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Thursday, January 24, 2008

I See What You Mean, It Is Broken

Lately, I've been hearing a lot about how recent events in financial markets show that capitalism is broken.

When regular old workers are thrown out of work and their lives are thrown into turmoil, we're told that's capitalism functioning as it should, creative destruction, dynamism, able to respond quickly to changes in conditions and all of that. It's a big shock to the workers who lose their jobs and their source of steady income, even more so for the large number who don't qualify for unemployment compensation that allows the unemployed to replace about half their lost income, at least for a time, but a necessary shock according to the creative destructionists.

However, when executives face the same dynamism and their income falls (so that they also face a reduction in their income, say from a million to half a million), global capitalism is broken and needs to be fixed (e.g. "Market Bloodbath Highlights Cracks in Capitalism," one of many along these lines).

So, when only workers are affected, it's capitalism doing what it does best. But when it's executives who are facing the turmoil, capitalism needs fixing. I actually agree that we could do more in terms of both preventative policy (better regulation of the financial sector for example) and stabilization policy (see the less than optimal current fiscal stimulus package) to help capitalism function better, it's just interesting how much louder the calls are to fix the system when it's the executive ox that's getting gored.

    Posted by on Thursday, January 24, 2008 at 09:01 PM in Economics, Market Failure, Policy, Regulation, Social Insurance | Permalink  TrackBack (0)  Comments (90)

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