, the authoritarian power is vested in either of the Feudals, Land lords , Army officers, Industrialists or Bureaucrats under the banner of democracy. An acute example of it is the Ukraine where,” Today, a small group of oligarchs clustered around Yanukovich have captured power. They manipulate elections, control the media, and are shaping the country’s institutions to further their own business interests. Condemnation by the West has had no impact. So long as they control the country’s industries and natural resources, they will maintain their grip on power – the approach perfected by their role model, former Italian Prime Minister Silvio Berlusconi.

Whatever one thinks of Tymoshenko, she was not imprisoned for any ostensible crimes she committed while in power. She is in prison because she lost that power. This sets a dangerous precedent, for it creates a powerful incentive – winner takes all, loser goes to prison – for ruthlessness.”

Does it mean that the democracy has failed to deliver?

Had not socialist system failed, we would have said yes.

Yes, again we have no excuse to declare that the the US democracy is increasingly on the path where it is declining to deliver to the masses.

Come at the examination of the two systems. First, we see what is the definition of the Democracy –“The Government from ,for & of the people”. The communism has/ had been claiming it was a perfect democracy & always posed that their government in USSR was “from, for & of the people’. Ignoring to discuss whether the Democracy is only a political system or also covers the domain of economics; we examine Democracy under both the system I,e; Capitalism and Communism, in terms of “the delivery”. We feel that both the systems fall short in attaining the definition of Democracy. While the Democracy in Capitalism is “Of & From the People”, it is not “For the People”. The communist system is “Of & For the People”, but not “From the People”.

And when the systems fail?

The democratic system fails when more than one characteristic of the democracy, in it’s definition, fails:

Failure of Democracy under Capitalism

I n capitalist system, the democracy has never been for the people, no matter how much the people were prosperous in this system. There were two reasons for the content of people in colonial

/Imperialist countries:

One was what Marx had determined in the 19th century. That the workers (masses) of colonial power countries get share from the plunder of the Colonies. As such they remain content and forget the class difference.The cold war arrangement by the imperialists to contradict the socialism. The imperialists were in competition with communism as such they had to provide their people with all the easiness of life . Any discontent of the people in their own countries would have made them easy prey to the Socialism.

Otherwise the present democracy under the prevailing Capitalism could not be “For people” ; as the two theories contradict in their principle and the aim.

Under the” Democracy”, the government has to run for the well being of the people and necessarily manage for it but under the “Capitalist” system, the “Competition “ prevails , to the extent that the capital has to capture the political power; in fact it goes to attain the “Monopoly”. This characteristic of Capitalism erodes on the right of people to govern. And it is what we are witnessing explicitly in US . Definitely, the masses of imperial countries are getting the share from the plunder of neo colonies but it is not much enough to satisfy them .After the fall of Socialism, there remained no need to compete with anyone. As such the Social welfare face which was the inevitable part of the Capital society in Cold war days, lost it’s significance. The Capitalism started to appear in it’s naked form. Another features of Democracy –“Of the People “ was also eroded by the Capitalism. The Multinationals got inroads in the political parties and started to produce their cronies in the power corridors instead of Peoples’ representatives. This conflict of Democracy with Capitalism has created the present day crisis in US. The “Occupy wall street” is the representative of this crisis. The deprived people are protesting against the Un equality, Joblessness, Underpaid jobs; & against the the corporate sector (Capital)which is creator & beneficiary of Capitalism. They are against “capitalization of Democracy”-Erosion of Capital onto Democracy.

Republicans and Democrats met and reached at a makeup compromise in shape of Higher Taxation & reduction in expanses to resolve the matter. November 2011 witnessed all time less rate of Joblessness for two years in US. This policy seemingly, creating jobs in hurry, will affect the performance of those departments where they are inducted and would multiply the finance crisis already in offing.

Failure of Communism  in conflict with Democracy

Theoretically, as the Communism provides for the Proletariat Dictatorship ; it takes form of the Communist party rule. As such it contradicts “From the people” phrase of the definition of the “Democracy”.  When the party hierarchy got the shape of Bureaucracy  , it not only appeared explicitly as such, but also it did not remain “Of the People”.  The conflict of Democracy with Communism emerged . The Party could not resolve this conflict as the resolve was the death of “The Party”. Eventually, it culminated in the downfall of Communism.

Need of a Just Economic System

The above discussion determines that it is not the Democracy which is at fault. The economic systems experienced till date are in conflict with the Democracy. As the Democracy is the ‘nature’ of  the Human in these centuries, any system against Democracy is destined to fail. The solid compromise under capitalism may work temporarily but will continue developing crisis .As such there is need of practicable economic system which is Of the People, For the people, and From the People. Does it exist? Will it be evolved?

This is a striking admission by one of the key people who's supposed to know what's going on that he doesn't.  This, in a way, is progress.  The first step is admitting that there is a problem.

The basic problem is painfully simple. If wages are merely an article of commerce, they will be reduced to the level at which labor is competitive.  This will be slightly above sustenance level. That's where "competitiveness" takes us.

As this happens, buying power decreases, and the level of economic activity decreases to match. That's happening now. The CEO of WaMart reports "“Our customers are running out of money, buying smaller pack sizes and less discretionary items near the end of the month."

Coupled with this is the effect of technological progress.  Productivity in manufacturing continues to rise. But this does not increae wages, because wages are determined by competiive forces.  It may reduce prices, but volume is limited by available consumer demand, which is in turn limited by wages. So increasing productivity now increases unemployment and underemployment. Which has happened.

Our current economic system is stable in that state, where most people are just barely making it. This is not a recession or a depression. This is the new normal. Even though we have the technology to operate at a higher standard of living, we can't use it, because labor would no longer be "competitive".

That's where we are, and that's how we got here.

I don't presume to suggest a solution. We need, though, to clearly understand the problem, and get decision makers out of denial about it.

We speak about 'modern', 'anglo american', 'central european' and 'chinese' capitalism.

But what is this capitalism? Is it some kind of a common ideology?

Or is it just a tool, a mechanism for distributing resources to the most efficient economic actors?

Now you'll ask me, or you should, how do I define 'efficiency'.

Mr. Rogoff says that "the leading capitalist economies have failed to price public goods such as clean air and water effectively".

So it not 'capitalism' at fault here but the societies themselves who don't make up their minds about what's important to them, fast economic growth, clean air or both.

The same thing with 'efficiency'. A tool is not responsible for the end result. The operator is.

It's our call about what kind of a capitalist society we want to live in.

And since I already lived 28 years of my life in a centraly planed economy, Romania, i can tell you that the capitalist one is far better.

betterfailing--

i posted a similar critique--the problem of defining capitlaism a little earlier i the thread. but don't you see that you are falling into the same trap? it's our chice to live n the kind of capitalist system we want? so, there is no other choice? wait, there is: a centrally planned economy. straw man. it is the failure of economics to think either outside of capitlaism or outside of the cold war era of capitalism or state communism.

capitlaism is all about choice: except when it comes to economic systems and political parties. we're all the "poorer" for it.

"...the problem with economics is that there are often as many interpretations of any crisis as there are economists..."

Well this comment room attracts a lot of cooks to the kitchen.  Also, never realized that unfree enterprise was so in fashion.

Health care costs won't continue their cuurent trajectory.  As the health tourism industry - in places like the Dominican Republic, Mexico, and perhaps in the future, Cuba - grows and becomes reputable, Americans will go there for big expenesive procedures.  If American hospitals want to compete they'll have to control their costs.

First we need to separate a competitive Capitalist system where both failure and success based upon innovation is possible and the "crony capitalist" system that we are evolving into, where success depends upon political contacts and bending the regulatory bureaucracy to their advantage and aginst innovative upstarts who could put them out of business.  The former is viable and the later is unstable. 

A properly functioning competitive capitalist system at least focuses greed on socially productive innovation driven by voluntary trade whereas crony capitalist satisfies greed and power demands by foce of law and regulations shifting money and control to the leaders. 

woahh!!! great comment deweaver!

Does it make sense to keep calling it Capitalism?  Before 1900 what did consumers own that depreciated rapidly?  In 1900 there were 8,000 cars in the United States.  In 1995 there were 200,000,000.  But do our economists talk about how much has been lost in depreciation on that stupidly designed trash?  It is 42 years after the Moon landing.  Cars have been manufactured for more than 100 years.  The auto companies are not really trying to make truly good machines.  They are making junk designed to be marketed to dummies that buy the crap for silly reasons.

This is not capitalism this is Corporate Consumerism.  Consumerism deliberately wastes too many resources, much of which could be measured in the depreciation of durable consumer goods, but our brilliant economist do not include that in their computation of NET Domestic Product.

Adam Smith talked about The Invisible Hand and enlightened self interest.  Why wouldn't making double-entry accounting mandatory in the schools improve the workings of the Invisible Hand?  But our economists do not suggest that even though double-entry accounting is 700 years old.  We certainly have cheap computers for everyone to do it.  They are all von Neumann machines which corporations were using to do accounting in the 50s and 60s.  So von Neumann could make his economic game theory accessible to everyone with these cheap computers if people would use the technology properly.

The Economic Wargame is a continuation of the Military Wargame by other means.

But our brilliant economists talk about Keynes and Hayek more than they do about von Neumann and Morgenstern.  But Keynes' ideas makes the economists believe they can control the economy though they can't get the NET Domestic Product algebra correct in 50 years.  If you give pseudo-intellectuals some new knowledge they will come up with more complicated ways of being stupid.  Keynes has been an excuse for building up deficits but not for creating surplusses to compensate. Capitalism is technologically obsolete unless we truly impliment what Adam Smith meant with EVERYONE knowing their self interest.  Going into debt to buy junk designed to become obsolete is not enlightened self interest.

http://www.toxicdrums.com/economic-wargames-by-dal-timgar.html

I would love to have someone explain why ever increasing growth, and therefore consumption, is a sustainable system form of capitalism. To me it implies infinite growth (population, industrial production, services, consumption of materials and services) based on very finite world resources. It makes no sense to me.

Will our sense of "growth" have to change? Do we have to keep "growing"? If populations and rate of consumptions level off, what it is wrong in staying flat or even decreasing the rate at which we consume ourselves into oblivion? Do they not have to level off or decrease at some point in the future--either consciously/deliberately through thoughtful action or due to catastrophes that may be self-inflicted?

I just don't get this notion of constant growth based on very finite and shrinking resources. To a non-economist it seems to be fundamentally flawed.

I am glade i am living in EU,everything seems to be better here.We maybe do not earn the same amount of money,but we certainly live better.We do not need to pay for healt care,education is almost free(we do not have anyexpenditure) ,we work 8 to 9 hours a day,a gap betwen rich and poor is low,so i do not understand way not to have Scandinawian capitalism.Lobbys are just to strong in usa,and thats way an usa citizen will never enjoy a life except he is rich.And what also dont like is that everybody compete with each other.

I like Mr Rogoff's encapsulation of the different capitalism systems that exist; it's useful.

Mr Rogoff devotes very little to cyclical behaviors, as if all can be viewed as time being linear. The one bow to cyclical behavior is this line: "Modern-day capitalism has had an extraordinary run since the start of the Industrial Revolution two centuries ago, lifting billions of ordinary people out of abject poverty."

For decades now we've been indulging everyone with more, more, more. This cannot last. Mr Rogoff appears to handle this by his reference to the Asian capitalist economies. At some point the Western economies have to work both harder and smarter and cease their prodigal ways.

What I don't get is why people seem so happy to give more and more power and money to government. Will we never learn?

All economic systems represent collective projections of the human mind, which is essentially unconscious.  To varying degrees, we are all simultaneously greedy, compassionate, insensitve, caring, angry, loving, etc, etc.  Our socities reflect our psychologies and replicate the impact of our developmental histories, personal, historical and evolutionay.  We are essentially blind to our deepest emotions and drives... as well as the consequences of our actions.  We repress our most troubling conflicts, personally and publically.  Unless we begin to look inside, we shall end up like the original inhabitants of Easter Island, who having exhausted their natural resources descended into decadence and barbarism. 

Re: the future of Capitalism

In a 6th grade Math class, I learned about the Chess Board and the doubling of the grains of wheat on each square that the King promised for payment.  Already I was aware of the growth projections for the school, the town, the taxes, the number of burgers eaten, the height of the basketball team,...and I was very confused. In the 2nd grade, I had decided that I wasn't going to live like these people and here was another example of the prescience of that decision.

So, whether it's a poker game or the economics of a great nation, when one person or one group of people have all the chips, the game is over.  How do you overcome this tendency and still generate the benefits of Capitalism?  Over the past 50 years, I've imagined dozens!  

Here's one:  redistribution of chips.  

A progressive system of taxation would allow the competitive benefits of Capitalism until the accumulation began to affect the economy; i.e. a monopoly.  However, prior to this point, a properally devised system of progressive taxation would have begun to slow growth until this monopolistic effect would not apply.

I would redistribute the chips through the education system.  Students...(The President of Harvard addressed the first graduating class: "It is not our intent to educate you for that is a lifetime job and your responsibility.") would be paid as they finished portions of a subject.  Bonuses might also be paid for increased facility though not through class competitivness or grades, rather through a competition with oneself.

I don't know why I continue to make the varied commments on articles I read.  I don't really care what anyone thinks.

There is an interesting concept by Mansoor Kahn to get rid of fractional reserve banking (which produces uncontrolled money leading to corruption of democracy) by separating the functions of storage, money creation and commercial risky banking.

He suggests the following:

a) Remove government bank deposit protection insurance schemes (e.g., FDIC deposit insurance) and allow “Free Banking”. Allow banks to fail. This will greatly reduce the ability of banks to create bank deposit private money. b) Give the public the option to “store” money electronically risk-free in a government owned bank which can only “store” electronic money and clear checks but not lend it out. 100% reserve credit risk-free money storage for a small fee.

c) Allow new money creation  in all forms (coins, paper bills or bank deposits) by the treasury department.

d) The new money should be put into circulation by spending it on legislature approved government expenses and projects and/or the new money can simply be credited to the citizens’ bank accounts and the public itself can decide what to do with it.

e) The object of the government will be no deflation and no inflation (stable purchasing power). I realize purchasing power is hard to measure and the process can be gamed by the government but benefits are so great that this risk should be taken and managed.

f) If inflation ensues the government can tax and destroy the money.

g) If deflation ensues then the government can create new money and spend it on legislature approved government expenses and projects and/or the new money can simply be credited to the citizens’ bank accounts.
Te web site is

http://seekingalpha.com/article/209386-modern-monetary-system-there-is-another-way

reply to  

sallis 10:27 07 Jan 12

Thank you!