Lately I have heard the phrase “increased regulation”a lot regarding our current economic and banking system. I even heard the president recently say that we must “strengthen regulation to insure this economic crisis never happens again”. I am not a politician nor am I an economist, and this is purely based on my opinion, not my expertise, but those words seem contradictory to me of what we have attempted to establish as a nation, regardless of one’s political persuasion. (I have spent far more time applauding the new president for his family life and leadership ability on this blog, so I should be entitled to offer some criticism as well. Read some good things I have to say about him HERE and HERE.) I am not advocating that we do not need new regulations and I am certainly for government protecting those who cannot protect themselves and for making an even playing field, but the point I am making is that I believe it is naïve to think we can ever regulate ourselves out of economic downfalls in a capitalistic society.
In a purely free-market society there will be seasons of prosperity and seasons of despair. There will be those who gain wealth and those who lose wealth. The more freedom that is given allows the more risks that will be taken and the more mistakes that will be made. No one who knows anything about capitalism should be too surprised at where we are today considering some of the abuse of the system, which has occurred in recent years, but that is part of the system. If there is any regulation needed, protecting from that type of abuse may be warranted, but we should never assume that if we provide enough rules our economy will never suffer.
Recently while I was in Lithuania I spoke with some people who want the country to return to Communism, because, as they put it, they feel they are “missing hope” in a capitalistic society. Under Communism, even though most had very little and the same people told story after story of doing without and wanting for more, they at least knew what to expect. That was their definition of hope. I understand that capitalism allows a large amount of uncertainty and risk. There are few guarantees, but that is what makes it capitalistic, the ability for individuals to make a difference for themselves through hard work, risk and speculation.
If we ever start to legislate to the point of stopping the economy from ups and downs we should consider calling it something other than capitalism.
What do you think?
Very nicely written. Capitalism does not come with a guarantee but rather as you put it, “hope” and incentives. When we expect and rely on government to provide everything then the system has lost sight of the term, “of the people for the people!”
I wholeheartedly agree. As an individual that manages a successful financial institution that has been properly managed for years, we have weathered the economic storm quite well. Those who took the aggressive posture and took “chances” are now baled out and have started the call for more regulation. I too agree that we should protect those that can not protect themselves, but it is beginning to feel that someone has decided none of us have the ability to take care of ourselves.
I have commented many times that individuals no longer want to take responsibility for their own actions whether it is taking out a loan, investing in the stock market, taking a new job, etc. If the regulation continues to increase to protect us from ourselves (or our own unwillingness to take responsibility for our own actions) then I believe we will be in a spot that would no longer fall under the definition of “capitalism” in the dictionary. Just my opinion!