The Economist, our most stalwart apologist for laissez faire economics, has published a noble defense of capitalism in its latest issue.
This article argues that “[o]ver the past century and a half capitalism has proved its worth for billions of people. The parts of the world where it has flourished have prospered; the parts where it has shrivelled have suffered.” The rhetorical ploy at the center of this argument is to keep the definition of “capitalism” fairly vague, often with the purpose of conflating trade liberalization with capitalism, and to ignore the fact that those parts of the world that have emerged from poverty in the past few decades have done so very precisely by ignoring neoliberal policy prescriptions and by adopting highly interventionist economic policies, exactly as the U.S. did when it industrialized in the nineteenth century.
There is also little recognition in this article that “true” capitalism has never really existed anywhere for very long and that the major fight within state capitalist economies has been between Keynesian policies and a version of the free-market cant which The Economist — for all its excellent reporting — has wholeheartedly supported, at least at the level of editorial policy. The TRADE LIBERALIZATION EQUALS CAPITALISM formula is visible in this article’s defense of “Washington consensus” economic prescriptions — dismantling of capital controls, lowering tariffs ((Except for rich countries, naturally!)), privatizing state-owned enterprises, etc. — which many argue partly helped contribute to the current economic crisis.
Is anyone who opposes the Washington consensus by definition anti-capitalist? Obviously not.
So one problem with this defense is that trade liberalization and capitalism are not equivalent concepts. The more serious problem, however, is that The Economist doesn’t believe its own argument. These purveyors of economic liberty admit that “[f]inance needs regulation. It has always been prone to panics, crashes and bubbles… Because the rest of the economy cannot work without it, governments have always been heavily involved.” The newspaper moreover agrees without reservation that “[i]n the short term defending capitalism means, paradoxically, state intervention.” The “global bail-out is pragmatic” because states “believe, rightly, that public capital is needed to keep credit flowing.” Our friends at The Economist also note, quite rightly, that “[c]apitalism has always engendered crises, and always will.”
So The Economist’s position is quite simple, really: “capitalism” will always periodically generate crises, especially in the area of finance, which will paradoxically (and periodically!) require state intervention, at taxpayer expense. At such inevitable periodic times of crisis, state intervention — often at a loss for the taxpayer — is necessary, for pragmatic reasons of course. Right. That’s The Economist’s version of capitalism for you in a nutshell — privatize profits, socialize risk. It is almost literally unbelievable that the editors of The Economist could so overtly contradict themselves — not in different pieces, mind you, written by different authors with opposed opinions, but within the same article.
If this is what “economic liberty” looks like, the editors should not be surprised if the general population remains unconvinced of their argument, especially when the public is having its money spent periodically — and predictably — to bail out the financial industry at a cost of hundreds of billions of dollars (or more). It is not an exaggeration to say that by their own definition, the editors of The Economist don’t actually believe in capitalism.