Capitalism works. It’s the economic system that won World War II and..

“Wait a minute, Dan! Russia was one of the World War II winners. I don’t think they were capitalists.”

“Do not bother me with factual details. I am on a roll here.”

... and created the biggest middle class the world has ever seen. The free market works wonders.

Penicillin works. It has saved millions of lives and killed zillions of pesky bacteria. Antibiotics work wonders.

Cutting cost works. Profligate, out-of-control spending is the ruination of countries and companies. Cost cutting is always possible.

As the world became more complex and inter-related, the attention spans of its human inhabitants shrunk. Now people want simple answers. They don’t want to think. They shun nuance. Politicians willing to compromise or change their mind are deemed mindless flip-floppers. Unfortunately, the world is complicated - and simple answers simply don’t cut it.

Because capitalism worked, people concluded that the ‘free market’ was the solution. At some point in the last few years, a conclusion - ‘the freer the better’ was reached. Regulation was relaxed (or eliminated), employee unions were eviscerated, taxes on capital were reduced, jobs were outsourced and when things went wrong - government was blamed.

As pendulum swung toward the free market, the swing-generators concluded that the government had no place in the economy and, moreover, did nothing whatsoever that was worthwhile.It is easy to find governmental stupidity:

Title 26, subtitle E, Chapter 51, Subchapter F, Part III, Section 5382:

"Any natural grape wine may be sweetened after fermentation and before tax payment with pure dry sugar or liquid sugar if the total solids content of the finished wine does not exceed 12% of the weight of the wine and the alcoholic content of the finished wine after sweetening is not more than 14% by volume; except that the use under this subsection of liquid sugar shall be limited so that the resultant volume will not exceed the volume which could result from the maximum authorized use of pure dry sugar only."

Credit Stanley Bing.

it is not, however, fair to conclude that everything the government does is bad. Business complained when the government introduced clean air and clean water regulations - the world went on and the economy didn’t collapse. Car manufacturers complained about mileage requirements - but they met the targets. The government, not Bank of America, got Bin Laden.

The lesson is simple: two much of a good thing is not good. Overuse of penicillin created MRSA; rampant cost cutting in Greece and Spain engendered extremism and civil unrest. Corporate cost cutting can kill innovation and profitability. (Think about it; if corporate costs are zero, it’s unlikely that you’re making a profit.) In the financial services industry, deregulation - a favorite of the ‘unbridled capitalists’ led to a massive economic meltdown that adversely impacted the global economy. I realise that this is a controversial claim. The regulations put in place after the great depression worked for 70 years. When they were relaxed, eliminated and unenforced, derivatives, structured products, leveraged trading and financial collapse ensued.

The tsunami in Japan highlighted the folly of nuclear reactor designs that don’t include an ‘off-switch’. (When something went wrong, the reactors could not be shut down - so they exploded instead) A recent report highlighted the cozy collusion of government, the utility and regulators:, a triad that fostered complacency and heightened risk. But what about large banks that provide the capital needed to make capitalism work? In the last few years, we’ve seen them construct “designed to fail” products (shamelessly peddled to their customers). They’ve touted IPO prices for saps, eh, common ‘investors’ while simultaneously conveying differing information to insiders. They helped Grεεce cook the books. They emasculated financial regulators by preaching the benefits of the competitive free market while simultaneously colluding to fiddle interest rates and garner welfare-like tax breaks for themselves. They embarked on trades so complicated and risky that they can’t be unwound - i.e. no ‘off-switch’. People reacted to the Japanese crisis by demanding that nuclear reactors be shut down. Do these banks realize the risks they’re taking? Or do the assume that people are too stupid to figure out what’s going on?

The current American economic problems are complicated. It is time to stop babbling simplistic solutions. It’s time to look at results and facts rather than ideology. The next edition will propose some actions.