Who Killed Capitalism?

Jonah Goldberg is a slow learner, but he deserves credit for persistence. The Republican columnist reports this week that "big business" has delivered the coup de grace to the good old capitalist system while admitting that "The absence of free markets isn't necessarily Bolshevism, or even socialism." He doesn't quite find a word to describe the particular absence he perceives in the United States, but he ascribes it to the realization that some corporations are "too big to fail" and will therefore be preserved at all costs through government intervention.

"Everywhere we look we see the great and once-great beneficiaries of free markets running to the state for protection from the cruel bullying of competition," Goldberg writes sarcastically. On the government side, he continues, "The basic idea is that big firms -- giant banks, insurance companies, etc. -- cannot be allowed to fail if their failure threatens something called 'stability.'" To Goldberg this is the usual arrogant naivete of liberals who think they can master business cycles, but worse for all is big business's discovery that they can exploit the liberal environment.

The problem, asserts, "is that big companies will understand the surest way to attain immortality is to become too big to fail. Once they've achieved that privileged status, these companies will become de facto wards of the state, insured for life at taxpayer expense like Fannie Mae and Freddie Mac, and in exchange they will do whatever Uncle Sam asks."

This approach violates Goldberg's sense that "real freedom means the freedom to fail as well as to succeed" because "Big business wants to be protected from the former and deny competitors the latter." It's Goldberg who's naive, of course, if he thinks this is a new development in corporate America. There has always been a temptation to seek monopolies among corporations. What's new now, Goldberg might argue, is that government, by guaranteeing companies against destabilizing failure, may prevent the normal transfer of capital to new, presumably productive investments that follows business failures. This violates the "freedom" sensibility that requires government to cultivate "opportunity" rather than actual well-being. It's no surprise that someone like Goldberg seems indifferent or contemptuous toward any concern for "stability." It's the belief of such people that "instability" is when you pick yourself up, dust yourself off and start all over again. Their ethos of perpetual competition offers no remedy for the dislocating shocks of creative destruction apart from, "If at first you don't succeed..." What happens if ordinary people, the workers dependent on companies that might be TBTF, never succeed is of no concern to them.

I think the government understands that a company is TBTF in part because so many working people depend on it for income and insurance. This particular government may err in confusing the people who own and run the structures on which so many workers depend with the structures themselves. Government should want to keep people working in factories, but it probably shouldn't be so concerned with keeping the same people in charge of them. Is competition desirable? Then let some genius submit his proposal to Washington on how to run GM better while keeping everyone at work. Let's have a bunch of proposals, and let the best one win. We can honor the beneficial aspects of competition without sacrificing multitudes on its altar, as people like Goldberg seem to want. His metaphorical cries for blood belie his own claim that capitalism is dead.